Rental companies snapping up used cars as chip crisis gets worse – Honolulu, Hawaii

Honolulu, Hawaii 2021-05-04 02:12:49 –

  • The shortage of semiconductors is affecting vehicle production.
  • This means there is a shortage of cars-and car rental companies can’t get the new cars they need.
  • Demand is driving the cost of used cars soaring.

The lack of semiconductors drastically reduced car production, making it impossible for car rental companies to get the new cars they needed, so they decided to buy a used car at auction.

This is an unknown territory, like Hertz Global Holdings and Enterprise Holdings, where you’ve made a profit by buying new cars in bulk at low prices, renting them out for a year, and selling them at auction. In the past, they bought some used cars to support the occasional unexpected surge in demand, but rarely because of the flagship of their fleet.

“You’ll never go to auction to buy a regular sedan or SUV,” said Maryann Keller, an independent consultant who was now a board member of the Dollar Lifty Automotive Group, which is part of Hearts. It was. “These are special situations. There is a shortage of cars.”

Demand is driving the cost of used cars soaring. The Mannheim index, which measures the price of wholesale auctions, shows 52% higher than it was a year ago.

Jonathan Smoke, Chief Economist at Cox Automotive, which owns Mannheim, the country’s largest used car auction, said: “Retail prices tend to follow wholesale trends with a six-week delay, so we expect retail prices to continue to rise until summer.”

Vehicle production fell 4.6% in the first quarter, according to LMC Automotive. This is compared to 2020, when the factory had already lost weeks of work due to the Covid-19 pandemic.

Despite the cost of the acquisition, Kircrunch is a boon to rental companies and can be very profitable as it rents all cars owned at a much higher rate than billed before Covid’s pandemic. .. But consumers will be hit if they want to rent a car for vacation, Keller said.

Hertz is adding as many cars as possible to its fleet to support travel rebounds, including used cars, spokeswoman Lauren Raster said in an email.

“The global shortage of microchips has affected the ability of the entire car rental industry to receive new car orders as soon as we want,” Raster said. “Hertz complements our vehicles by purchasing fuel-efficient used vehicles from a variety of channels, including auctions, online auctions, dealers, and vehicles that are out of the leasing program.”

The same is true for the tightly held enterprise, the country’s largest rental company. The Avis Budget Group did not immediately respond to requests for comment.

“Our fleet acquisition team is working hard to secure additional vehicles (both new and fuel-efficient used vehicles) across all channels to meet the ongoing increase in demand.” Said Enterprise spokeswoman Lisa Martini in an email. “But overall, both new and used car inventories remain low. Our team will continue to do everything we can to support our customers’ transportation needs.”

Hyundai’s sales to fleet buyers fell 27% in April as the company focused on producing for satisfying retailers, said Chief Operating Officer Jose Munoz.

“When I joined the company, I had a strategy to prioritize retail and fleet,” Munoz said in an interview. “We are grateful for the fleet business. We have a very good fleet business and we strive to support it as much as possible. But yes, we deliver to end customers. Priority is given. “

The problem began a year ago when the pandemic drastically reduced travel. The rental company has sold hundreds of thousands of cars, said Neil Abrams, president of the Abrams Consulting Group, which works in the rental industry. Later, when car production was hit by a shortage of semiconductors, the trip quickly bounced back.

Ford Motor Co.’s production will decline by 17% in the first quarter and could decline by as much as 50% in the second quarter, the company said in a statement on April 29. Other companies have a foresight message as well.

“This is one of the rare events I’ve seen, with a lot of customers and a shortage of cars,” Abrams said.

Supply tightens

Mannheim’s smoke said in an email that supplies are becoming increasingly tight. Mannheim started this year with record low supply, but further increases in demand further reduced it, he said. The value of wholesale vehicles has risen for the 13th consecutive week so far, and prices have accelerated to the highest weekly levels in recent weeks.

Rental companies have to keep their cars longer. According to a mid-month report in Mannheim in April, the average mileage of rental cars auctioned was 127,000 km, up 54% year-on-year and 18% month-on-month. Rental companies usually like to sell their cars before they reach 64,000 km, Keller said.

Meanwhile, AutoSlash CEO Jonathan Weinberg says that if consumers can find a car, they are paying the highest price.

“You can see some amazing numbers. You can see average rates of $ 100 a day (R1440) in Florida, $ 200 a day (R2 880) in Hawaii, and $ 600 a day (R8 640) in Puerto Rico. You can, “says Weinberg. Said. “We expect it to worsen in the coming weeks. Vehicle movements are increasing and vehicle inventories are decreasing.”

Jefferies & Co. Avis said prices rose 3% in the fourth quarter, said Hamzah Mazari, an analyst at. Avis believes it can report an increase in daily earnings of at least 4% in the first quarter. The company announced earnings on Monday after the deal closed.

Consumers may hate it, but he says rental companies will enjoy some fat margin a year after Hearts goes bankrupt and Avis loses $ 569 million (Rant 8.1 billion). It was.

“We haven’t seen such a rate for a long time,” Mazari said. “They will make very good profits.”

Source: News24

Rental companies snapping up used cars as chip crisis gets worse Source link Rental companies snapping up used cars as chip crisis gets worse

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