Car Rental Companies Are Buying Used Cars Due To Chip Crisis: Bloomberg

Author: Anusuya Lahiri | May 03, 2021 12:47pm

• The semiconductor chip crisis-fueled car production cuts have compelled the rental-car companies like Hertz Global Holdings Inc (OTC: HTZGQ) and Enterprise Holdings Inc to purchase used cars from auctions, Bloomberg reports.
• The rental car companies previously purchased new cars in volume and rented them out for a year, followed by their sale at an auction. They previously purchased used cars for occasional demand spike only.
• The demand spike has led to the burgeoning price of second-hand cars, increasing 52% year on year based on Manheim Index.
• The car production cut is estimated to translate into higher profits for the rental companies through higher pricing. However, it will affect the demand from vacationers.
• Cars are being rented in Florida, Hawaii, Puerto Rico at $100, $200, and $600 a day in Puerto Rico. Higher traveling and lower inventory are further estimated to drive the costs within the next couple of weeks.
• Hertz and Enterprise aggressively added low-mileage, second-hand cars from auctions, online auctions, dealerships, and vehicles coming off lease programs to tap the travel rebound.
• Price action: HTZGQ shares traded higher by 13.9% at $2.58 on the last check Monday.

Posted In: HTZGQ LYFT UBER