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Hertz files for bankruptcy protection (nytimes.com)
122 points by boulos 11 days ago | hide | past | web | favorite | 97 comments





My question is, how come these claims of a "decimated used car market" never seem to make it over to actual customers. I'd sure as shit buy a car at 40-50% less than it was 3 months ago.

The margins for used cars aren’t high enough to support that kind of discount (https://jalopnik.com/how-to-negotiate-for-a-used-car-5570813 and https://www.autonews.com/article/20180428/RETAIL04/180439997...).

Think of it this way: there isn’t nearly enough demand right now, regardless of whether you (the dealer) discount your inventory or not. I.e., you will not move enough cars to pay for fixed costs like the mortgage on your building, financing the inventory on your lot, etc. The Fed has done various studies on household savings account balances and/or net worth (https://www.valuepenguin.com/banking/average-checking-accoun... and https://abcnews.go.com/US/10-americans-struggle-cover-400-em...). The vast majority of Americans would have to finance a car purchase, even for something like a 10-year old used car. Yes interest rates are low right now, but does it make sense for a consumer to buy a depreciating asset and increase their monthly interest costs at this point in time?

To the car dealer (or rental operation like Hertz), the question is does it make sense to have a fire sale on your inventory now (at prices that will almost certainly lead to an accounting loss), or do you take your chances in bankruptcy court? If you believe that in the next year or two that the market for used cars recovers somewhat, you can sell those assets off during bankruptcy proceedings to pay off creditors etc. There’s a strong case that taking this approach will leave the company as a whole better off in 3-5 years, though equity holders will certainly be taking a huge hit.


> Yes interest rates are low right now, but does it make sense to buy a depreciating asset and increase your monthly interest costs at this point in time?

At what point do you suspect the "vast majority of Americans"--who apparently can't afford to purchase a 10yo used car outright--start genuinely contemplating the financial impact of asset depreciation and overbearing interest in a strategic manner before signing a purchase agreement...you know, the one with all those legal words for lawyers and such? Call me impractical but...$1,201 just chillin' in the bank, yo!


In boom times, it’s probably true that people can develop irrational exuberance e.g., taking out a big mortgage because hey, housing prices are going up everywhere. When things are good, maybe you don’t budget so precisely. I know I don’t!

But when ~20% of working age Americans are living off unemployment benefits, and millions more who work in industries like restaurants, hospitality, and travel facing the possibility that they will likely never have a job to go back to, my guess is that you’d have to be pretty well off (or very optimistic) to take on an additional $100/month car payment, not to mention adding a car to your insurance policy etc. :)


I don't know man...I mean $1,201 is lot of presidents just waiting to be put to work! That's like downpayment on a practically new set of wheels and enough herb to last until facebook says the unemployment website is fixed. Might not have another global panedemic like this ever again, and as the old saying goes: you miss 100% of the shots you don't take. Opportunity's callin' my name!

Jokes aside, people who live life along this asymptotic approach are real, where the only conditional that registers is, "the current number in my bank account is still bigger than the number on this bill...which is completely optional 'cause repo ain't gonna find me this time, ha!"


You're getting downvoted, but it's actually quite staggering how many people live this way, even when they really can't afford to. A UPS warehouse worker I know just bought a $60k car because he got a "really sweet deal", even though the monthly loan payment is significantly higher than his rent.

Pretty much this. Depreciation is outpaced by the slashing of the margin you'd have to incur to sell today in any sort of reasonable quantity (especially if it is a cash transaction).

I went to Nevada a few weeks ago from the Bay Area and bought a very clean car at about 60% of what I would have paid for a similar Craigslist listing here in the Bay Area. If you are willing to travel a bit the deals are out there to be had.

On that note, back in 2015 I found a nice gentlemen in Los Angeles who was a Prius enthusiast who would drive over to Phoenix/AZ and buy used ones, drive them over to LA and privately re-sell them. The Prius I bought from him (2005 model) is still being driven by my father five years later.

Where exactly in Nevada? Close to the border at Lake Tahoe or further in some really small town?

There is an important difference between prices and volume.

To make a living you either have to get decent margin or huge volume. When both the margin and volume drops you have a problem.


