The Great Car Rental Revival of 2020

Matt Posky
by Matt Posky

Rental-car agencies, shunned by a population that didn’t know whether it was safe to go outside for most of the year, have reportedly started to turn things around. While the recovery didn’t come soon enough to save Hertz from having to declare bankruptcy, the summer months were much kinder to the industry as a whole. Despite the likelihood of 2020 remaining an unprofitable year, the final two quarters should help rental groups recoup some of the sustained losses.

A recent assessment conducted by the Wall Street Journal suggested that the industry is benefiting from a population that continues to shun air travel during the pandemic and elevated used vehicle pricing. While discount prices actually hampered Hertz right when it needed a miracle, secondhand auto rates surged through the latter half of the summer and helped stabilize the rest of the vehicle rental industry.

From WSJ:

These trends helped Avis Budget Group Inc. swing to a net profit of $45 million in the third quarter, reversing losses in the first half of the year, the company said Friday. Privately held Enterprise Holdings Inc. also said it has benefited from an uptick in leisure travel, with bookings improving over the summer and customers renting vehicles for longer periods.

Both Avis and Enterprise say they plan to resume buying vehicles to update their fleets after some downsizing earlier in the year, a move that could bolster sales for car companies reliant on rental-car firms for a portion of their business.

Hertz, still in bankruptcy and recently delisted from the New York Stock Exchange, this summer pointed to record used-car prices as aiding efforts to whittle down the company’s fleet to raise cash.

“We’re starting to see new usage cases for rental cars,” Chris Woronka, an analyst for Deutsche Bank, told the outlet. “In big cities, people are renting cars to get to work, and some companies are even paying for that instead of public transportation. That just didn’t exist before.”

As someone who is dumb enough to live in one of those big cities right now, your author can attest to how difficult it is to snag a trouble-free rental. By August, the spring’s rock-bottom pricing and bloated inventories had completely evaporated — leaving customers with fewer options and higher prices. Worse yet, most facilities have incredibly aggressive health protocols in place that make the whole affair kind of frustrating. That, working in collaboration with low fuel prices, convinced me to take my vintage gas guzzler outside the city limits for the first time in ages. But I’ll be back with the rest of the suckers come the holidays, as plane travel comes with new restrictions I’d rather not deal with.

Many Americans are also avoiding ground-based mass transit whenever possible, Uber/Lyft ridership remains heavily suppressed, and there has been a mass exodus from cities. All of that has contributed to jacking up used vehicle prices and rental demands. While June offered the first real signs of the industry turning a corner, things just kept getting better. By September, it had become clear that rental firms no longer needed to worry about staying afloat and instead needed to begin planning for what will presumably be an extremely busy winter.

“Rental-car companies suddenly were in a very ideal position,” said Jonathan Banks, an automotive analyst with J.D. Power who tracks vehicle valuations. “There was some initial worry that they would flood the used-car market, but it ended up being a boon.”

[Image: Roman Tiraspolsky/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

More by Matt Posky

Comments
Join the conversation
3 of 7 comments
  • Watersketch Watersketch on Nov 03, 2020

    Have tried to pick up a rental car the last couple of weekends and the local Avis locations have been sold out. This usually only happened over holiday weekends.

  • Petey Petey on Nov 06, 2020

    I worked for a a rental car company and keep in touch with a few that are still in the game. 75% of the work force was laid off in March with no one called back to this day. And this is at one of the busiest locations in N.america. I highly doubt they are making a comeback going into the slowest part of the season for rentals.

    • Scoutdude Scoutdude on Nov 06, 2020

      I can see higher than normal rental car activity for Thanksgiving and Christmas, though more of an expansion of the time frames. Less people will fly and rent just before/after and more people will rent to drive to their destination, picking up the car earlier and dropping it off later to account for the travel time. Because many can work remotely now, that may also lead to longer stays at the destination. So instead of flying Wed for Thanksgiving they'll be driving on Sat/Sun and working remotely Mon-Wed. Don't know if those additional days for the drive only people will make up for the loss of the fly-drives.

  • ToolGuy This might be a good option for my spouse when it becomes available -- thought about reserving one but the $500 deposit is a little too serious. Oh sorry, that was the Volvo EX30, not the Mustang. Is Volvo part of Ford? Is the Mustang an EV? I'm so confused.
  • Mikey My late wife loved Mustangs ..We alway rented one while travelling . GM blood vetoed me purchasing one . 3 years after retirement bought an 08 rag top, followed by a 15 EB Hard top, In 18 i bought a low low mileage 05 GT rag with a stick.. The car had not been properly stored. That led to rodent issues !! Electrical nightmare. Lots of bucks !! The stick wasn't kind to my aging knees.. The 05 went to a long term dedicated Mustang guy. He loves it .. Today my garage tenant is a sweet 19 Camaro RS rag 6yl Auto. I just might take it out of hibernation this weekend. The Mustang will always hold a place in my heart.. Kudos to Ford for keeping it alive . I refuse to refer to the fake one by that storied name .
  • Ajla On the Mach-E, I still don't like it but my understanding is that it helps allow Ford to continue offering a V8 in the Mustang and F-150. Considering Dodge and Ram jumped off a cliff into 6-cylinder land there's probably some credibility to that story.
  • Ajla If I was Ford I would just troll Stellantis at all times.
  • Ronin It's one thing to stay tried and true to loyal past customers; you'll ensure a stream of revenue from your installed base- maybe every several years or so.It's another to attract net-new customers, who are dazzled by so many other attractive offerings that have more cargo capacity than that high-floored 4-Runner bed, and are not so scrunched in scrunchy front seats.Like with the FJ Cruiser: don't bother to update it, thereby saving money while explaining customers like it that way, all the way into oblivion. Not recognizing some customers like to actually have right rear visibility in their SUVs.
Next