People don’t rent cars anymore – and that means higher prices and worse options for used car buyers
Vehicle rental accounted for 31% of the auto market in January 2020 and only 17% in July 2022. Kekyalyaynen / Shutterstock.com
- Car rental prices fell by almost 50% last July compared to January 2020.
- Rising rental costs and changing buying habits are driving change.
- That means less supply to the used car market, keeping prices high and inventories low.
Car buyers in the US don’t seem to want lease vehicles anymore.
Leases accounted for 31% of the auto market in January 2020 and just 17% last July, according to a new auto study from consumer credit reporting agency TransUnion.
Of the 3.8 million consumers who ended a car lease between July 2021 and June 2022, only 25% of consumers chose to lease again, according to TransUnion. That’s a 40% drop since January 2020.
Instead, these drivers chose to sponsor a new car buy or buy a car without financing, even though the former means their monthly payments increase.
Additionally, during the same time period, about 26% of consumers ended a lease six months or more before the expected end date, up 63% since 2019.
Why don’t people rent cars anymore?
This is happening for a few reasons. For one, rentals are getting more and more expensive. The average rent payments reached $661 in December 2022up 33% from March 2020, according to Cox Automotive.
According to TransUnion, inventory constraints played a role in this decline. Shoppers don’t want to keep coming back to the market looking for a different car every two to three years, especially when inventory challenge seen at authorized dealer during the pandemic.
Car owners, in general, also keep their car longer. S&P Global Mobility found the average age of a car is 12.2 years in 2022. Much of that is also driven by lack of chips affects the number and types of new and used vehicles that can be purchased on seller a lot in the past few years.
Consumers are also willing to invest more money in maintenance as the value of their vehicles has increased and vehicle quality means longer expected life.
“Parking is now worth more than hundreds of billions of dollars,” said Cox senior economist Charlie Chesbrough at the Federal Reserve Bank of Chicago annual auto symposium in Detroit. . “Should I replace that engine? Am I going to fix that transmission and spend thousands of dollars on this car? The economy has really changed to suggest that, yes, investing in that car will pay off. more rational.”
What does that mean for used car prices?
All of that means fewer new, more fuel-efficient cars targeting the used market.
Fewer used cars on the market, but with the same amount of demand, will keep used car inventory low and their prices are relatively high.
Used car prices have been increasing for the past few monthsand is just started crawlingwith average cost at $27,143 in December, according to Cox.