You used to be able to buy older cars with plenty of life left before cash for clunkers. This effectively killed the cheap used car market

I have never, ever, had a good experience at a Hertz (or most of the other majors to begin with). The process of renting a car is one dark pattern after the other, from the website, to the real-life rental location, even the cars themselves. Every experience was at best frustrating, typically rage inducing. I won't miss them.

The last time I rented a car, I pre-paid everything online, so I was hoping to just pick up the car after a long flight. However at the airport, the new bill the presented me was 10 times higher because they tried to get me to another car (claiming they’ll give a discount), they don’t present you with the no insurance option. I had to explicitly ask them to just give me the car I had paid for.

Or they make a nice offer for an upgrade, which I decline. Then it turns out that the smaller car was not available, so they had to give the upgrade anyway.

And somehow they still looked at me as if I played them..


I always rent through some sort of AAA (automobile club). Almost each country does have a similar organization.

I do mostly rent my cars through ADAC (German AAA) which usually comes with unlimited miles, no excess insurance(s), young driver benefits, free additional driver, ... and a hotline which just 'works':

Hertz once charged a pretty extra on a prepaid rental. One call to ADAC complaining about the extra charge and I had my money back a week later.


The process of renting a car is one dark pattern after the other

I also despise dark patterns that car rental involves. Fortunately, two things make it easy to rent a car from Hertz (or probably any other major):

1) work for a company that has a corporate rental agreement with Hertz. All the bullshit about collision damage waivers, liability insurance, etc. just goes away.

2) sign up for their "rewards" program (the name differs by company). This puts all your important info into their computers. That way they aren't constantly re-entering info from your drivers license, etc.

3) There is a third option. You should rent trucks instead! :)

Just kidding about trucks being a real alternative. But whenever I rent from U-Haul it's absurdly pleasant, compared to renting cars as an individual. For example, the collision damage waiver for a car rental can be $30 a day or more. The same thing was only $10 on my most recent U-Haul rental.


That's odd. I have good experiences with them. Walk into the place, talk to no one, get in a car, drive to the window, take off.

Whenever I try to rent a car from somewhere like Hertz I'm presented with a baffling array of choices for waivers and insurance. I have absolutely no idea what I'm supposed to buy and how the insurance works.

They want me to pick and sign right there under pressure and with no time to read the agreement. I'm almost always left with no real understanding of what happens if I have a crash and pretty worried that I may be liable for more than I'm worth.

It's comical they way they wave those barely readable sheets of paper around randomly circling things and putting crosses in places.


Yeah, you gotta be a Gold member (or equivalent at other places) to get around this BS and do it all online / before you show up. I agree that the stock experience is miserable. Fortunately through AMEX it's free, same with Delta if you're any sort of status, etc etc. It's a method of gatekeeping.

Same here. When you are a Gold member, you they can't even try to upsell you anything. You just show your license at the exit and then drive away.

I have always had good experiences, besides the fact that on the website they show a model of a car and you get a different one (but of the same segment)

>I won't miss them.

I will. I don't have a car, but sometimes I need it so I typically go to Avis. I had very good experience with Avis almost always. Nice clean cars, friendly personnel, sufficiently convenient website. I frequently get free upgrades to premium or bigger cars.

ZipCar, another car-sharing service I sometimes use is horrible. Dirty cars, annoying stupid website, refuel credit cards almost never work, so I have to use my own and submit refunds.

PS. I know, ZipCar belongs to Avis.


All car renters are full of dark patterns but in my experience Hertz was the best one amongst them.

After a while you realize how it works: Use some CDP code to rent for cheap on their website and refuse all the addons that are pushed onto you at pick up (where they are trained to scare you). That clears 99% of the dark patterns


Working in this industry I can tell you that it can be in your interest to buy either damage waivers or supplemental insurance. Especially when you are renting larger vehicles. People often don’t realize how much it costs to repair a panel truck. At the very least review your insurance policy to make sure it covers non owned autos. It really sucks when a customer finds out after the fact that their insurance is not going to cover their accident.

Many (most?) credit cards have rental car coverage, it saved me a ~thousand dollars when a bird shattered a windshield. I always make sure the card I rent with has it.

