Rental car prices skyrocket as the pandemic causes supply shortages
Philadelphia — As the economy restarts, distortions are rippling through a wide swath of industries and sector. One such business is the car rental market, which has seen prices skyrocket as the car supply plummets.
Maureen Curry wanted to rent a seven-passenger minivan or SUV in July for a trip to her son’s Marine Corps initiation at Quantico, Virginia.
She’s a rental-car veteran: The 55-year-old Downingtown woman and her husband, Rick, had rented vehicles more than a half-dozen times a year over the last eight years, as their two older children traveled off to colleges and set up apartments, saving wear and tear on their own vehicles.
But this time, Curry said, none of the big rental companies had any vehicles available for the trip. And she had been shopping two months in advance.
“I’ve never, ever had to make a reservation for a vehicle more than two days in advance,” Curry said, “and never had difficulty getting a vehicle before this occurrence.”
It’s no secret that getting a rental car has become tricky in some locations, and very expensive in many others.
According to AAA’s Leisure Travel Index, average daily car rental rates have almost doubled from $89 a day over Independence Day 2020 to $166 during that same time period in 2021. But some destinations are getting hit much harder, with daily prices reportedly ranging from $250 to $600 or more at some airports across the country.
Sue Spinney, vice president for ground transport with the Expedia Group, said in an email that a comparison of searches for rental cars showed interest more than doubled, jumping 115%, from June 2019 to June 2021.
The rental-car shortage gained a national audience July 8 after singer-actor Audra McDonald, known recently for her role as Liz Reddick in the legal drama The Good Fight, posted her frustration on Twitter when she discovered Hertz had no cars in Atlanta, tweeting: “lt’s the hunger games out here.”
Jessica Caldwell, analyst for the automotive industry go-to site Edmunds, explained the tsunami of bad events that befell the rental-car industry.
First came the pandemic, and the country went into lockdown. Because so much of rental-car business involves vacationers and business travelers, once those industries dried up, rental car companies faced a cash-flow cliff.
Executives had to sell off unused vehicles, in some cases as part of bankruptcy restructuring.
This business decision seemed wise at the time. Hertz, which also owns Thrifty and Dollar brands, reported that between April and June last year, utilization of its U.S. cars was a dismal 28%, versus 82% during the same period in 2019. The 2020 plummet came despite its rental fleet shrinking by almost 50,000 cars compared with its 554,794 vehicles the prior year. So, obviously, some of these cars had to go.
And so they did — from 516,726 vehicles at the end of 2019 in the U.S. to 298,183 at the end of 2020, according to Hertz, a 40% reduction in a year. The company achieved utilization rates of about 75% by both the end of 2019 and the end of 2020, according to Hertz.
But, Caldwell continued, the trouble didn’t stop there. In 2021, the spread of vaccinations had Americans eager to get back on the road, and demand for rental cars increased. At the same time, consumer demand to purchase vehicles also skyrocketed, in part because people were wary of mass transit in the pandemic. Car sales, after wobbling in spring 2020, went through the roof by the end of the year — and stayed there.
And finally came the computer chip shortage. Cars couldn’t be finished for lack of computer chips, and with a shortage, automakers are not interested in fleet business.
“In terms of automakers wanting to sell cars, their first priority is retail consumers, or people like you and me, and secondly is their fleet customers,” Caldwell said. “I think rental cars are kind of at the bottom of that list; those are generally the lowest margin in terms of their profit.”
Caldwell shared the experience of a colleague at Edmunds, who had just returned from a trip to her home state of Hawaii.
Talia James-Armand, Edmunds’ associate director of public relations and communications, said finding a three-row SUV for five nights in the Aloha State became an impossibility. Her party settled for a Dodge Grand Caravan, but it came at a cost.
Five days with the car cost $2,100, James-Armand said, or $400 a day, compared with about $90 when she’d taken a trip to the Big Island in 2018.
“Finding lodging was no issue, but finding a rental car was kind of a nightmare,” James-Armand said.
A new wrinkle that may change the rental car market yet again is the coronavirus delta variant, and the new masking and travel advice from the Centers for Disease Control and Prevention. Jana Tidwell, AAA MidAtlantic manager of public and government affairs, said AAA always emphasizes that travelers follow the CDC guidance if they decide to get out of town.
“It feels as though we are having a very different conversation about travel today than we were having just two or three weeks ago,” Tidwell said.
She expects demand to drop after Labor Day, after a summer season when travel demand was down just 2% overall from 2019, according to AAA’s figures. Business travel has not rebounded in the way leisure travel has, Tidwell added.
Keli Laverty of West Chester wanted to explore Glacier National Park in Montana for a week and needed an eight-passenger vehicle for a week-long trip in late August.
“It was really impossible to find a car,” said Laverty, 43. She particularly worried that she’d reserve the large vehicle her family needed, only to be stuck with a sedan.
She learned of the online car-sharing marketplace Turo, which is like Airbnb but for cars. There, car owners offer up their private vehicles to people looking to rent. Laverty was able to find a Ford Expedition in time for the trip, even canceling a minivan also reserved through Turo that would have ended up being a real squeeze.
Various reports found some travelers renting U-Hauls or Home Depot pickups. And even this has had a trickle-down effect.
Curry, of Downingtown, tells how her daughter, Anna Curry, 24, recently moved from Wissahickon to Manayunk. She rented a U-Haul as she’d done several times before. But this time, the younger Curry hit a snag.
“She paid more, and she had to travel farther to get the vehicle,” Curry said.
And, like traveling itself, venturing into the unknown for a rental car — such as on Turo — can have its upside.
Laverty and her husband, Nate, also 43, had an unusual adventure while on their trip. The group spent an afternoon at a waterfall where people could dive.
Nate and a friend watched another park patron jump into the 50-degree water, but not surface. They waited and finally decided to jump in for a rescue. They managed to save the man, but in the confusion, Nate Laverty forgot the key in his pocket to the Expedition the group had rented on Turo. When they returned to the vehicle, the soggy fob wouldn’t start the car.
The owners told the Lavertys that they would travel to the park, pick up the car with a spare key, and get it to them, after the vacationing group hiked an hour and a half for cell service, and over the phone explained that they needed the car the next day.
Keli Laverty said that the help from the car owners was an unexpected perk of renting through Turo. “I think the personal communication and the kindness of strangers to help us out essentially make a bad experience better,” she said.