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 2,300 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 2,300 companies that employ 191,300 workers and generate $47 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
Recent Developments
Mar 21, 2024 - Labor Costs Rise, Prices Fall
- Car rental and leasing firms’ producer prices have risen gradually through Q4 but were down moderately on a year-over-year basis. As of Q4, wages at car rental and leasing firms increased moderately. Industry employment has also risen sharply as car rental and leasing firms staff back up after demand returns to pre-pandemic norms. Profit margins could suffer if producer prices charged by car rental and leasing firms can’t keep pace with wage and other cost growth.
- 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.
- As electric vehicle (EV) prices have fallen, some leasing firms are demanding manufacturers safeguard their EV purchases to protect them from the potential of reduced residual values, according to Carscoops and reporting by Bloomberg. Leasing companies base their rates on anticipated vehicle depreciation over the life of the lease. If vehicle fleets depreciate faster than expected, leasing companies stand to suffer significant financial losses. According to Bloomberg, France-based auto leasing firm Ayvens has begun receiving monetary compensation for the reduced values of its EVs.
- The US car rental market is returning to more normalized conditions after the lofty rental rates, high profit margins, and weak inventories of new cars seen during the pandemic, according to Auto Rental News. For 2024, car rental firms are still expected to see strong demand, but margins may take a hit as high vehicle prices and interest rates push up vehicle acquisition costs. While passenger vehicle inventory levels have returned to normal, fleet mix is more expensive as carmakers are not manufacturing many entry-level vehicles and most cars come with pricey trim packages. While the Federal Reserve is expected to cut interest rates in 2024, they are unlikely to reach the low levels last seen in 2022.
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