Dealers and auto dealers are offering deals on new car rentals in an effort to lure consumers back to the rental car market.
According to the National Auto Dealers Association, the number of rentals per month dropped by 8.3% during the first six months of this year, but auto dealerships have had to make tough decisions about what they can sell and what they won’t.
The National Association of Home Builders estimates that the rental market will be flat for the next six months.
“The rental industry is experiencing an incredible period of consolidation, as dealers have struggled to maintain their existing business and attract new consumers,” said Matt McBride, executive director of the NAFB.
“Rental car ownership is at a historic low point.
Consumers are not buying cars in large numbers.
The rental market is not growing as quickly as the rest of the economy.
We have to re-evaluate the viability of our industry and our relationships with our customers.”
While the NAAB estimates that rental car owners will spend $1.4 billion on car rentals this year—a $400 million decrease from last year—the industry is bracing for an even worse year as the recession hits.
“Rental vehicle ownership is already in its lowest level since 2009, when the recession hit,” said Mark Mauer, CEO of Kelley Blue Book.
“This is going to be a real drag on the industry as more and more consumers look to drive themselves around.”
Rental companies are increasingly targeting millennials who are seeking to save money on rent, but the NAAA says there’s a downside to this approach.
“Millennials are not looking for an inexpensive rental vehicle,” said McBride.
“They are looking for a car that is going the extra mile for them.”
Mauer says that many millennials don’t want to wait for their lease to end and are instead looking to rent cars when their lease is up.
“A good majority of millennials have a lease for less than a year,” he said.
“If they don’t have a vehicle that is available, they’re not going to want to rent.
They don’t see that as a way to save.”
The NAABC says many millennials are also turning to cars in part because of the cost of car insurance.
“Younger adults are finding that the cost per mile for car insurance has gone up dramatically in the past two years,” said Mauer.
“We see a significant amount of people who are renting cars, but have been covered by the same car insurance as their parents, who they might have had a policy with.”
Maugers insurance company offers a wide range of policies, ranging from $50 to $100,000, but says that some drivers are being priced out of the market.
“Insurance companies are not willing to offer more than a certain number of policies to younger drivers, and some policies don’t cover them for a year, so younger drivers are not able to get coverage,” he explained.
The NAAA also believes that rental cars are a popular way for young people to save.
“For younger people, there is a lot of financial savings that can be realized from driving a rental car,” said McGowan.
“It’s a good way to get around.”
For more information on rental car rental companies, visit the NCA website.
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