By on May 12, 2020

With Hertz concerned with avoiding bankruptcy as the coronavirus pandemic eliminates vacation plans en masse, the company has decided to cancel 90 percent of the new cars it would have purchased this year to refresh its fleet. Minimizing costs for 2020 will be essential for all rental agencies until demand for their services picks up. It’s also indicative of an industry that doesn’t believe life is going to snap back to normal by the end of the month.

We’ve previously covered how badly the economic ramifications of COVID-19 lockdowns have treated car rental groups, but haven’t said much about how they scoop up a large number of vehicles from manufacturers every year — helping to pad their annual volumes. Hertz held roughly 567,600 vehicles in its U.S. fleet and 204,000 in its international unit in 2019. Under normal circumstances, those cars would be rotated out in favor new models after spending a little over a year servicing customers. But Hertz will only need 10 percent of that number this annum, with the distinct possibility of other rental agencies taking similar action

That doesn’t bode well for manufacturers hoping for a swift rebound once social distancing mandates ease (or are simply ignored by citizens tired of waiting). However, it sounds a necessary response to ensure Hertz actually makes it to 2021, which is anything but a certainty at this point. According to Automotive News, the business’ concerns were front and center in its latest financial discussions:

Chief Executive Officer Kathy Marinello revealed the cost-cutting move in a 20-minute conference call Tuesday, one day after the company reported a larger-than-expected first-quarter net loss and said it may have difficulty continuing as a going concern. That signaled the company’s management doesn’t expecting a quick rebound in demand for rental cars over the next 12 months.

“The coronavirus created a major disruption as the global travel market and the used-car market effectively shut down,” Marinello said. “We have to be pragmatic about the timing of an economic rebound including a second wave of the virus in the fall. So we are focused on safeguarding liquidity.”

Hertz’s inability to replenish an aging fleet that won’t see much use anyway will disproportionally impact Detroit automakers, as they’re the models most prevalent in its existing lineup. Hyundai, Kia, Toyota, and Nissan will also take a hit. The rental firm currently faces a May 22nd deadline to settle up with lenders. While they’ve already extended some leniency by pushing back the date, Hertz will still have to renegotiate payment terms to avoid financial ruin. Unfortunately, it hasn’t issued an update on the matter (and probably won’t until there’s agreement in place or the deadline arrives).

[Image: IJzendoorn/Shutterstock]

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26 Comments on “Hertz Cancels New Car Orders for 2020...”

  • avatar

    What was the number of cars that they cancelled?
    Or how many cars were they going to replenish this year?

  • avatar

    Were any of the cars already built?

    Were any of them built with delete-bazillion-side-airbags, rollup windows, and AM radio with mono speaker?


  • avatar

    I follow a few auctions that sporadically sell used rental cars. Some have 10,000 miles. Some have 30,000 miles. It will be interesting to see whether the next batch of used cars sold at these auctions will be two year old beaters or two years old cars in excellent shape with 4500 miles.

    • 0 avatar

      Anyone know why the rental agencies sell cars with such varying mileage? I’ve wondered this at times but never investigated.

      • 0 avatar

        I’d imagine it has to do with the original purchase agreement.

      • 0 avatar

        Part of the reasoning is that rentals build their fleet with a mix of vehicles they own, and vehicles on a lease agreement with the OEMs (which dictate lower sale mileages and shorter owning terms). Other than that, there’s also seasonality in some places (where the fleet size required varies over the year), and some vehicles fall off a depreciation cliff more quickly than others.

    • 0 avatar

      @Jon after the last Great Recession I had a couple of rentals during 2010-12 that were in pretty awful condition. I remember one particular Ford Fusion out of Denver with 44K miles on the clock. Parking lot rash on every panel, pitted windshield, vibrating steering wheel, warped rotors, Check Airbag light on, one speaker blown.

      I had several rentals well north of 30K during that era, and more than a few that were 2 years old with 40K plus. The Fusion was definitely an outlier.

      GM Epislon cars didn’t hold up well either with high miles on them, Malibus became completely off my list during that period.

      Altimas seemed to have held up better, but a lot of interior wear.

      I did have a GMT900 Chevy Suburban LT with 45K miles on it during this period and you could have convinced me it had 5K miles. Interior and exterior was in great shape and it road/drove/ran like new. That one sticks out in my mind for the other end of the spectrum.

