Hertz Global Takes Steps To "Defleet"
What happens to all those late model, high mileage cars that are used as daily rentals, when the new model vehicles come out each year? They flood the used car market in October, as summer tourist season draws to a close and the new-car sales cycle kicks off. Known as “prior daily rentals” or PDRs, these cars and trucks have not had the personal care of a single owner. Moreover, most airport rental lots are located outside -- exposed to elements including floods, hail and wind-driven sand -- rather than safely covered under a carport or in a garage. Usually the PDRs are unloaded with somewhere between 15,000-20,000 miles on the odometer and are worth up to 25% less than cars of similar vintage and milage.
This year is expected to have a bumper crop of PDRs. Hertz Global Holdings reports that it was overly optimistic about demand and placed too many rental cars and trucks in its nationwide fleet, particularly at its numerous U.S. airport rental lots. Accordingly, CEO Mark Frissora has gone on record saying, “We will defleet over the next six months.” “Defleet,” a verb not found in any standard dictionary, apparently means Hertz is deflating its expectations.
Hertz Global rents vehicles through its Dollar and Thrifty brands, as well as under the bright yellow Hertz banner.
However, not all rental car companies got it wrong. While Frissora credited the downturn to lower consumer confidence and less business travel, these factors were no surprise to others. Enterprise and Avis/Budget responded that their summer fleets matched their anticipated demand. David Wyshner, CFO of Avis/Budget reported, “we believe this over-fleeting was Hertz specific and not industry-wide.
In California, Prior Daily Rental vehicles must be labeled as such, including a note on the title itself. Failure to do so exposes the seller to civil liability for violation of consumer protections laws. Hertz sells most of its fleet vehicles itself, so consumers would know they are getting PDRs. However, independent dealers who buy rental cars at auction and resell them without disclosure are violating unfair and deceptive practices laws.