As Pandemic Eases, Travelers Find Car Rental Costs Will Be Huge
Travelers have been patient for more than a year as the pandemic raged across the country and they had to wait. Now, the pandemic shows some signs of waning and travel is slowly opening up. One of the results of the pandemic and travel is that rentals are now hugely expensive as this analysis shows.
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Now that signs of a slowdown in the pandemic are becoming evident, many travelers plan to visit friends and relatives they haven t seen in more than a year. If they aren t planning to see the people in their lives, they may be planning to take trips to vacation spots that the pandemic forced them to put on the back burner.
A semiconductor shortage has affected vehicle production.
This means there is a shortage of cars - and rental-car companies can t get the new cars they need.
The demand is sending the cost of used cars soaring.
The
semiconductor shortage has slashed vehicle production so much that rental-car
companies can’t get the new cars they need, so they have resorted to buying
used vehicles at auction.
This is uncharted
territory for the likes of Hertz Global Holdings and Enterprise Holdings, which
have made their profits by purchasing new vehicles cheaply in bulk, renting
them out for as much as a year and selling them at auction. In the past, they
Rental companies are buying up used cars as chip crisis deepens
The car crunch is a boon for rental companies, which can probably rent out every car they own at much higher rates than they charged before the pandemic.
Vehicle rental companies including Hertz, Dollar and Budget are listed on a sign at a parking garage in Arlington, Va.
The semiconductor shortage has slashed vehicle production so much that rental-car companies cannot get the new cars they need, so they have resorted to buying used vehicles at auction.
This is uncharted territory for the likes of Hertz and Enterprise, which have made their profits by purchasing new vehicles cheaply in bulk, renting them out for as much as a year and selling them at auction. In the past, they have bought some used cars to shore up an occasional unforeseen burst in demand, but rarely for the mainstays of their fleets.
Rental Agencies Uncharacteristically Buying Used Cars
With rental companies coming off a particularly lean 2020, fleet downsizing turned out to be a necessity for many agencies. Unfortunately, demand for rental vehicles has begun to return and some markets have found themselves operating with an insufficient number of cars. The upside to this is the ability to charge exorbitant fees for models nobody wanted to rent in the first place. But businesses can’t cash in on vehicles that didn’t get rented, leaving agencies desperate for new product that’s been backlogged by the auto industry’s semiconductor shortage.
The solution is a novel one, at least for rental companies. Rather than gamble the business on whether or not supply chains normalize before summer, they’ve been prowling auctions and hoovering up used cars in record numbers.Â