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Rental cars may be about to flood the used-car market

Business Insider logo Business Insider 5/28/2020 Kristen Lee

Video by KTVK

Now that rental car giant Hertz has filed for Chapter 11 bankruptcy, the company's next steps aren't clear. But if a whole slew of used rental cars suddenly hits the market, don't immediately shy away from them. Picking up a used rental car isn't always as bad as you'd think.

Car sales have been in terrible shape this year, mostly because of the COVID-19 pandemic. It's currently a buyer's market for sure, so if you're thinking about picking up something new for yourself, now might be the time to do it. 

Hertz has no intention of buying any more cars for its fleets this year. In fact, Hertz and other suffering rental car companies are likely to sell off a big chunk of their fleets instead. Industry experts expect the companies to unload 1.5 million cars from their US fleets in the coming weeks and months, according to CNN Business

What does that mean for you, a potential buyer? It means that you're going to have a lot more used cars to choose from, and probably at more favorable prices. 

"Generally speaking, you can get a rental car for a bit cheaper than a similar one elsewhere," Tom McParland, who owns a service called Automatch Consulting that helps people buy cars, told Business Insider. (Full disclosure: McParland contributes to the automotive site Jalopnik, which is where I used to work.)

It's routine for rental car companies to sell their cars after they've been in service for a year or two. Hertz offers no-haggle pricing, which saves you the trouble of negotiating for the price of a car. 

Take, for example, that recent story of all the yellow 2019 Chevrolet Corvette Z06s for sale at nearly $20,000 lower than comparable 2019 Z06s. And that the 2020 Toyota Corolla with the LE trim, when new on Autotrader, costs $20,208. But used and on the Hertz website? It's $15,129 at a no-haggle price

One thing to note, however, is that rental companies typically order the most basic of trims for their fleets. So if you're someone who likes fully loaded and well-optioned vehicles, the pickings will probably be slim for you. 

a car on display in a store: Justin Sullivan/Getty Images

Justin Sullivan/Getty Images
© Justin Sullivan/Getty Images

Understandably, some might be nervous about buying a used rental car. The belief here is that rental customers don't treat rental cars as well as they would their personal cars and that they are driven far more than cars owned by individuals. The latter is indeed true in some instances. 

"A lot of folks are concerned that rentals were abused, but I think that fear is overblown," said McParland. "Your average person isn't driving their rented Altima like Mario Andretti. Also, rental cars tend to be pretty well maintained despite having higher mileage."

There's an incentive for the rental company to keep their cars in good shape, CNN Business points out. A well-maintained rental car is more valuable to the company than a lousy one because then customers won't have issues with them. In fact, most rental car companies have strict service schedules to ensure their cars are in tip-top shape. A used car owned by a private individual is required to follow no such guidelines. 

Hertz also offers a Rent2Buy program, which is something that should definitely be taken advantage of. Basically, Hertz will let you rent one of its used rental cars for essentially a three-day test period at a low rental rate. That means you can take your time with testing it out, check and see if anything needs work, and even take it to an independent mechanic to have it looked over.

a car parked in front of a building: Cindy Ord/Getty Images © Cindy Ord/Getty Images Cindy Ord/Getty Images

When test driving the car, it's important to keep your eyes peeled for anything that might be a potential red flag. Look for any body damage, wear and tear, and listen for any weird noises when you're driving it. 

It's also a good idea to obtain a vehicle history report and make sure the car is up to date with recalls. By law, rental car companies must fix recalled cars in their fleets. 

"The vehicle history report should show whether there are any outstanding recalls, but it doesn't hurt to check yourself by running the vehicle identification number (VIN) through the National Highway Traffic Safety Administration's free recall site," according to Edmunds.

If, after all that, the car still doesn't live up to your standards, then move on. No big deal. But don't be so quick to dismiss a used rental car. Reconsider the used rental car. It could save you thousands of dollars.


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