Car rental rates have fallen back down to earth after skyrocketing last spring. But will the upcoming winter tourism season again launch them to unaffordable levels?
Count on it, says Jonathan Weinberg, CEO of rental car price tracking website AutoSlash.com.
Rates have dropped as travel demand softened after Labor Day, he said. “We’re kind of in a shoulder season with people going back to school and work after Labor Day, but prices are going to spike back up again in Florida as Thanksgiving and Christmas approaches. By February and March next year, all bets are off.”
The dramatic price spike and rental car shortage that confounded travelers last spring was unprecedented, he said.
Vaccinations and a sharp decline in infections unleashed a pent-up demand for travel that caught rental car companies by surprise. During spring break in Florida, many airport rental car lots were completely sold out. Advertised rates for the few vehicles that were available — even economy cars — were as high as $500 a day.
Analysts blamed the shortages and high prices on a microchip shortage that continues to disrupt production of new vehicles. During the spring 2020 quarantine, rental car companies decided to sell off large numbers of vehicles that were sitting in lots unused. But as restrictions eased and the economy came back to life, the microchip shortage prevented them from buying enough new vehicles to meet the renewed demand.
Average rates remained above $100 a day over the summer, particularly in Hawaii and in northern cities close to traditional vacation hot spots. “We called it Carpocapalypse or Carmegeddon,” Weinberg said.
On July 22, for example, the average daily rental rate was $177.14 in Boston, $132.70 in Chicago and $135.80 in New York, according to data from the online travel booking site Hopper.com. Meanwhile, on the same date, the average daily rate had fallen to $81.40 in Orlando, $92.45 in Miami and $105.43 in Fort Lauderdale.
Nationally, the average daily rental rate peaked at $120 at the end of June, then drifted lower through the end of August — possibly reflecting the delta variant’s effect on air travel, sad Hopper.com economist Adit Damodaran. “When air travel demand or hotel demand decreases, demand for rental cars decreases as well,” he said.
If you wait too long before the holidays to rent a vehicle, you might find yourself out of luck or paying exorbitant prices, Weinberg said. He recommends booking long in advance, but not prepaying. That way, if prices happen to fall, you can cancel and rebook at the lower rate. Weinberg’s website AutoSlash.com is able to track changing prices and alert consumers if the change is large enough to warrant a rebook.
When and if prices start drifting back to pre-pandemic rates will depend on when automakers are able to resume normal production levels, Damodaran said. And that will depend on when microchip production normalizes, he said.
That might not be happening anytime soon, Weinberg said. According to a Sept. 3 report from analyst Cox Automotive, fleet sales by major automakers, which include rental cars, have totaled 1.2 million this year through August. That compares to 2 million over the same period in 2019.
Even as rental companies gradually restock their fleets, higher new car prices will dissuade them from rebuilding to pre-pandemic levels, he said. They’ve learned that maintaining tighter supplies will keep prices and profit margins higher, he said, meaning the days of the $10-a-day rental are likely over for good.
Weinberg doesn’t see production returning to normal until late 2022. And that could mean travelers will face another spring of low rental car inventory and crazy high prices, he said.
His message: Plan early and book your vehicle now. “I expect a lot of sticker shock for people who plan only a week or two in advance,” he said.
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