Hertz feels the hurt as rentals plummet, used car sales hit the skids

May 16, 2017

America's rental car industry ain't what it used to be. 

For starters, rental companies now have to repair recalled vehicles before loaning them to customers (a requirement that the industry fought tooth and nail for years).

Also, decades-old industry heavyweights find themselves competing against nimble, new car-sharing companies like Maven, not to mention ride-sharing firms like Lyft and Uber. That's no small challenge: ride-sharing and car-sharing have both made getting around without a car of one's own much easier than in days past, giving consumers fewer reasons to rely on rentals. 

Oh, and then there's the glut of used cars on the market. So, all that moolah that rental outfits used to make from selling off fleet vehicles? Not so much anymore. 

Ouch.

Few rental companies are feeling the hurt quite like Hertz. Following a complicated restructuring last summer, Hertz's stock prices took a nosedive, and investors have been hesitant to shell out for new shares since. 

Worse, the company is racking up bills at an alarming rate. Due to falling rental revenue and a huge purchase of new fleet vehicles, Hertz is now $14 billion in debt. 

And as mentioned above, Hertz isn't generating as much cash from its older vehicles as it might like. Thanks in part to the abundance of used vehicles hitting the market, depreciation has surged 15 percent--a rate not seen since the Great Recession. 

In sum: Hertz is bringing in less money from renters and buyers, and it's spending huge sums to upgrade its fleet. The company's new CEO, Kathryn Marinello, hopes to turn things around by charging more for rentals of Hertz's new vehicles, including loads of the SUVs that consumers love. Given today's declining rental rates, though, we're not so sure Marinello can make that happen.

Even if she manages to get more for rentals, the question remains: can Marinello bring in the dough faster than Hertz is bringing in the bills? And can she help keep Hertz a viable competitor against the next wave of car-sharing and ride-sharing giants?

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