Frugal Shopper: Does It Make Sense To Buy A Used Rental Car?

May 21, 2010
If you're thinking about a late-model used car instead of a new one, the used cars on offer by major rental companies can be tempting. From a price standpoint, you're getting a nearly new vehicle that's been regularly checked over and maintained, for a bit less than a comparable used car would cost at the dealership.

But for a number of reasons, used rental cars aren't the great deals they used to be.

In the past, when few if any certified pre-owned (CPO) programs existed, it was your chance to get a late-model used car that had been properly maintained and, generally, taken good care of. Automakers were building as many vehicles as rental fleets could handle, and then some, and dumping them at a massive discount to renters. But recently, with automakers realizing that strategy isn't good business, and rental companies cutting costs, they're keeping vehicles in the fleet much longer and renting them out more frequently. Today it's not at all uncommon to see a rental car with 30,000 or even 40,000 miles, whereas a decade ago the vast majority of rentals had less than 15,000 miles.

"At this point, unless it's a really good deal, I wouldn't recommend it," says Charlie Vogelheim, executive editor of IntelliChoice. Vogelheim says that, anecdotally, when customers are in a vehicle that's not in as good condition, they're not going to treat it as well. And with many of today's rentals looking quite weary, it's a slippery slope.

Beware of title flags

Also of concern is the branded title flag that rental cars get in some states, which can knock thousands of dollars off the value if you plan to resell the vehicle within a year or two or make the vehicle tougher to sell over the long term. If you're going to keep a vehicle for a long time, rental cars are still a really good deal, according to Vogelheim, but you lose a lot of value right away.

Over half of the market is looking for a new car in the next two years

Over half of the market is looking for a new car in the next two years

That said, the pricing can be quite attractive. For instance, we looked for a late-model Chevrolet Malibu—a vehicle still quite common in some rental fleets—in a major metro area (we picked Chicago as an example), and from Hertz found a 2009 Chevrolet Malibu LT, with nearly 29,000 miles, for $13,400. With the same mileage, according to Kelley Blue Book, the '09 Malibu LT would be worth $18,135 as an excellent-condition used car or $18,635 in excellent condition under GM's Certified Used program, which applies new-car-like coverage to the purchase. But as a private-party sale the Malibu would be worth just $14,885 in good condition (or $13,585 in fair condition, which might be the case on closer inspection). Provided the car is in excellent condition, you're getting it for thousands less than its proper dealership value; but if it has a few blemishes or signs of hard use—more likely the case—the deal wouldn't nearly be as sweet.

In most cases, the pricing is officially no-haggle, meaning that you're expected to pay what they're asking; but in cases where you think a branded title or cosmetic issues will keep the vehicle from being worth as much in the short term, there's still room to haggle despite that. Inspect the vehicle thoroughly yourself, and don't hesitate to bring it to your mechanic or a body shop for a second opinion.

Signs of use...or abuse?

Most of these vehicles are at least visually in good shape. After being taken out of the fleet, they're inspected with a relatively thorough process, as well as cleaned and detailed for an almost new look. Things like cracked cupholders or broken trim are replaced, though the signs of hard rental use like ignition-key scrapes and upholstery wear spots might remain.

Vogelheim also advises that not all rental-car companies are the same either—not so much because of the way they maintain their vehicles, but because of their type of customer. Enterprise vehicles are likely to have less general wear and tear and signs of abuse than those from other companies, Vogelheim says, while not costing any more, because the company is known for appealing to longer-term local renters who need a replacement while their vehicle is in the shop. Vehicles from other rental companies are more likely to have been driven hard by travelers in a hurry, on unfamiliar roads.

Chrysler Warranty Logo

Chrysler Warranty Logo

Enterprise also offers more extensive warranty coverage than the other major renters. Through them you'll get 12-month/12,000-mile powertrain coverage, a seven-day/1,000-mile, no-questions-asked buyback program, through which you'll get all but a $200 fee back.

Weak warranty coverage

Warranty is where many used rental purchase programs are weak, however. Hertz offers in most cases a 60-day or 2,000-mile limited warranty that covers core components but even then has a $50 deductible per visit. That's not much more that what's required by law for an "as-is" dealer sale in some states, but all the companies also offer add-on protection plans that altogether, typically for a few hundred dollars, will generally add the equivalent of a factory warranty to the purchase—but through a third-party company. Certified pre-owned (CPO) programs, however, offer years of additional coverage—usually an extension of the factory warranty—on late-model used cars.

Hertz offers a two-hour test drive, but if you go over that limit (to take the vehicle your own mechanic for a check, for instance) you're charged either $49 or $99 per day. Under a new Rent2Buy program, Hertz is now allowing potential buyers to rent the vehicle at "a special daily rate" for up to three days; if you decide to purchase the vehicle, the rental charges will be waived.

Another selling point is that the rental-car companies might be able to put you in a nicer vehicle than other used-car dealerships. Thanks to partnerships with financial institutions, they're often able to work around blemishes in your credit history, so it might be easier to find reasonable financing through them than if you were looking to find financing for a private sale. Avis, for instance, says, "If you have experienced credit problems, we are usually able to overcome many of the obstacles associated with past credit problems without an increase in the current rates." Leases are also typically possible and arranged on an individual basis.

With all the excellent automaker-run CPO programs today—offering meticulously inspected vehicles, factory financing and, in many cases, the warranty of a new car, for not much more money—rental-car companies are no longer one of the best sources of late-model vehicles.

Although buying a former rental once made a lot of sense (and still can for some), for most of us it's an idea whose time has come and gone.

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