After weeks of hardship due to decimated demand, the car rental giant Hertz filed for Chapter 11 Bankruptcy late Friday night. Hertz has been struggling to keep its head above water since the Covid-19 crisis began, and it seems the company has held out for as long as it could. Its fleet of used cars are now hitting the market, and one company’s misfortune will soon become some car buyer’s killer deal.
After a tense day of talks with creditors, Hertz filed for Chapter 11 Bankruptcy, according to Automotive News. While Chapter 11 allows the company to continue to operate in order to figure out how to pay debts and hopefully turn the business around, the situation for the car rental company is pretty dire:
Hertz said it had $1 billion in cash to support its operations, which include Hertz, Dollar, Thrifty, Firefly, Hertz Car Sales, and Donlen. But it might need to raise more, perhaps through added borrowings while the bankruptcy process moves forward, Hertz said.
The court petition listed about $25.8 billion in assets and $24.4 billion of debts. Its biggest creditors include IBM Corp. and Lyft Inc., according to the document.
Hertz has traditionally been a leading buyer of fleet cars from the Detroit 3 and other automakers. Last year, Hertz held as many as 567,600 vehicles in its U.S. fleet and 204,000 in its international unit, holding those in the U.S. for an average of 18 months and international vehicles for 12 months, according to a U.S. filing.
Its biggest suppliers of fleet vehicles were General Motors (21 percent), Fiat Chrysler (18 percent), Ford (12 percent), Kia (10 percent), Toyota (9 percent), Nissan (7 percent) and Hyundai (5 percent), according to the filing.
Hertz normally leases its fleet, instead of doing buybacks with the auto companies it works with. Normally, Hertz would simply sell off excessive vehicles when demand dropped, but with the used car demand dropping along with travel (Hertz does most of its business at airports) the company had no way to keep its head above water. But selling off inventory may not be enough.
Hertz already tried selling enough cars to stay afloat, and it didn’t work. In early March Hertz sold 41,000 used cars in the U.S., but pumped the brakes as returns shrank and auto auctions stopped, according to CNN. Used car prices then fell 34.4 percent in April. A ton of new inventory on the market will likely push prices down even more, making it extremely difficult for Hertz to climb out of the hole it is in.
Automakers are also worried about the trouble in the rental car market. Last year car rental fleets accounted for 10 percent of U.S. auto sales; sales already suffering automakers can ill-afford to lose. Hertz also let go of 12,000 employees in the U.S., while some 4,000 were furloughed—a furlough which may prove permanent.
On Monday, Hertz dumped a bunch of bumble bee-colored Corvette z06s on to the used car market for a heck of a good deal. More used car deals were rolling in Saturday morning on Hertz’s website after the filling announcement. Here’s a 2020 BMW 740i for $52,949 and only 8,595 miles on the odometer, a full $5,000-$8,000 less than similar cars with similar milage in the same area, for instance.
There are plenty of less flashy cars for decent deals as well, especially if you’re in the market for one of the old rental car standbys, like a Toyota Corolla or a Chevy Tahoe. If a company that has been around since 1918 has to die, consumers might as well pick the bones clean.
(h/t Isaiah on the 740i listing)