Rental car market in crisis as prices skyrocket and available vehicles dwindle

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Holidaymakers are finding the cost of renting a car abroad is prohibitively expensive, with many companies charging double or more from previous years. The pandemic, the chip shortage, the war in Ukraine and the higher cost of buying electric cars have all played a part in pushing up rental car costs at home and in other countries.

It has led to a rise in services like Turo, essentially an ‘Airbnb for cars’ where owners allow strangers to rent their vehicles in the short term.

Problems in the industry started when Covid restrictions on travel led to major players having to sell off their fleets to replace lost revenue, reported Wired.

Almost two-thirds of Avis-Budget’s rental business at airports disappeared, with revenues company-wide dropping 41 percent year-on-year in 2020.

At Europcar, 2020 revenue was down 42 percent, and Hertz’s revenue fell 46 percent before it filed for bankruptcy—though it has since restructured and recovered.

In the UK, fleets were cut by 30 percent, according to the British Vehicle Rental and Leasing Association (BVRLA).

In 2019, Hertz had 700,000 vehicles globally but by the first quarter of 2022, that collapsed to 481,000, according to a company spokesperson.

Europcar’s fleet size numbered 293,000 vehicles in the first quarter of 2020 but plunged to 187,200 in 2021.

But then restrictions began to ease and when companies attempted to restock they were met with a drastic shortage of new cars to buy.

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That led to a shortage in available rental cars and then prices rising dramatically.

Over Easter, car rental costs were up by an average of 135 percent across Portugal, Cyprus, Spain, Greece, Italy, and France versus 2019 levels, according to consumer organization Which.

Yusuf Allinson, an analyst at market research firm IBISWorld said: “You’re buying the car for more, you’re fueling it for more, there’s more demand—it’s very logical for prices to increase.”

Andre Haddad, CEO of peer-to-peer rideshare app Turo, recently told Yahoo Finance Live that the rental car shortage will “resolve itself over time” but “is going to be “challenging for the rental car giants for the next six to 18 months”.

Carsharing is beginning to take off in the UK as an alternative, although numbers are still very low.

Turo only has 3,000 vehicles offered by the public to others despite cars sitting unused for a reported 96 percent of the time.

A similar UK business, HiyaCar has 2,000 cars for its 150,000 registered users.

Cofounder Rob Lamour said: “We have lots of demand but not enough cars.”

He added: “You can’t just launch in an area and suddenly have loads of cars for people to hire; it takes time for it to build up.”

Car sharing clubs are also set up in areas without enough vehicles in general, such as central London, where people often use public transport but occasionally need a car.

The rental sector has responded by lobbying for tighter regulation of car sharing apps.

They are demanding. tighter vehicle checks and restrictions on drop-off zones in airports.

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