Used Cars From Shrinking Rental Fleets May Not Be the Steal You Expect - The New York Times

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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 say 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 percent 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 say 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. (The company’s holdings include Manheim, which runs auctions and tracks the used-car market.) But demand and prices began rebounding in May, as states started to reopen their economies, Mr. Rahim said.

It’s uncertain how much Hertz’s bankruptcy will affect prices over all. Hertz’s fleet comprises more than half a million vehicles in the United States, and a big influx of cars at one time would probably affect prices, Mr. Schuster said.

But the holdings represent a small fraction of the roughly 40 million used-car transactions that occur each year, Mr. Rahim said. “It isn’t enough to put huge downward pressure on prices,” he said.

Plus, it’s uncertain how many Hertz cars will end up on the market. Chapter 11 proceedings allow companies to reorganize and keep operating, rather than liquidating holdings. Hertz’s various outlets, including its Dollar and Thrifty locations, remain open for business.

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. Used-car values in some states are nearly back to where they were before the pandemic, he said, and in some — like Florida — are higher.

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, buoying demand — and prices.

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

Still, Julie Blackley, a spokeswoman for the car research firm iSeeCars, recommended checking rental agencies’ sales websites. The company analyzed thousands of cars available in May on HertzCarSales.com, where Hertz sells directly to consumers, and found many models were available at prices considerably lower than expected. On average, vehicles could be found for about $1,400 below market value, up from an average discount of less than $1,000 in April.

But rental cars, especially smaller models, which are typically less expensive to rent, may have more miles on them than other used cars, iSeeCars reported. The average mileage on Hertz cars sold in May was 31 percent higher than on used cars from typical dealerships. But luxury cars, which are less popular rental options because of their expense, often have “significantly” lower mileage than average.

Here are some questions and answers about buying a used rental car:

What are the pros and cons of buying a car from a rental agency?

Rental cars have many drivers, some of whom may not have treated the vehicle as gently as they would their own car. For that reason, buying directly from a major rental company may be preferable to buying from smaller outlets, which tend to buy used cars from the big companies and hold on to them for another cycle of rentals, said Jon Linkov, deputy auto editor at Consumer Reports.

“It’s had a life already,” he said. “Best to stay away from the third life.”

Most big rental companies replace their cars when they are one to two years old, but most warranties expire after a certain number of miles, Mr. Linkov said. So even if the model is relatively new, the time left on the manufacturer’s warranty may be limited.

Still, Mr. Linkov said, it’s wise to register a used car with the manufacturer, if there is any time left on the original warranty, to make sure you get notices of recalls and other updates.

The rental companies typically include limited warranties with their used vehicles. Hertz, for instance, offers 12 months or 12,000 miles, but that warranty is likely to be worthless if Hertz goes out of business, experts said.

The Coronavirus Outbreak

• Frequently Asked Questions and Advice

  Updated June 16, 2020

  • I’ve heard about a treatment called dexamethasone. Does it work?

    The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.

  • What is pandemic paid leave?

    The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.

  • Does asymptomatic transmission of Covid-19 happen?

    So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

  • What’s the risk of catching coronavirus from a surface?

    Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

  • How does blood type influence coronavirus?

    A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

  • How many people have lost their jobs due to coronavirus in the U.S.?

    The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.

  • Will protests set off a second viral wave of coronavirus?

    Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.

  • My state is reopening. Is it safe to go out?

    States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.

  • What are the symptoms of coronavirus?

    Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

  • How can I protect myself while flying?

    If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

  • How do I take my temperature?

    Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.

  • Should I wear a mask?

    The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

  • What should I do if I feel sick?

    If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.

  • How do I get tested?

    If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.

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Also, rental companies may not offer the most feature-laden models, Mr. Linkov said, so they may lack desirable safety options like blind-spot monitors and forward-collision warnings.

But because rental companies have increasingly tried to match their fleets with consumer taste, they may offer for sale models beyond the stereotypical “compact plastic box,” including sport utility vehicles, light trucks and luxury vehicles, said Jessica Caldwell, an analyst with the automotive website Edmunds.

How do I buy a car from a rental agency?

The major rental companies, including Hertz, Avis and Enterprise, offer websites where customers can search inventory, then visit a lot for a test drive. Prices on the direct-sale websites are typically fixed, with no haggling, Ms. Caldwell said.

Hertz has 90 sales locations and offers home delivery in 21 states; delivery is free within 75 miles, with fees of up to $1,000 for greater distances.

Avis offers home delivery at 14 sales lots. Enterprise offers it in some areas, according to its website.

The companies typically offer at least a few days for buyers to drive the car and return it if it doesn’t meet expectations. Mr. Linkov suggested having a trustworthy mechanic inspect the car during that time.

What financing terms are available on used-car loans?

The average used-car loan in the first three months of this year was $20,273, up from $20,137 from a year earlier, according to Experian Automotive. The average interest rate fell to 9.65 percent, from 10.06 percent.

Edmunds reported that the average interest rate for used cars in May was 8.3 percent.

Mr. Linkov advised approaching the purchase of a used rental car as you would any used car: Line up financing ahead of time so you aren’t forced to use the agency’s financing if your preapproved rate is lower.

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