Auto rentals were already high going into 2022, but seven months later things are really getting out of hand.
First, auto rental rates rose by 50% from December 2020 to December 2021 and up 60% from the same time period in 2019, according to Autoslash.com.
Auto rental consumers may look back at those days fondly.
By mid-2022, U.S. car rental rates have experienced a “massive spike”, with average weekly rates well over $500 in U.S. cities like Charlotte, N.C., Chicago, Seattle, and Los Angeles, among many others.
There’s no shortage of factors in play to explain the soaring costs of renting a vehicle.
Primarily, the high cost of gas, increasing inflation, and seemingly never-ending supply chain issues have drivers competing with one another for a limited supply of rental vehicles.
“When the Covid-19 pandemic hit, the auto rental industry was faced with a hard decision,” said Jim Trevor’s, head of operations at WeReviewTires.com. “They had to sell off most of their inventory to stay afloat. Now that the travel sector has gone back to somewhat normal, auto rental companies have a shortage of vehicles."
The biggest factor in this is the availability of new vehicles.
"Without any new cars on rental lots they need to charge more to compensate for the lost business," Trevor's noted.
Other industry observers agree, adding that the shortage of vehicles is a widespread, global issue.
“Lack of supply drives up new vehicle prices, which then drives up used vehicle prices," said Michael Beauchamp, the CEO and founder of GO, a subscription car service in Philadelphia, Pa. "Fewer new vehicles are being produced now than in years past,”
Increasingly, supply chain shortages, from semiconductors to more standard parts are exacerbated by staffing shortages related to covid shutdowns or more folks staying out of the workforce.
“Everyone in the industry is struggling to get cars – ranging from subscriptions like GO, to car rental companies, to dealers,” Beauchamp said. “Nobody is spared.”
Get Creative and Get Back in the Driver’s Seat
There’s a sliver of good news for U.S. consumers looking for a good short-term ride at a good price.
For starters, car leasing subscription services like Go can work, especially if a monthly subscriber is a frequent need of a short-term set of wheels. Basically, Go cuts out the middleman by eliminating down payments, acquisition fees, destination fees, title/registration fees, extended warranties, and processing fees.
Beauchamp said that consumers can save as much as 40% on monthly payments using Go’s auto leasing subscription service.
To get auto consumers back in dealerships, manufacturers are also pushing incentives.
“Car manufacturers offer incentives each month to make car purchases and leases more affordable,” said Kenny Kline, president and financial director at BarBend, in Nashville, Tenn., and a former risk manager at Bank of America.
Many of these low-cost leasing incentives are currently available, but the deals could change as auto sales recover. Kline suggests going to the manufacturer's website and searching for special offers to find deals.
“The lease terms are spelled out by listing the three major components of the contract,” he said. “Payment is made monthly; the lease's duration is also monthly, and the amount due at signing is similar to a down payment. Lenders can adjust these variables and apply cash incentives in a variety of ways to achieve a low lease payment.”
Ask Your Neighbor
Drivers can also lean on their community members to get access to a car for a few days – or even a few hours.
“Maybe you have a neighbor or family member who doesn't use their car as much now, thanks to a work-from-home lifestyle,” Trevor’s said. “You can ask them if you can rent their car from them. If so, you'll pay so much less than you would at an auto rental company.”
Additionally, there are mobile apps like Toro, where consumers can rent out their personal vehicle and charge a fraction of the cost auto rental companies do. “Uber has a similar service but I find Toro to be much more cost-effective,” Trevor’s noted.
If you’re looking to buy a new vehicle outright, however, you’ll need to practice patience.
“Waitlists are the norm for anyone looking to get behind the wheel of a new car right now,” Beauchamp said. “I suggest waiting for the market to cool down.”
