The wholesale cost of used cars has plunged since February due to the onset of the coronavirus (COVID-19) pandemic. They’ve gotten even cheaper now that Hertz has declared bankruptcy.
As it seeks to raise cash, the struggling car rental company is increasing the number of its cars it is selling into the used car market. But unlike the wholesale market, where dealers may not pass on lower prices to buyers, Hertz sells its cars directly to consumers.
HertzCarSales.com is a portal where late-model vehicles are offered to the public after they reach a certain mileage limit and need to be retired from the fleet. Since current rental cars are sitting unused during the big drop in travel, and since Hertz is in desperate need of cash, some of these cars are also being offered for sale.
Most of the vehicles appear to be offered at attractive “no-haggle” prices. A 2019 Volkswagen Beetle 2.OT S hatchback with 20,000 miles is listed for $15,444. According to Kelley Blue Book, the fair market value for the same vehicle at a car dealer is between $17,040 and $21,533.
A recent report from Manheim, a subsidiary of Cox Automotive, showed that wholesale prices for used cars and trucks fell 11.8 percent in the first 15 days of April, compared to the first half of March, due to a surge in inventory. Year-over-year, the index that tracks wholesale prices was down nearly 10 percent.
Adding to the inventory
Hertz’s move to increase its used car sales will add to that inventory while providing more competition for dealers that may be reluctant to pass on those lower costs. Hertz may be less reluctant since it needs to raise cash quickly.
According to USA Today, Hertz had around 700,000 vehicles in its fleet in late May when it filed for Chapter 11 protection. It appears to be aggressively pricing its vehicles, acknowledging the recent decline in used car values due to the pandemic. Hertz even offers free delivery within 75 miles of the car’s location.
When it filed for bankruptcy protection in late May, Hertz said the financial reorganization would provide it with a path toward a more “robust financial structure” that puts the company in an optimal position for the future as it rides out what could be a prolonged route to overall global economic recovery.
Hertz stock has plunged to below $2 a share on Wall Street, where the company plans to supplement its vehicle sales by selling new shares of stock. But in a filing, the company warns the shares may be “worthless.”
The bankruptcy court approved the sale of new shares in a ruling late Friday.