(dramatic music)
- [Narrator] Americans are traveling again
but if your summer travel plans involve a rental car,
be prepared for long lines and sticker shock.
- I think it's all over the country.
There isn't one area where you can find a cheap rental car.
- Using a car right now is expensive,
whether you're buying it or renting it.
- [Narrator] According to the travel website Kayak,
rental car prices in the first two weeks of June
are up 89% for the July 4th weekend,
compared with the same dates in 2019
and as much as 300% in some places.
But even if you decide to pony up the additional cash
for a vehicle,
many reservations are simply not being honored
by rental agencies
and travelers have reported showing up at rental counters,
only to be turned away
because there aren't enough cars on the lot.
So why have rental cars become so expensive?
And how long can we expect these high prices to last?
- It's a pretty classic supply and demand issue.
There are not a lot of rental cars to go around
because these companies downsized their fleets
when nobody was using them.
At the beginning of the pandemic,
travel of any kind really collapsed,
but particularly air travel,
which the rental car companies rely on very heavily.
And so there was this situation
where they had to react very quickly
to a very rapid drop in demand.
- [Narrator] For months, the pandemic transformed airports
into ghost towns, which in turn wiped out
about 2/3 of the rental car business.
- What happens is all of the rental car companies
react quickly, sell off their cars
before they lose too much value.
Downsize their fleets, cut costs, downsize their staff.
I mean, find every way to pinch pennies
and stay alive really.
It was a make-or-break moment for these companies.
- [Narrator] To survive, many rental car agencies
sold off large parts of their fleet.
- It was a great time to sell cars too
because new car production still hasn't normalized.
So they sold a lot of cars
to build cash flow
but then they also sold cars
in order to right size to demand.
And so you had a double whammy
in terms of supply getting cut.
And then you also had Hertz go bankrupt.
(pensive music)
- [Narrator] In May of 2020,
Hertz filed for bankruptcy
but Mazari sees a silver lining in the disruption.
- COVID was a blessing in disguise for this industry
because it created pricing discipline
and supply discipline.
These companies basically had to cut their fleet size down
by 35%, so this was a dysfunctional oligopoly.
Supply was never tight.
- [Narrator] This summer, consumer demand has returned
and now a new problem has arisen.
There's an extreme shortage of new cars.
- When demand came back,
it did not trickle back.
It came back almost overnight
and you have these companies
that have right sized themselves
to a market that basically wasn't using them before.
And they just weren't prepared.
- We're also hearing is that these companies
are so desperate to get fleet
that they're buying cars in the used car market,
which is in the auction market.
So don't be surprised if you get into some rental car
that has a lot more miles on it.
- [Narrator] Exacerbating the car shortage issue
is another shortage: semiconductors.
Automakers have said the production
of new vehicles has been slowed because of chip shortages.
- New car production with a chip shortage
isn't gonna normalize until Q4.
So for these companies, it's gonna be very tough
to add fleet back this year.
And so this year, pricing's gonna remain very high.
- [Narrator] In separate statements
to The Wall Street Journal,
both Hertz and Enterprise acknowledged
that customers might have a tougher time securing a rental
because of the spike in demand.
Enterprise wrote,
"While still below pre-pandemic fleet levels,
our fleet is not down significantly.
A key challenge right now
is the global chip shortage,
impacting new car availability."
Hertz wrote, "The microchip shortage
is also affecting the car rental industry
but Hertz is working closely
with our automotive partners
to add new vehicles to our fleet
as quickly as possible while also moving vehicles
to the areas with highest demand."
(dramatic music)
If you have to rent a car this summer,
Mazari recommends booking early and booking backwards.
Typically, travelers book flights or hotels first
but that strategy won't work this year.
- You essentially, you just have to book in advance
and kind of pay up for it
and be prepared for that, if you're lucky enough to get one.
(dramatic music)