Car rental rates could rise as residual values on second-hand cars fall, according to several leading car rental companies.
Car hire companies’ business models involve buying or leasing large numbers of new cars at heavy discounts from manufacturers. They then sell these – typically 6-12 months later – and replace them with a new intake of brand new cars. According to John Leigh, managing director of Europcar UK Group, “Weakening residual values are both a serious concern for us and the manufacturers.”
Falling second-hand prices means that the gap between purchase price and resale price gets bigger. The only way to compensate for this is for rental companies to increase their daily rates – something which seems likely.
Free Upgrades No Longer Desirable
Rising fuel prices and tightening purse strings look set to mark the end of another honourable rental tradition – the free upgrade. Corporate rental customers increasingly have stringent environmental policies that specify maximum carbon emissions for rental vehicles – and private customers are increasingly concerned about minmising fuel costs.
The result of both these trends is that “people are getting very vocal about not wanting a larger car”, according to Chris Payne, a spokesman from Dollar Thrifty who was speaking to The Guardian.