Commentary: How Much Are Rental Cars Now?!?

Yes, the travelers have returned. They are boarding planes with masks on to get away from their COVID-19 pandemic routine. They are also hitting the roads trying to find new adventures. 

However, there is one issue that came out of the COVID-19 pandemic is putting a huge hurt on traveler’s wallets. Because of the immediate impact the shutdowns had on the travel business, a lot of financial decisions had to be made. While airlines parked planes all over the world, rental car companies found that they could not afford to keep up current fleet levels when business dropped. 

In 2020, the rental car business saw a deep drop in bookings. These agencies felt compelled to sell off their excess fleets, which resulted in a fluctuation of used car values. That issue alone sent Hertz into bankruptcy, which it is still dealing with. 

A year later, people started traveling again. The same rental car agencies that sold off their fleets found themselves short on vehicles to meet the surge in reservations. 

The immediate effect of this became a double whammy across the automotive and travel industry. Used car prices went up by an average of 20% above values recorded a year ago. On top of all of this, rental car rates skyrocketed because of the old principle of supply and demands. 

Rental car fleets are running short on supply against the demand for them. They cannot replenish them quick enough due to supply chain issues at the automakers to meet that demand. 

Let me give you an example of what I’ve witnessed so far…

I was looking to rent a vehicle for a business trip in August down in Chicago's Northwest Suburbs for the media association I belong to. First, I checked the location nearby my home for a major rental car agency I have a loyalty program with. I found that I could get an Intermediate car – the equivalent of a Toyota Corolla – for a total of $274 for two days. For a three-day rental, that price went up to $411. These figures include the base rates, taxes, and additional fees before any additional protection coverage was selected. 

If I picked the same vehicle up through the same rental car agency at their Minneapolis-St Paul International Airport location, my bill for three days would skyrocket to $723. In comparison, the same rental from a rival "discount" agency at the same airport would end up costing me $854. 

I know that if I went through Priceline or another third-party travel website, I could get a better rate. Sadly, I was unable to get something that actually cost less than my own loyalty discounted rate at the agency I normally do business with. 

For a further comparison, I wanted to see whether flying there would be more affordable than driving. I checked Southwest Airlines from Minneapolis-St. Paul to Chicago’s Midway Airport and found I could do an overnight itinerary for $201. The drawback would be transfers to and from the venue and host hotel in the Northwest Suburbs, that would include local public transport, a commuter train, and an app-based ride hailing service. In all, my trip would set me back approximately $484, including a single night at the host hotel. The same trip using a rental car from the Twin Cities would be end up costing me $100 more. 

This does not sit well with me. All of it. 

The reason I bring up this issue is that a lot of the travel for this website is paid out of my own pocket. That includes auto shows and media association events. If you do not make a lot of money from this work, you have to find ways to fulfill the obligations of your audience. It comes down to budgeting realistically towards achieving a reasonable return on investment.

With that said, we try our best to get the best deals for everything – hotel rooms, air fares, and so forth. Because of the current state of supply and demand doing this stage of the COVID-19 Pandemic, those deals are gone.

Or, are they? 

Let’s hope that things do shake out a bit soon. Not just replenishing rental car fleets to meet demand, but for the entire industry to manage supply chain issues better and ensure that the economy does not dip when the supply-demand principle takes another hit downward. 

After all, we need to get on the road. And, we need to afford to do so.

All photos by Randy Stern