By on July 29, 2020

While negotiating the terms of its bankruptcy with creditors, Hertz has been informed that it can sell 200,000 would-be rental vehicles to help cover its debts.

According to a filing with the U.S. Securities and Exchange Commission (approved Friday in the U.S. Bankruptcy Court in Wilmington, DE), Hertz will be allowed to “dispose of at least 182,521 lease vehicles” between now and the end of 2020. Proceeds will then be used to pay off $650 million it owes lenders, with most funds going toward principal payments on financed vehicles.

With the pandemic knocking out manufacturing for months, this is likely welcome news for buyers eyeballing the secondhand market. Dealer lots are light on fresh product at present and times are getting tougher for consumers, making used vehicles all the more appetizing. Even though former rentals have a tenancy to be abused, they typically to go for a bit less than something living a more carefree existence —  and Hertz will be desperate to offload them quickly.

Someone hoping to sell their used ride may have missed their window to maximize their return, however. Hertz is about to flood the market, likely suppressing used prices for the rest of this year. The Wall Street Journal and CarScoops, which tipped us off to the SEC filing, had more:

Of course, used rental cars were already a bargain as they cost 5-15 [percent] less than what used car dealers charge. The discount varies by model, but a recent study showed Hertz vehicles are typically priced 8.0 [percent] below market value for an average savings of $1,389.

That same study showed the best bargains were on the BMW 7-Series, Chevrolet Trax and Mercedes A-Class. Customers can also score big discounts on the Infiniti QX50 and Toyota Tundra.

Hertz will make those sales as easy as it possibly can to ensure customers clean up its inventories, and it has loads of used models it’s itching to get rid of on its website. You’ll probably be able to talk them down on the price, too. Just remind them that they’re the ones that need to make the sale to continue existing.

Assuming everything goes according to plan, Hertz Global Holdings has a real chance to keep lenders off its back for another year and return to business as usual with a much smaller footprint (and fleet). But that’s the best-case scenario. Eventually the company has to resume normal operations or continue selling its fleet (totaling around 500,000 units before the big sell-off) until there’s nothing left. Hertz’s management of the crisis will play a major factor, though the final outcome will also be dictated by how the world responds to the ongoing pandemic.

If normalcy fails to return sometime in 2021, and rental demand remains severely depressed, Hertz will undoubtedly go belly-up.

[Image: Hertz]

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26 Comments on “Hertz Given Approval to Dump 200,000 Vehicles ASAP...”

  • avatar

    Unfortunately, the quickest way for Hertz to “dump” these car is to sell them in bulk right to the dealers. So the dealers will reap the rewards of any bargains Hertz might have to offer

    • 0 avatar

      Pretty much spot on, especially when you wholesale a bunch to a dealer, they probably don’t need to honor their own 12 month warranty. They really aren’t that interested in selling to individuals.

    • 0 avatar

      I wouldn’t be surprised that’s what happens here – bankruptcy courts like to make things to happen fast, so a bulk sale would be preferred. Maybe auction ’em off in big lumps to AutoNation, Carvana, etc.

  • avatar
    SCE to AUX

    I’d definitely consider another fleet vehicle as a used car (like my 09 Sedona was), since it should have at least received regular service in fleet life, unlike many used cars out there.

  • avatar

    Perused their listings. Fire sale pricing not found. Low retail prices. This was in my 20 mile radius which yielded 350 vehicles.

    Used rentals should be closer to trade in value rather than retail price. They will have to adjust if they want to move the metal quickly.

  • avatar
    CKNSLS Sierra SLT

    Hertz has a local resale Lot near my city. Just checked their website-decent values-maybe but no major deals. I suspect major dealer chains are going to approach Hertz Corporate and snatch up many of these vehicles much less than what (prices) are listed on their website(s).

  • avatar

    Do rentals really have a tenancy to be abused? Or is that just anecdotal? I would like to see a study or evidence.

    • 0 avatar

      I’ve bought a couple of used rentals over the years without issue, but I’m sure some are abused

    • 0 avatar

      *Some* rental customers abuse rental vehicles, but as SCE to AUX points out, *all* rental vehicles have professionals paid to regularly check on critical fluids, etc.

      ‘Gently’ driving a vehicle which is low on oil or coolant is arguably worse for the engine than aggressively driving a vehicle with the proper fluid levels.

      You can abuse a transmission if you intend to (but modern nannies might prevent it somewhat).

      Body or interior damage is self-evident.

      • 0 avatar

        I agree that damage is self evident, like the V8 Charger RT we rented with 4 different tires and scratches everywhere. But I would argue strongly that the fleet Malibu/Impala that carried pharm sales execs from the airport to the hotel to the hospital back to the airport is just fine.

    • 0 avatar
      Art Vandelay

      Can you check the locations they were rented from? I ask because the stuff we would rent at Fort Bliss (El Paso) for example got beat on. Not because anyone was flogging them (I’m sure it happened, but we tried to typically get trucks because of the nature of what we were doing with them). We would have them for months at a time driving them over the open desert. Not intentionally flogging them, but when you are shadowing units on the range, the cars eat dust, get bottomed out and all sorts of things. I got a Sedona once (reserved a truck but it was a big exercise and my flight was late). Cactuses had punctured 3 tires by turn in and it had gotten hot once due to mud caked on the front. Again, not intentional here, but we had a job to do and the vehicles tended to suffer. We are all executive elite due to the frequent rentals so National never said anything when they came back with 1/4 inch of dust on them.

