Car prices decreasing due to Hertz unloading vast number of cars

[grasshopper]

Hmmmm, just paid for 5 more years of tabs/registration on my 10 yo GMC PU. Side note Ms.G wanted a small car cause she thought the truck was too big. So now we have the Santa Fe but she drives the PU because she feels safer, .

 

[jazz4cash]

Interesting article in the WSJ today (I'm sure it's behind a paywall, but the headline is "Hertz Was Already in Terrible Shape. The Pandemic Finished It Off" so you may be able to google it).



The gist of the article is that Hertz has been horribly mismanaged for many years and was heavily indebted, so unlikely to survive the bankruptcy. Major investor Carl Icahn is expected to lose his entire $1.5 billion investment in it.



https://www.wsj.com/articles/hertz-...ff-11590434631?mod=itp_wsj&mod=&mod=djemITP_h

Didn’t read the piece but I suspect many of the BKs due to pandemic are similar: companies that were already on the ropes when the pandemic hit. It may give them cover to blame BK on the pandemic and a few will actually benefit from the lifeline provided by BK. Many will probably go under anyway or get acquired because bad management is bad management.

 

[Perryinva]

So I guess my Hertz points are worthless now. I had a few free rentals days worth.

 

[braumeister]

I used to be a loyal Avis customer -- used them for decades. But after they merged with Budget the service seemed to go downhill and in the last few years I've had much better service with Hertz, so I'm sad to see this happen.

 

[GTFan]

Rental cars are the perfect cars for going off-road, practicing burnouts, and hitting speed bumps at speed. I’ve done all that or been in a rental with friends who’ve done that.
I wouldn’t buy a rental under most any foreseeable circumstance.

Lots of anecdotes, not a lot of evidence that it's widespread. And anyone can get a car inspected before purchase, the rental car sales outfits give you plenty of time to do so.

I've had no issues buying multiple former rentals over the years, which is just another anecdote.

 

[Spanky]

I could never buy a previous rental. The smell of the inside of a rental car makes me gag!

Mike

Don't they do extensive cleaning prior to selling?

 

[timo2]

The rental cars in legal cannabis states are rumoured to smell like cannabis, because that is the only place many tourists could smoke the stuff. Or so I heard.

 

[ExFlyBoy5]

I would give it a month or two before expecting to see what the Hertz liquidations will do to prices. They are now in bankruptcy and anything they do likely requires the assent of the presiding judge.

This. It's going to take time and the BK Court is not going to let them go out and sell a bunch of assets without approval, and this will mean a lot of gnashing of teeth with creditors.

And this...

In November 2006, while the getting was still good, they sold the heavily indebted Hertz via IPO to the public.

What?!? This *never* happens with ANY companies!!!

 

[ExFlyBoy5]

The rental cars in legal cannabis states are rumoured to smell like cannabis, because that is the only place many tourists could smoke the stuff. Or so I heard.

You can't smoke in the cars and most of the companies have high fines for doing so. I have rented many cars where pot is legal and I have *never* "smelled" pot in the cars. So, yep...big rumor as far as I am concerned.

 

[aja8888]

What?!? This *never* happens with ANY companies!!!

Well, that's what private equity guys do! How else would they raise money for their "bonus".

 

[statsman]

I wonder if this will ripple over from the used vehicle market to new vehicles. So far from what we've seen, most new vehicle manufacturers/dealers are holding firm to close to MSRP, less a small discount for incentive.

Our DD is in the market for a new vehicle, but we're seeing less incentive to sell new vehicles now than there was back in February. It may take a few months for the new vehicle market to shake out. By that time, new vehicle models for 2021 would normally start coming out. Gotta wonder about that too.

 

[brewer12345]

I wonder if this will ripple over from the used vehicle market to new vehicles. So far from what we've seen, most new vehicle manufacturers/dealers are holding firm to close to MSRP, less a small discount for incentive.

Our DD is in the market for a new vehicle, but we're seeing less incentive to sell new vehicles now than there was back in February. It may take a few months for the new vehicle market to shake out. By that time, new vehicle models for 2021 would normally start coming out. Gotta wonder about that too.

I would not be shocked if the factory shutdowns and the difficulties getting restarted mean that the supply of new vehicles is modest hence the low discounts. If they successfully start cranking out loads of new cars into a high unemployment economy, you may well see discounts grow.

 

[intent]

Just read an article that France is bailing out their auto manufacturers and is offering a $7K rebate to purchasers of EVs and $2K for hybrids. According to the article, they have ~400K cars that are built and ready to be sold just sitting.

Not sure if the US manufacturers are in the same boat.

 

[MatatuPuncher]

I am shocked at the number of people that would consider buying a rental car. The amount of abuse dished out to those things, omg.

 

[braumeister]

I am shocked at the number of people that would consider buying a rental car. The amount of abuse dished out to those things, omg.

Too narrow a perspective. Sure, there are a$$holes who routinely abuse rentals. But I've been renting cars for business and vacation travel for half a century and I've never abused one. It's just transportation when you're away from home. I have to think I'm fairly typical, so the abusers must be a minority.

For my two friends who have been buying from rental fleets all their lives, there have been no lemons and all good deals. So that's just an anecdote but still a data point.

But I suppose I have to admit that I'm one of those who think most people are good. That gets me in trouble once in a great while, but most of the time it keeps my stress level way down low.

