Car prices decreasing due to Hertz unloading vast number of cars

[sengsational]

I don't consider myself an abuser, but did take the whining small rental to the telescopes and didn't worry too much about the strain. No need to ride the brakes, but got the rpms up on the way up and down.

 

[REWahoo]

But honestly don't give a hoot if the rental brakes are getting trashed as I descend Haliakila. Definitely a jeuvinal A-hole perspective to it!

In no way would I treat my cars the same way.

^ This is the same mindset that has always deterred me from becoming a landlord.

Back on topic, I agree with Brewer that the used car market probably won't bottom out on price for another couple of months at least. Being patient will probably save you a few bucks.

 

[aja8888]

The story on Hertz's vechiles:

Hertz, which runs the second-largest rental fleet in the US behind Enterprise, owns its fleet in two types of setups: as “program vehicles” and “non-program” (or at-risk) vehicles.

Program vehicles are purchased from automakers under repurchase or guaranteed depreciation programs, where automakers agree to repurchase the vehicles at a set price; or they guarantee the depreciation rate until the vehicle is repurchased or sold at auction. These program cars are more expensive for Hertz. But they have two benefits for Hertz that would now be sorely needed: They shift the risk of the vehicle’s value to automakers; and they allow Hertz to get out of units at preset prices, giving Hertz flexibility in cutting its fleet when it needs to without taking losses.

If Hertz decides to shed some of those vehicles, they’ll show up at the auctions, adding to the supply of used vehicles. But it’s the automakers that will have to take the losses.

However, only 29% of its fleet in the US, or about 164,000 vehicles, were program vehicles as of Dec 31, according to its 10-K filing.

The remaining 71%, or 400,000 vehicles, were non-program at-risk vehicles. They’re owned outright by the company, and it carries all the risks.

Hertz leased these 400,000 vehicles from entities it created and owns – such as Hertz Vehicle Financing II LP, a “bankruptcy remote” wholly-owned special-purpose subsidiary of Hertz. These special-purpose subsidiaries are not part of the bankruptcy filing. But they have securitized these leases of the at-risk fleet into $14.5 billion of asset-backed securities (ABS) as of March 31.

These $14.5 billion in ABS, which are also not part of the bankruptcy filing, are held everywhere, from pension funds to hedge funds and bond mutual funds. The 400,000 vehicles are the collateral.

On April 29, Hertz announced that it missed making the payment on its vehicle operating lease to its special-purpose subsidiary. Thus, the cash flow to the special-purpose subsidiary collapsed, which then cannot pay the holders of the ABS. Hertz was able to negotiate “short-term relief” with the holders of the ABS at the time, it said, but was “unable to secure longer-term agreements” to reduce the payments.

The ABS holders now have a right to foreclose on the vehicles and sell them at auction. But they have to wait for 60 days. So this scenario would commence toward the end of July.

https://wolfstreet.com/2020/05/24/h...-vehicle-market-with-burst-of-pent-up-supply/

 

[njhowie]

^ This is the same mindset that has always deterred me from becoming a landlord.

Back on topic, I agree with Brewer that the used car market probably won't bottom out on price for another couple of months at least. Being patient will probably save you a few bucks.

Definitely true. As I mentioned - dealers have also been refusing to take back leased vehicles which have reached their end of contract...and they will have to. This will add to the glut of available inventory.

https://losangeles.cbslocal.com/2020/04/29/dealerships-leases-coronavirus-pandemic/

https://www.usatoday.com/story/mone...tough-lenders-refuse-accept-autos/5120328002/

 

[REWahoo]

The story on Hertz's vechiles:

https://wolfstreet.com/2020/05/24/h...-vehicle-market-with-burst-of-pent-up-supply/

Good info. Looks like if anyone is in the market for a used car it might pay to wait until at least August to buy.

 

[Texas Proud]

They had an article recently where they were selling Corvettes Z-06s specially build for Hertz... and a 'decent' discount from what others were selling...


Not sure if any are still available as IIRC there were only 10...





