Car Rental Companies' Profits Hit by Detroit's Fleet Reduction
As predicted, car rental companies' balance sheets have taken a ding, thanks to Detroit's determination to trim the fleets. Dollar Thrifty reports today that second quarter net income was $15.3 million, compared to $26.7m in '06. Prez and CEO Gary L. Paxton was quick to finger The Big 2.8's cutbacks, and reveal the inevitable result: "Vehicle manufacturers have been reducing the number of vehicles sold to the rental car industry and increasing our fleet costs. We are also absorbing higher vehicle financing costs as a result of lower credit ratings in the auto industry… raising rental rates is the key to offset these vehicle related increases." Meanwhile, the Avis Budget Group is on its way to recovery– reporting a $24m profit compared to a loss of $1.1b in '06. Still, their per-unit car fleet costs increased six percent year-over-year, "reflecting industry-wide increases for model-year 2007 vehicles." Both companies are responding to rising car costs by aggressively cutting their own.
It doesn't matter how long the cars are in service, the buying and selling price of the vehicle is the concern. That's probably why I see more Camrys in service: strong residuals mean they can be sold quickly at auctions (dealers love them used Camrys) and with minimal depreciation.
I've rented cars several times and have never had a rental with more that 10k km (6k miles) on it. Maybe they shuffle the cars to smaller centers (like Laramie) after they get a few miles on 'em?
How about if the tables are turned... cars coming off a 2 or 3-year lease could do a 2-year stint in a rental fleet.
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