 

[Montecfo]

I wonder if this will ripple over from the used vehicle market to new vehicles. So far from what we've seen, most new vehicle manufacturers/dealers are holding firm to close to MSRP, less a small discount for incentive.

Our DD is in the market for a new vehicle, but we're seeing less incentive to sell new vehicles now than there was back in February. It may take a few months for the new vehicle market to shake out. By that time, new vehicle models for 2021 would normally start coming out. Gotta wonder about that too.

It has to, yes. It will be a buyer's market for cars for perhaps the next few years.

 

[aja8888]

I am shocked at the number of people that would consider buying a rental car. The amount of abuse dished out to those things, omg.

Buy a 2 to 3 years old used car at a dealership and pull a Carfax. Half the time the original owner is listed as "Fleet", and guess what that means. In good times, their probably are upwards of 2 million "fleet" cars entering the used market annually. Guess where they go......

 

[Z3Dreamer]

And then there is this:
https://www.latimes.com/business/story/2020-05-01/auto-glut-parked-on-ships

It says that normally ships carrying new autos dock, unload, then leave. Auto business is normally a "just-in-time" kind of thing. Now, ships are waiting to dock. Once they do, dealers and rental agencies don't want or need them. So manufacturers are renting lots to stockpile.

 

[teejayevans]

I think you need to wait until October when 2021 models come out. Big dealers have to take their allotment so they should be willing to lower prices on the 2020 models they haven’t sold.

 

[Bamaman]

Getting back to the original statement about used car prices going to decrease because of the Hertz bankruptcy.

It's going to be a couple of months before the court hearing where the judge gets a plan of action on what to do with this company.

Hertz will reorganize and thousands and thousands of vehicles will be liquidated. And they will come back as a smaller, leaner company.

I also expect many of the other rental car companies to go to school on what Hertz has recently done wrong and avoid doing such a thing. Enterprise will continue as the top dog in the industry.

In the meantime, Hertz will no longer be purchasing additional vehicles, and those rented out will be getting higher mileage. Eventually cars going to auctions will be purchased at "advantageous prices", and they'll be good buys--for those that like to drive vehicles that are a little less luxurious.

The automobile companies have been counting on rental car companies to purchase around 15% of their production. Production has already been down due to SUV's being the hotter end of the retail market. I can see automobile production to be taken down lower than they are even now.

I've been watching our local Hertz rental lot close to my house. They've seldom had any cars on the lot except on weekends. We do have an Enterprise lot in town, and they too appear to be doing well. No other competition is out there other than the car dealerships.

Whenever the Corovid situation is settled and the traveling salesmen get back on the road, they may have difficulties obtaining rental cars locally and in far off cities. They provide a service in most times that's very much needed--but few salesmen are presently out on the road right now.

 

[RetiredAtThirty-eight]

And then there is this:
https://www.latimes.com/business/story/2020-05-01/auto-glut-parked-on-ships

It says that normally ships carrying new autos dock, unload, then leave. Auto business is normally a "just-in-time" kind of thing. Now, ships are waiting to dock. Once they do, dealers and rental agencies don't want or need them. So manufacturers are renting lots to stockpile.

Normally, in the US, automobile inventory ebbs and flows with the seasons. January-April are slow and inventory builds up. Then they sell it off through the summer and into the end of the year. This year automakers had more than normal amounts of inventory as Coronavirus started to shut things down so they have a problem on their hands, even with the reduced production due to CV shutdowns.

Now some big automakers are shutting production, ostensibly due to a failure of their supply chain to have the necessary parts available and the auto workers union is applying pressure at some plants to shut production due to a couple of employees who tested positive. But the UAW only represents the workers in principle - often they are actually doing the bidding of the automakers themselves. In other words, corruption at the expense of the workers. If Ford or GMC had to admit they had stopped making cars because they couldn't sell enough of them it would tank their stock even worse. So, they make up excuses for stopping production.

The auto dealers have contracts and take out loans to buy the new production so the automakers get to sell the vehicle right off the production line, at least until the dealers have too much inventory.

Oddly enough, Tesla is making cars faster than ever before and has a huge order backlog and very little inventory in most areas! They were supply-constrained before Coronavirus hit and they are still supply constrained even with both factories in full production. Their new Model Y has the highest demand and you might have to wait a few months to get one.

 

[Sunset]

Carl Icahn has really disappointed me, not the investment whiz he was touted to be.
Maybe I can get a Hertz car as a dividend

 

[Dawg52]

I am shocked at the number of people that would consider buying a rental car. The amount of abuse dished out to those things, omg.

I've had a couple and both performed well and were in good shape when I bought them. Maybe I was lucky.

 

[REWahoo]

I've had a couple and both performed well and were in good shape when I bought them. Maybe I was lucky.

Same here.

Actually I've heard far more complaints about getting a lemon from people who bought new cars than from those who purchased a rental. Probably just luck.

 

[ExFlyBoy5]

Same here.

Actually I've heard far more complaints about getting a lemon from people who bought new cars than from those who purchased a rental. Probably just luck.

Makes sense. Rental cars that are resold have most bugs worked out of them (if any). I own a vehicle (truck) that was fleet and runs great. The *only* issue I have ever had with a car purchase was a brand new one that was eventually bought back under the state lemon law. I wouldn't hesitate to buy another fleet vehicle.