BTW, I think most people treat the rental car as they do their own... it is a vehicle to get you from point A to point B... as for Camaro, I rented a convertible when we went to Hawaii... drove it like a normal car but enjoyed it... plus it was designed to be driven hard.. I would not get one because they are not that great on long term reports...

 

[OldShooter]

Good info. Looks like if anyone is in the market for a used car it might pay to wait until at least August to buy.

Yes. There will be a liquidation plan proposed to the court, including a plan for the ABS vehicles. Probably they will just be legally handed over as foreclosed collateral. Then the ABS security owners will participate in some kind of plan to sell them, probably in wholesale quantities. Finally those buyers will feed them into the auctions.

The fancy 'vettes and (IIRC) Camaros may be a special case and actually be owned by Hertz. If so, they can be sold to improve the company cash position. If someone can get a VIN I suppose the actual titled owner can be identified.

 

[RunningBum]

An example of the "abuse" I used to give rental cars would be to go out of the hotel in the morning and with very little time to warm up I'd be gunning it up the very near on ramp to a freeway. Not that good for a car, and not something I'm usually in a position to do with my car. So, yes, I am generally harder on rental cars than with my own.

 

[Golden sunsets]

The very first thing I do with a rental car is floor it to see if it will burn out. I take them up mountains, and don't worry about burning brakes on the way down. I don't worry about curbs. I baby nothing in the car. I don't dent them though. That would cost me.

Seriously? Why would you do that?

Having asked that though, as it sounds like atypical(strange) behavior, I would never buy a rental vehicle, as there may have been literally many hundreds of people who rented the car before the rental company retired it. That fact would not appeal to me.

 

[Golden sunsets]

I use them as test to see if the make of car is worthy for future make or model purchase decisions. But honestly don't give a hoot if the rental brakes are getting trashed as I descend Haliakila. Definitely a jeuvinal A-hole perspective to it!

In no way would I treat my cars the same way.

Well I'll give you points for owning up to A hole behavior.

 

[NameTaken2]

I use them as test to see if the make of car is worthy for future make or model purchase decisions. But honestly don't give a hoot if the rental brakes are getting trashed as I descend Haliakila. Definitely a jeuvinal A-hole perspective to it!

In no way would I treat my cars the same way.

kar·ma
/ˈkärmə/
noun: karma (in Hinduism and Buddhism) the sum of a person's actions in this and previous states of existence, viewed as deciding their fate in future existences.

1. informal
   • destiny or fate, following as effect from cause.
   
   
   
   

 

[Montecfo]

Aja8888-

Thanks, that is very valuable to cut through the clutter on the Hertz situation.

Commenting on the thread, I have not found that CPO cars are primarily former rentals. In my experience, most are lease returns but some are also bought at auction, as are a great many used cars in the US.

I do find the former rentals through Hertz are cheaper in terms of ask prices. My guess is that is a pretty cheap way to buy, assuming you do your homework.

Any used car purchase carries an element of risk. I would not shy away from buying a low mileage former rental for the sole reason that it was a rental. I think you need to inspect the car and scrutinize history.

I do know folks that primarily seek to buy a rental when in the market for a car, because they perceive there is value in them.

 

[brewer12345]

Yes. There will be a liquidation plan proposed to the court, including a plan for the ABS vehicles. Probably they will just be legally handed over as foreclosed collateral. Then the ABS security owners will participate in some kind of plan to sell them, probably in wholesale quantities. Finally those buyers will feed them into the auctions.

The fancy 'vettes and (IIRC) Camaros may be a special case and actually be owned by Hertz. If so, they can be sold to improve the company cash position. If someone can get a VIN I suppose the actual titled owner can be identified.

Since the ABS trusts are bankruptcy remote, they needn't go through the court to liquidate collateral. All they have to do is follow the rules laid down iin the offering memorandum/indenture.

 

[RunningBum]

I get that people don't like how daydreamer drives rental cars. However, if you think that people drive rentals gently and are thinking of buying one used, you might appreciate that insight that some treat them more roughly. I doubt he's the only one.

 

[braumeister]

I do know folks that primarily seek to buy a rental when in the market for a car, because they perceive there is value in them.

I have two friends who have been buying from rental companies for over 40 years and never gotten anything but a good deal.

