Drawdown of Hertz Rental Fleet Will Not Materially Affect Used-Vehicle Pricing
Wholesale prices are currently at all-time highs as the result of pent-up demand due to interruptions caused by a variety of pandemic-related economic conditions.
Approximately 87,000 units of the 182,000 vehicles to be disposed of by Hertz over the remainder of 2020 were scheduled to be released to market in June and July.
J.D. Power expects used rental vehicle wholesale prices to land 3% higher in December 2021 than in December 2020.
By: J.D. Power
"A variety of factors, including the fact that approximately 87,000 units should have already been disposed of by Hertz in June and July, have prompted J.D. Power to project relatively little impact to prices through the rest of the year," Dixon says. "Under normal conditions, Hertz churns through approximately 550,000 units over an 18-month period. This equates to 30,550 sales per month, or 60% more than what would be sold if Hertz's remaining 96,000 vehicles were released to market in equal increments over the remainder months of 2020."
Wholesale prices are currently at all-time highs as the result of pent-up demand due to interruptions in normal buying patterns caused by the pandemic along with manufacturing and supply chain disruptions that led to reductions in the available inventory of new and used vehicles. The contraction of new vehicle availability has prompted consumers to turn to "nearly new" used vehicles to satisfy their transportation needs. This has helped put upward pressure on prices.
Used Vehicle Rental Wholesale at Record Levels
"In fact, the recently launched J.D. Power Used Rental Wholesale Price Index -- which tracks prices of rental fleet-oriented used vehicles that are up to 2 years old -- shows that prices over the first 3 weeks of July were 6% higher than they were in February," Dixon explains. "Used vehicle prices in this category have actually reached the highest point on record."
While used-vehicle prices are expected to drift slightly lower over the next few months, this modest downward adjustment will not be significantly influenced by Hertz's planned fleet reduction.
"Other more fundamental factors -- such as waning pent-up demand, improved new vehicle inventory landscape, and macroeconomic headwinds related to the pandemic -- will drive the pricing trajectory,"
With this context in mind, the Used Rental Wholesale Price Index from J.D. Power anticipates a modest 4% decline in prices for this category by year's end. After that, prices are expected to gradually improve over the course of 2021.
"Price resilience in 2021 will largely be driven by a large reduction in late-model used vehicle supply stemming from the substantial decline in new rental fleet purchase activity," Dixon notes. "New-vehicle sales to rental fleets are expected to remain well below pre-virus levels for the foreseeable future."
As a result, J.D. Power expects rental vehicle used wholesale prices to land 3% higher in December 2021 than in December 2020, essentially placing the market back to levels recorded in July 2020.
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To learn more about the J.D. Power Used Rental Wholesale Price Index visit https://discover.jdpa.com/
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