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Rental car, new car shortage combined with increased demand driving price spikes, travel changes

Peer-sharing car rentals gaining traction
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Posted at 7:16 PM, Jul 19, 2021
and last updated 2021-07-20 10:15:13-04

DENVER — Cruising around in one of Justin Villa’s Jeep Rubicons feels about as Colorado as travel gets.

“You can fit four passengers,” Villa said. “Plus, your luggage, plus your skis. Guests love it.”

Villa and his wife, Meagan, started renting out Meagan’s Jeep in November 2019, and now they have a fleet of five Rubicons, plus a Ford F-250 pick-up.

“You go to Enterprise, you might find like a basic Jeep with no features on it,” Villa said. “The cool thing about us, we can have a nice Rubicon. It has the larger tires, off-roading capability.”

The newlyweds are capitalizing on a growing trend: peer-sharing car rentals.

The company they use is called Turo. It's like Airbnb for cars.

“We were able to use her Jeep that she had originally,” Villa said. “We kind of used it as a test run and it worked out well for us.”

It’s certainly working out right now. There simply aren’t enough cars.

There’s a major rental car shortage. There’s also a shortage of new cars being manufactured, which Shortline Buick GMC’s Don Hicks explains very simply.

“We should have 150 trucks in stock,” Hicks said. “I’ve got 5.”

Hicks says a major part of the problem is a chip shortage.

“The biggest semiconductor plant in the world burned down in Japan," he said. "It’s going to take a couple years to get it back.”

Hicks said, on top of that, manufacturers were already behind because of the virus and delays related to COVID-19 shutdowns on the assembly lines.

“COVID was the factor,” Hicks said. “If anybody showed signs of COVID, everybody went home.”

Hicks said one of the most difficult things in the world is to restart an assembly line.

“As a car comes down the assembly line, the tires show up just in time,” he said. “The engine shows up just in time, so they don’t have storage.”

If a single component is delayed — like microchips right now — it throws a wrench in the whole process. And with demand surging, it’s the perfect storm.

“Nobody thought the automobile industry was going to be this strong this soon after COVID,” Hicks said.

That is certainly evident on car lots and at the rental car counters.

“Basically, overnight,” said regional AAA spokesman Skyler McKinley. “Overwhelming demand for rental cars came back suddenly.”

McKinley said this all started when no one was renting.

“Rental car companies had their backs against the wall when there was no demand," McKinley said. “Really, there was no rental car demand in this country. So, they sold off their fleets just because these (cars) are on their books as a liability.”

Major rental car operators sold off more than 770,000 cars as the pandemic pulverized demand. Now, they can’t buy back inventory fast enough because there’s no inventory to buy.

“It’s just the long tail of the effects of the coronavirus pandemic,” McKinley said.

The rental car companies are begging customers to stick with them, and their stock prices are up.

The Avis Budget Group said in a statement, “As we return to a state of normalcy, we expect larger fluctuations in market demand… and are constantly adjusting our fleet to meet that demand.”

Enterprise, Alamo, National is seeing increased demand across the entire nation and said, “We anticipate this will continue throughout the summer. If you’re planning to travel… providing flexible travel dates and branch pick-up locations in your search may also help increase your options.”

McKinley said that does work.

“Consider off-airport rental locations,” McKinley said.

The problem for rental car companies is that during this crunch, travelers are figuring out how to get around without a rental.

“You can get anywhere you want to go in a cab, or even in a Lyft or Uber,” McKinley said.

“I checked out rental cars pretty briefly online,” said one traveler at Denver International Airport. “I think the cheapest I could find one for was like $350 for two days.”

That surge pricing is turning many customers off, perhaps for good.

McKinley said there are plenty of ways to get around, especially in big cities.

“Most times you don’t need the car,” McKinley said. “So, don’t pay all that extra. In Denver – we’ve got a great train to the plane. And I think, if anything, this crisis will cause Americans to think – do I really need a car for this whole trip?”

And that brings us back to Justin and Meagan.

“It’s nice because you use an app,” Meagan said. “So, there’s no counter involvement. You don’t have to go to a counter.”

Their philosophy – keep their rates competitive.

“I think it’s more important to have bookings versus a higher price,” Justin said.

“They’re anywhere from $75 a day to — this one gets up to $100 a day,” Meagan said of the Jeep Rubicons. “And it’s fun to drive cool cars.”

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