Mismanagement and debt have plagued the company for years.
The pandemic has all but killed rental car companies.
Hertz owns the vast majority of its fleet, contrary to its competitors.
All companies and services related to travel and tourism have been hurt by the pandemic. Rental car agencies are no different. Typically, in tough times, car fleets are trimmed via sales or returns in order to slow financial losses. In the US specifically, the used car market has taken a hit from slowed sales amid the pandemic and an influx of hundreds of thousands of cars from Hertz will only further devastate the used car market – over 560,000 in the US alone.
While part of the story may be that Hertz could be forced into bankruptcy due to their crushing $21 billion debt, what is of particular interest to us is the fact if all 3,000+ locations end up liquidating their fleets, the damage to the already struggling used car market will be catastrophic. Because it owns up to 89% of its fleet, compared to 66% for Avis Budget Group, Hertz will need to offload them and not “return” them.
Volvo XC60 T8 | Photo: Olivier Delorme
The impact is double fold, in a way, as a slowed used market will show little interest at auctions to buy these vehicles, further pushing down their value. Now, the upside could be loads of cheap late-model cars and SUVs to buy for consumers, which is the case, but sales have declined by up to 70% in April.
A perhaps unexpected side-effect to this will be manufacturers, such as GM, Volvo, FCA, Nissan, and others, will be forced to lower residual values on their leases. This will negatively impact leasing’s relative affordability. This is an ongoing story.
Hertz has until May 22nd, tomorrow, to work out a deal with its lenders and bondholders
Nissan Rogue | Photo: Nissan
