No windfall for consumers from shrinking car rental fleets

The coronavirus and the related drop-off in travel have pummeled the rental-car industry. That means car shoppers may find deals on used vehicles this summer as the rental companies trim their fleets — but not necessarily bargain-basement discounts.

Auto rentals fell abruptly when the pandemic brought business and leisure travel to a near halt in March. Hertz, one of the world's largest auto-rental companies, filed for Chapter 11 bankruptcy protection in May.

The fate of Hertz's fleet remains uncertain, but analysts said the company may sell at least part of its holdings. (The company declined to comment on the outlook for its fleet, which is subject to negotiations in bankruptcy court.) Even before the bankruptcy, Hertz said it had accelerated sales of its cars and canceled orders for new ones. Other rental companies did so as well; Avis said it sold 35,000 cars in March, or about 10% of its fleet in the United States.

The additional rental cars for sale, along with a steady stream of cars coming off lease agreements, may push down prices for used cars, said Jeff Schuster, president of Americas operations and global forecasting at the research firm LMC Automotive. "It's good for consumers," he said.

But the auto market is complex and economic conditions remain in flux, so used-car experts said they can't predict the size of any discounts shoppers may see.

Wholesale prices — what dealers pay for used cars at auction — fell steeply in April, as demand dwindled and auctions were halted because of the pandemic, said Zo Rahim, manager of economics and industry insights at Cox Automotive. But demand and prices began rebounding in May, as states started to reopen their economies, Rahim said.

It is uncertain how much Hertz's bankruptcy will affect prices overall. Its holdings represent a small fraction of the roughly 40 million used-car transactions that occur each year, Rahim said. "It isn't enough to put huge downward pressure on prices," he said.

George Chamoun, chief executive of ACV Auctions, which conducts online used-car appraisals and auctions, attributed the rebound in vehicle values to more demand for used cars as people avoided public transportation and ride-hailing services out of concern about the virus.

But even as some people are buying cars to commute to work, others may be continuing to work at home, which may reduce demand for cars. Auto manufacturers cut production in response to the pandemic, and that may push more buyers to used models.

All of that doesn't mean there won't be deals to be had, Rahim said, but consumers shouldn't count on fire-sale prices.