      I think a Sedona or something is OK typically, but I’d look it over long and hard. We have put thousands of those sorts of miles on some vehicles.

      Then there are the “never buy as rentals” cars. Normal Mustangs, Camaros…stuff like that. We have a guy in town that has a Challenger Scat Pack he got as a rental and drove from Kansas. I didn’t know that was a thing. I would run away.

      I don’t know if it makes a difference in most cases, but the higher end stuff is typically used by frequent renters that have status with the company. I’d imagine the novelty of beating on rentals is long worn off

      Our government guys have to get the compacts though due to regulation. They typically feel pretty beat.

    • 0 avatar

      @mdanda – It would most likely depend on the region and what kind of rental unit. In my part of the world rental pickups are usually beat on. They are rented by seasonal contractors like tree planters. I think that your typical car rented by a salesperson or mid-level corporate type would be fine.

  • avatar

    A lot of rental car companies are self insured which means that accidents sometimes are not reported to Carfax. I used to drive daily on my way to work near a huge holding lot. I knew when it was time for maintenance because a lot of them had their hoods up and a guy with a long hose would suck the oil out of their engines. Oil filter change? I doubt it. None of them were on ramps and I doubt all had oil filters accessed from the top.
    I still wouldn’t hesitate to buy a clean vehicle under 15,000 miles though of the price was right. Also I am a bit worried that the manufacturers have special trims for rental companies. A few weeks back I rented a 2020 Chevy Malibu LT ( mid level) and it had none of the new safety nannies ( blind spot monitoring, back up alert, etc) which I found rather odd.

    Every time I look on Avis’ site and Hertz’s I am never impressed by their deals. Are they abused? Probably. Does it matter? Not as much if bought with very low miles. When I rent a vehicle I always treat it like my own. Before I set to drive, I check the oil level and the tire pressure.

    • 0 avatar

      @Carrera – the company my brother works for has hundreds of pickups and they do the same. They don’t insure their vehicles for damage. They just insure for damage to other vehicles, operator injury and injury to others. The money they save covers the occasional write-off or repair.

  • avatar

    When I looked at the Hertz Las Vegas retail website, I was surprised to see all of the low-priced cars had 80k+ miles. I don’t think I’ve ever rented a car that had more than 45,000.

    • 0 avatar

      Hertz rents out to Uber/Lyft drivers in some cities (including Las Vegas), using vehicles that would otherwise be at the end of their service life. Odds are, those are the cars you’re seeing.

    • 0 avatar
      Art Vandelay

      I wonder if that is a Hertz thing. I do National and I can’t recall ever seeing much over 25k and that’s rare.

  • avatar

    They are not bargains, and they are not “below” market value. Former rentals carry more uncertainty than other cars, and the market value reflects that by being lower. That is their actual market value.

    But if someone is perhaps looking for a new Rav4 Hybrid… this could be the opportunity.

  • avatar

    These won’t be sold directly to consumers, can you imagine the hassle of trying to sell 200K cars one at a time to individuals? That could take years.

    They will continue their normal resale business for those uninformed who think prices should be good(gravy!), and will dump the majority on the wholesale dealer auctions. I could even see dedicated sale dates at the major distribution locations for just ex rentals. They will then filter to used car lots everywhere, where the dealer will gain extra profit from the difference in the low buy price and the high used car market, especially if Carfax reports aren’t SOP at the dealership.

  • avatar

    I’m sure most rentals are not actively abused, moreso driven cluelessly like most normals…but…..

    I worked with Rally NY as a radio operator a few years back. Before opening a rally stage for hot competiton, we’d run three cars (0, 00 and 000). The course marshal team I was assigned to would always rent a crew cab pickup as our course car. I learned that Ford Trucks are indeed very, very tough when run over ruts and bumps at full speed on dirt roads. Even though tires were always carefully inflated, they’d always blow one and end up returning it on the spare. We were the third and final course marshal to go, so the course was already swept twice, so it was full speed ahead. Some of the bangs and pops made me SURE something had come off the bottom of the truck, but it never did.

    Having said that, probably the worst thing for a typical rental is that despite all the no smoking signs, probably half of the rentals I’ve had reek of cigarettes…..

    • 0 avatar

      @speedlaw – if they routinely rent Ford pickups it probably would be a good idea to have a set of 10 ply tires on Ford rims in storage to put on the truck for the “pre-running”. That would reduce the risk of blowing a tire.

    • 0 avatar

      Christ, it’s stories like this that will prevent me from EVER buying a rental car, despite people telling me otherwise..

  • avatar

    I’m not sure I understand this part of the story:

    “Hertz will be allowed to “dispose of at least 182,521 lease vehicles” between now and the end of 2020. Proceeds will then be used to pay off $650 million it owes lenders, with most funds going toward principal payments on financed vehicles.”

    To sell a leased vehicle you first have to get the tiile, which is with whatever firm financed the lease, then hope the proceeds cover the lease payment obligations. Did Hertz have an in-house leasing company for their own fleet?

  • avatar

    I bought a Hertz rental and it took 3 months to do the deal – title, tags, etc. I can’t imagine them selling 200,000 cars.

  • avatar
    Jeff S

    Hertz will run these 200k cars thru an auction and dealers will be the buyers. An auction is the quickest way to dispose of these vehicles and get the cash Hertz needs.

    • 0 avatar
      Art Vandelay

      Yep. For the most part, you won’t get a “rental discount” unless you haggle with the dealer after pointing it out on the carfax. They may retail some of their higher end and exotic stuff, but they aren’t unloading all of those Altimas and what not through their retail channel.

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