  • avatar

    Nissan will have to file bankruptcy now.

  • avatar
    SCE to AUX

    The real problem will be the used car market being flooded with liquified rental cars. Prices will drop as will trade-in values, and this will also affect new car sales because your trade will be worthless.

    Generally, we could be entering a period of deflation, which is bad for everybody.

    • 0 avatar

      Then after all the money printing with trillions in stimulus money, inflation will come roaring back like a dragon pun intended, hint, hint.

      • 0 avatar

        And your trade-in value will go up greatly!! :D

        (Er, not the value, but the price… it’s semantics, all you have to do is not pay attention to basic economics.)

      • 0 avatar

        Fear not! The chairman of the Federal Reserve says he sees no inflation in the future.

        Of course, that means the government will issue trillion$ in new debt, and the Federal Reserve will buy the bonds and keep them on their balance sheet. The national debt will go up, but the F-R will call it an asset on their books, instead of flooding the world with more government paper.

        Just add another $15,000 to the current $68,000 debt for every man, woman, and child, that we’ll never pay off.

    • 0 avatar

      “your trade will be worthless”

      If your trade-in is already worthless, it wont matter.

      • 0 avatar

        If your trade-in is already worthless it is a good time to buy a car. I’ve been following a couple of used cars locally that I’m interested in and they’ve been coming down about a $1000 a week for the last few weeks. I am so tempted, but my already worthless trade-in just runs and looks so good that I’m having a hard time justifying it

        • 0 avatar

          (Sigh) Its a white 2010 Camry LE with 120K – pretty close to worthless given the CUV craze. It wont die anytime soon and I cant bring myself to hasten its mechanical failure by neglecting it. Currently, my desire for a new truck is less than my dislike for a new car loan. But I already have its replacement picked out if it catches fire tomorrow.

  • avatar

    There is going to be a lag in the economic stats, so it looks like the stats will be looking worse over the next 3-6 months.

  • avatar

    I’ve been driving in and out of NYC the past 3 weeks.
    Commuter traffic is really building up each day almost. Yet the cities streets are still largely deserted. Looking at lights on in building maybe 20% of offices appear lit up. Anecdotaly this tells me that while most people are not back at work, those comuters that are, drive even if they didn’t before.

    I used to take a train, wouldnt go near it now.
    For that matter one item the article misses is were moving most everyhting out NYC. Many companies are thinking that way. The illusion oif needing to be in a city, or for that matter everyone going every day to an office is broken.

    My prediction is large metro hubs are going to suffer severly the next few years, and commercial real estate within metro centers is really going to tank.

    Its been pretty nice comuting with no traffic.

  • avatar

    I’ve been trying to assess the market for a 1-2 year old slightly used Dodge Durango RT with under 15,000 miles and the pickings are very, very slim. I do a search 200 miles within my house, which is a decent radius ( encompasses a 4 mil people area) and I can only find 5-6 vehicles at most). I welcome the flood of slightly used ex-rental SUVs.

  • avatar

    my 70 year old mother just picked up a 2018 Nissan Versa at Hertz car sales. brother took her to look at a car at another dealer first and one of the tires was flat. he’s had a real bad experience looking for small cars under $10k at dealers. so little profit there they just don’t seem to care about them.

    but this is the second compact nissan he has bought from hertz and both times it was a great experience. hers has 48k miles but believe it or not he said there is hardly a scratch on it. she is super happy as it is small, has good visibility, and will get her from a to b comfortably enough.

  • avatar

    Well look on the bright side – Ford leaving the sedan business now looks like a smart move.

    Nissan on the other hand, and Toyota Corollas…

  • avatar

    Bought a 2013 Altima from Hertz in 2014 with 63k miles on it. Compared to everything else I looked at in that price range, it was like a new car. Easiest buying experience I ever had and the car’s been the most reliable I’ve owned in 50 years of driving.

    This was my second ex-rental and I wouldn’t hesitate to buy another.

    • 0 avatar
      SCE to AUX

      Same with my 09 Sedona. I bought it used (18k miles) from a dealer, but the door jamb had a Hertz checklist on it.

      Still have it, and hopefully will for a long time to come.

  • avatar
    el scotto

    Hmmm, no one is complaining about their Challenger or Mustang GT rental.

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