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An interesting fact about the rental industry learned during the pandemic was that the cars are all just bought on short term loans rather than being owned outr

An interesting fact about the rental industry learned during the pandemic was that the cars are all just bought on short term loans rather than being owned outright. The rental companies float the cost of the loan and it pay it off with the rental fees. Since they buy thousands of cars they get the lowest prices possible from manufactures, and they use this to their advantage to turn over their inventory on the used car market. During the pandemic this backfired on them since they weren’t able to rent the cars to pay the loans off and the car market also ground to a halt.

sokoloff 5y ago
Used car prices went up pretty dramatically during the pandemic, especially once new car supply chains started to get disrupted. I’m sure the travel reduction was bad for them, but it’s not like they got stuck with a bunch of rotten tomatoes; the cars were still valuable.
- jeromegv 5y ago
  This disruption was real and did happen at the beginning of the pandemic as the used car market was not up in March and April. It brought a major rental company to bankruptcy.
chii 5y ago
if only they have some liquidity/capital to pay the loans during the initial stages of the pandemic, and last long enough to see the price of used cars sky rocket, they could've sold those cars at a profit to pay back the loans and still be operating (with a reduced fleet i guess?).
- mst 5y ago
  If (big if) I remember the Matt Levine stuff right this is kinda how Hertz came out relatively intact except with "spending a while in bankruptucy" in place of liquidity/capital. Though I don't think most people expected it to end that way since the "used car prices rising" thing was unexpected and I suspect their meme stock adventures were a pretty essential unexpected bonus that helped as well.
BenoitP 5y ago
> Since they buy thousands of cars they get the lowest prices possible from manufactures They also don't get much to choose in which models, and that's the actual point of the thing. The overall problem is fitting low elasticity in production vs variability in consumer demand. Once you understand that problem is pervasive, you see solutions to it everywhere: * Why do multi-fruit juices never advertise the exact composition of the blend? Because it's variable! They do production arbitration, they lower waste in overproduction of some juices (which depends on weather) * Same thing with cooking oils. In France we have 'isio', which is a blend of 4 oils. Again, though not much advertised, these are variable in their content. * Same thing with industrial cheese. These are made out of surpluses of various other cheeses. * Sausages: variable content again (it even got into the a language expression!). Sometimes the demand is lower for some low grades of meat; and that's where they get turned into sausage. * All of these also being arbitraged by promotions and coupons! We talk of the market and have beautiful models of matching one demand to one supply, but really things are much more intertwined than what is seen at first glance.

sokoloff 5y ago

Used car prices went up pretty dramatically during the pandemic, especially once new car supply chains started to get disrupted. I’m sure the travel reduction was bad for them, but it’s not like they got stuck with a bunch of rotten tomatoes; the cars were still valuable.

jeromegv 5y ago
This disruption was real and did happen at the beginning of the pandemic as the used car market was not up in March and April. It brought a major rental company to bankruptcy.

chii 5y ago

if only they have some liquidity/capital to pay the loans during the initial stages of the pandemic, and last long enough to see the price of used cars sky rocket, they could've sold those cars at a profit to pay back the loans and still be operating (with a reduced fleet i guess?).

mst 5y ago
If (big if) I remember the Matt Levine stuff right this is kinda how Hertz came out relatively intact except with "spending a while in bankruptucy" in place of liquidity/capital. Though I don't think most people expected it to end that way since the "used car prices rising" thing was unexpected and I suspect their meme stock adventures were a pretty essential unexpected bonus that helped as well.

BenoitP 5y ago

> Since they buy thousands of cars they get the lowest prices possible from manufactures They also don't get much to choose in which models, and that's the actual point of the thing. The overall problem is fitting low elasticity in production vs variability in consumer demand. Once you understand that problem is pervasive, you see solutions to it everywhere: * Why do multi-fruit juices never advertise the exact composition of the blend? Because it's variable! They do production arbitration, they lower waste in overproduction of some juices (which depends on weather) * Same thing with cooking oils. In France we have 'isio', which is a blend of 4 oils. Again, though not much advertised, these are variable in their content. * Same thing with industrial cheese. These are made out of surpluses of various other cheeses. * Sausages: variable content again (it even got into the a language expression!). Sometimes the demand is lower for some low grades of meat; and that's where they get turned into sausage. * All of these also being arbitraged by promotions and coupons! We talk of the market and have beautiful models of matching one demand to one supply, but really things are much more intertwined than what is seen at first glance.