Rental Car Companies Resort to Buying Used Cars Amid Microchip Shortage

Christian Wardlaw | May 04, 2021

A global microchip shortage is wreaking havoc across business supply chains, including those that fuel the automotive industry. 

rental car companies buying used cars amid shortage

Without the vital components, car companies must pause production, producing a scarcity of new vehicle inventory just as America’s economy is revving back up. This situation makes it harder for you to find the exact car, truck, or SUV you want to buy. And it makes it harder for you to rent a vehicle when traveling on business or for pleasure.

If you haven’t heard, car dealers are having a tough time keeping new vehicles stocked. The automotive industry’s production problems also make it difficult for rental car companies to buy new vehicles to replenish fleets. During the pandemic and associated steep drop-off in travel, rental car companies sold significant portions of their fleets to survive. Now that people are traveling again, rental car shortages are pushing prices higher – in some cases to stratospheric levels.

For example, if you travel to Honolulu, Hawaii for a week in July, a “Nissan Versa or similar” will cost $830 if you book a reservation two months in advance. Based on a search on travel website Expedia, that is one of the least expensive rental vehicles available at the airport from July 7 to 14. Since Hawaii is a popular travel destination for families, vans are the most costly vehicles to rent right now. The cheapest Chrysler Pacifica rental is a whopping $2,964 for the week.

These rates reflect the imbalance between supply and demand and are forecast to fuel profits as rental car companies rebound from a year of lost revenue. However, to ease this financial pain with consumers and to combat rental car apps such as Turo from siphoning customers, the big rental car companies are buying used vehicles to restock their fleets. (Through Turo, a 5-year-old Toyota Corolla is available in Honolulu for that same week for just $34 per day.)

“The global microchip shortage has impacted the entire car-rental industry’s ability to receive new vehicle orders as quickly as we would like,” Hertz spokesperson Lauren Luster told Automotive News. “Hertz is supplementing our fleet by purchasing low-mileage, preowned vehicles from a variety of channels including auctions, online auctions, dealerships, and cars coming off lease programs.”

With continued production problems stemming from the microchip shortage, the pipeline of new cars won’t fill until later this year. In addition to demand from rental car companies, consumers seeking vehicles are also turning to the used car market to find their next ride. Demand for pre-owned cars, trucks, and SUVs is strong, pushing prices for them much higher than is typical.

What does this mean for consumers? If you don’t need a new vehicle right now, wait until the semiconductor industry resolves the microchip shortage. If you have an extra vehicle that your household rarely uses, now is an excellent time to sell it to realize maximum resale value.

Or, if you live in a tourist hotspot, you might want to look into putting your car on Turo and make a little extra money on the side.

Trusted publications are the sources of information for this article. It was accurate on May 4, 2021, but it may have changed since that date.

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