Car rental shares soar after used-car prices hits a record high

Date: 11 JUN 2018posted by Car Rentaledited by WinX

Car rental shares rallied after Edmunds.com found used-vehicle prices in the first quarter this year were the highest on record. Used-vehicle pricing is a major impact for car rental companies since it determines the value of their fleet, some of which are sold to in the used market or at auctions after their career as a rental car. Some auto manufacturers also buy back some of the rental cars after a fixed period of time. The report found the average transaction price for a used vehicle was $19,657, up 2.2 percent from the same period last year and a 17.6 percent increase from the same period in 2013.

After the report car rental shares soared. Hertz Global Holdings Inc. saw their shares surge 11 percent, while Avis Budget Group Inc. saw a 5.1 percent increase. A used-car website Carvana Co. jumped 7.4 percent and was headed to its highest closing price on record. "With rising fuel costs breathing fresh air into this segment, subcompact and compact cars are finally retaining value again," said Ivan Drury, senior manager of industry analysis at Edmunds, in the release. The company related the increase in prices to a growing supply of more valuable near-new vehicles coming off-lease and a greater demand for vehicle of all sizes and ages. "Used-car shoppers are typically more price-sensitive to changes in the market, but this is the first time in years that we're seeing renewed demand for smaller vehicles."

The analysts report found rising fuel costs hit a four year high in the first quarter of 2018 which led to price-sensitive customers to reconsider making the switch from a car to a SUV or truck, thus leading to smaller cars transferring faster into the hands of consumers. However, on the other hand, rising fuel costs has yet to translate into a loss of value for SUV and trucks. But Edmunds experts also noted that if fuel costs continue to surge, this may be subject to change. The declining value of used-cars had investors panic as recent as last year. Major car rental companies such as Hertz and Avis saw their stock make major dips attributed to the devaluation of their fleets. During one of the major drops in the used-vehicle price index in March 2017, Hertz shares lost twenty percent of their value in a week.

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