 

[RockyMtn]

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.

We used to have a saying..."only kind of car better than a four wheel drive car is a rental car. Only kind of car better than a rental car is someone else's rental car!"

 

[RunningBum]

We used to have a saying..."only kind of car better than a four wheel drive car is a rental car. Only kind of car better than a rental car is someone else's rental car!"

Ha! I remember riding on a city street in Chicago with a co-worker. At the last minute both of us saw a big pot hole he was headed toward. Might be dangerous to swerve, might be dangerous to stop, definitely brutal on the car if he did neither. In unison we said "Rental car!" and he banged through it.

 

[Z3Dreamer]

Let me summarize. Many have good experience with buying cars from rental agencies. Many have personal experience with how rental cars can be treated poorly. For recent events to cause any price movement will take some time - maybe a few months.

Anything else?

 

[VanWinkle]

But why?

I don't drive a rental car any different than I do my personal vehicles... they are a way of getting from A to B.

Just because I can get away doing something stupic doesn't mean that I am so juvenille as to do it.

+1

 

[REWahoo]

Anything else?

Wait until 70 to take SS, don’t buy a variable annuity, and LBYM.

 

[FANOFJESUS]

But why?

I don't drive a rental car any different than I do my personal vehicles... they are a way of getting from A to B.

Just because I can get away doing something stupic doesn't mean that I am so juvenille as to do it.

+1
I drive them better because if something goes wrong I have to pay for it. On my own car if I scratch it I don't have to pay for it.

 

[wrigley]

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

Mike

 

[Badger]

But why?

I don't drive a rental car any different than I do my personal vehicles... they are a way of getting from A to B.

Just because I can get away doing something stupic doesn't mean that I am so juvenille as to do it.

+1 although I rarely rent a car anymore since retired. However, my experience over the years and especially the past couple of decades, is that a huge number of people mistreat their cars, drive recklessly, and don't know the rules of the road. My best guess is they don't care or don't have proper instruction (if any) when getting a driver's license, and figure insurance will take care of any damage. Concern for others on the road is not part of their thought process. Try riding a motorcycle or bicycle to get the experience driving on the road with cars these days. If you have survived and are still in one piece then you have seen and experienced how reckless people are with their cars.



Cheers!

 

[braumeister]

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-was-already-in-terrible-shape-the-pandemic-finished-it-off-11590434631?mod=itp_wsj&mod=&mod=djemITP_h

 

[Markola]

Yes. There will be a liquidation plan proposed to the court, including a plan for the ABS vehicles. Probably they will just be legally handed over as foreclosed collateral. Then the ABS security owners will participate in some kind of plan to sell them, probably in wholesale quantities. Finally those buyers will feed them into the auctions.

The fancy 'vettes and (IIRC) Camaros may be a special case and actually be owned by Hertz. If so, they can be sold to improve the company cash position. If someone can get a VIN I suppose the actual titled owner can be identified.

Here’s an out take from the Wolfstreet article summarizing what happened to them. Fortunately, it appears taxpayers apparently haven’t had to clean up after the greedy financial engineers who ruined Hertz, though I’d bet Hertz has DC lobbyists working overtime, too:

“Hertz was ripe and ready when the pandemic hit.

Hertz’s debt problem goes back to its leveraged buyout in 2005, when ML Global Private Equity Fund (an affiliate of Merrill Lynch) and private equity firms Carlyle Group and Clayton, Dubilier & Rice acquired the company from Ford. In November 2006, while the getting was still good, they sold the heavily indebted Hertz via IPO to the public.

But 14 years is a long time, and if the company had tried to reduce its debt load, it could have, including by raising new equity capital by selling shares in follow-on offerings when its share price was still high. But it waited to raise equity capital until June 2019, via a rights offering of $750 million, by which time its shares had already collapsed to the $16-range. Icahn loaded up.

Hertz said that it has tried to obtain a bailout from the US government and from European governments, but that such bailout for the rental car industry “did not become available.”

So Hertz was ripe and ready, and when the pandemic crushed travel in general and demand for rental cars, Hertz popped.