The rental car services in the US have come to a halt. And it is affecting the auto industry, which is already collapsing.
No New Cars
Last year the US new car sales estimates at about 1.7 million to 1.9 million but this year it is not the same. Many rental car companies have already expressed that they are not going to purchase any new car as the demand for rental cars is low due to COVID-19.
Most of the business of rental cars come from airport locations. But the airports are operating with limited flights and very few passengers are traveling these days. It has brought the flights down by 94% as compared to the same time last year resulting in low demand for rental cars as well.
Need Cash Not Car
Hertz the rental car giant has announced that it will not buy any new cars this year. The company has also filed for bankruptcy, as it was not able to pay back its lenders and cope up with the debts. Avis the rival of Hertz also said that it would hold back the purchase of new cars by 80% this year.
Though both the companies are not buying new cars but still they have hundreds of thousands of cars in their fleet. The sports stadiums are filled with rental cars but experts say that the companies will soon sell out these cars in the coming months, which costs almost $1.5 million. As right now the companies don’t need the cars they need cash.
Selling the Used Cars
Hertz has already sold about 41,000 cars from its fleet in the United States and from its Europe fleet about 13,000 cars have been sold. As the car dealerships and auction of new and reused cars are closed this immobilizes the companies from selling their cars.
This was a major reason that Hertz filed for bankruptcy. Avis has also sold 35,000 cars from its US fleet in the month of March.
Despite the challenges both the companies expect to chop their fleet in the coming months.
Automakers in Turmoil
Once these companies start selling the cars the used car market will have more than enough supply and this will drop the prices. This will be good news for the used car buyers but it will dent the automobile industry.
It may also raise the cost of leasing the new car. Car sales to these car rental companies make a good size of business for the automobile industry. The struggles of which are enormous especially after closing down for nearly 2 months.
Although the cars sold to these companies are of the lowest margin, the revenue is good enough to keep things moving.