Auto Rental & Leasing

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 2,400 auto rental and leasing companies in the US provide vehicles for short-term or long-term use. Rentals and leases typically involve passenger cars or trucks. Companies may also provide the use of vans, sport utility vehicles, luxury cars, limousines, or hearses. Some companies lease used vehicles. While large rental companies own thousands of individual locations worldwide, they also license brand names to independent operators.

Dependence on the Travel Industry

Air travel is a key driver for car rental volume.

Resale Risk

Companies bear the risk of decreases in residual value for vehicles reaching the end of their rental or lease life.

Industry size & Structure

A typical auto rental company employs 50 workers and generates around $17-18 million annually, while a typical auto leasing company operates a single location and generates about $34 million annually.

    • The auto rental and leasing industry consists of 2,400 companies that employ 129,500 workers and generate $55.1 billion annually.
    • The auto rental and leasing industry is concentrated at the top, and fragmented at the bottom; the top eight firms account for 86% of total revenue. Most small companies operate out of a single location.
    • While large rental companies own thousands of individual locations worldwide, they also license brand names to independent operators.
    • Large auto rental companies include Enterprise Holdings (Alamo, Enterprise, National), Hertz, and Avis. Major companies that provide auto leasing services include Element (formerly GE Capital Fleet Services and PHH Arval), and Holman (formerly ARI Global Fleet Management).
                                    Industry Forecast
                                    Auto Rental & Leasing Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Recent Developments

                                    May 22, 2024 - Steady but Flat Industry Growth
                                    • The auto rental and leasing industry is expected to see weaker sales growth this year, but demand is projected to remain steady, if a bit flat, over the next several years. The industry’s year-over-year sales increased by 13% in 2022 before dropping to 6.1% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth is projected to moderate further to about 2.8% in 2024 before rising to 5.3% in 2025. The industry will then see steady but mostly flat average annual growth of about 5.1% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
                                    • In mid-April, industry experts who were opening the Car Rental Show in Las Vegas shared their views on the state of the industry, according to Auto Rental News. As of mid-April, year-to-date TSA screenings at US airports are up 7% over the same period in 2023, outpacing GPD growth, which suggests a healthy propensity for travel. As for fleets, rental car firms are adding more vehicles than many industry watchers expected. Vehicle availability is expected to continue to improve, and while prices are still high, they’re expected to moderate later in the year. The speakers noted that day rates for rental cars were down in Q1 compared to Q1 2023, but rates are expected to improve as the travel season heats up.
                                    • Auto leasing is gaining popularity, especially for luxury brands, according to Ward’s Auto. In the first quarter of 2024, leasing’s share of the total new-car market was 24% compared to 19% a year earlier, according to Power Information Network’s analysis of Ford Credit’s first-quarter financial reporting. Leasing demand has risen as auto manufacturers offer better lease incentives to make monthly payments more affordable. Leasing is considered an especially good option for drivers seeking a luxury car because a lease customer only has to finance the difference between the upfront cost and the predetermined residual value, which can often help the customer get more car for their money.
                                    • In mid-March, rental car firm Hertz announced CEO Stephen Scherr would step down, according to The Wall Street Journal. Gil West, formerly an executive with General Motors’ Cruise division and Delta Air Lines, will succeed him. Scherr’s departure came amid a sharp adjustment to Hertz’s electric vehicle (EV) strategy. Hertz invested heavily in EVs beginning in 2021, but consumer demand for EV rentals has been lukewarm, and EV fleets proved costly to operate. In January, Hertz announced it would sell a third of its EV fleet or about 20,000 vehicles. At the time, Scherr said the value of Hertz’s electric fleet dropped in part due to price cuts by Tesla, according to The New York Times. In 2023, Tesla cut prices by about 30%. Lower prices on new vehicles push used car prices down.
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