I’ve seen customers get denied by their auto insurance and 2 credit cards. Just because a credit card provides coverages it doesn’t mean it covers everything. Insurance is complicated and you should never assume you are covered.

For sure. In general, if it isn't your fault, it will be covered. If it's your fault, almost any policy will fight to not pay. Insurance sucks.

This is true, but often this only covers physical damage to the car only, not anything you hit. Claims for loss of use of the rental car while it's being repaired often aren't covered, either.

I hated car rental companies every time I had to use them, even if it was being charged to a company I was visiting.

That changed after I became 26. Tons of extra fees and requirements are tossed on younger drivers which turned out to be most of the pain I had with them. Just aging made the rental process so much nicer


A manager of a competing company told me that Hertz managers have a monthly damages target. I have no trouble believing this.

So they laid off or furloughed 10000 staff, but cancelled pay cuts for management? Well, I know one rental company I’ll never buy from...

I also thought this is as damaging a quote as it gets "The company had cut pay for senior leaders in March, too, but reversed that decision recently."

So they'll be flying into bankruptcy with a golden parachute.


If you know your company is about to go bankrupt in a few months, and they tell you your salary is being halved, and your share options are now worthless, you'd leave right away too.

Management staying on to do a more careful windup of the business and protect assets from theft or other losses is probably money well spent.


The fact that it might be a rational business decision doesn’t mean that it isn’t also an indicator of a diseased company culture. I can’t imagine my employer announcing that 10k jobs will be cut but senior management keeps full pay...

> an indicator of a diseased company culture

Well yeah the company is as diseased as it could be - it's dying.

Why would they care what you or their employees think about their culture? The customers are gone and they're firing the employees. They're protecting as much of the investment as is left at this stage.


I meant the culture is diseased. You could have a company with a healthy culture that ends up in a very bad situation and deals with it in a more ethical way. See Airbnb. Can you imagine accepting to fire half your staff and still getting full pay?

As a downstream comment notes, this is a retention sweetener for an orderly transition or shutdown. The optics aren't great, but the reasoning is fairly defensible.

That's a shame. I still don't quite understand how they racked up so much debt. I get that they took on tons of compacts when the nation wanted midsize suv's, but it seems like somewhere an alarm bell should have been ringing a while ago...

They were bought from Ford by private equity which loaded them with extra debt to finance a dividend. They offloaded it via an IPO a year later.

Isn't dividends supposed to be payed from equity? "Loading with debt" will not increase the equity available for dividends.

Yes but you might need that cash on hand for running the business.

The article does a pretty good job of laying out the many mistakes that compounded their problems.

This is an opportunity for Tesla to buy out the Hertz brand, it would make a perfect complement!

I disagree. Tesla is a luxury brand. Hertz is not.

I think you missed the joke

(And also, Tesla a luxury brand? Seriously?)


Half of their models start at $80k+ USD. Sure seems like a luxury brand.

I have a Toyota Corolla to sell you at $100k.

I think outside of the US it’s considered very luxurious.

Model S and Model X are definitely higher end cars. Once you remove the hype factor, Model 3 is comparable to Honda or Volkswagen.

In the UK a Model 3 is priced like a BMW. A typical Honda or Volkswagen is a lot cheaper.

Hertz had fleets of cars including Honda Fit, Nissan Versa and Toyota Yaris, to be super specific.

The base msrp is about 16k on that class, the tesla 3 is 40k.

That's 2.5 times more expensive. Substantial difference.


if I sell you a Volkswagen for the price of a BMW, does it make it luxurious?

Model3 is expensive because it is hype and electrical.

EDIT: your reply is actually making my point (cannot reply anymore so replying here). All the other EV Cars such as the Bolt that nobody would consider luxurious are around the same price.


No to your edits. The Jetta and Civic are < 20k. The model 3 is not in a Jetta class.

The electric comes at a premium. The gasoline Kona is 20k and electric is 37. Go drive both for a week, then come back to me and say they handle the same, the acceleration is the same, the experience is the same. You won't because it just isn't...

I've extensively driven hybrid and electric models of the same cars (I have been working in a fleet related car company for years, I have access to hundreds of cars), they are as different as a flip phone and smartphone. This is the broad consensus of the staff ... it's plain and obvious when you can do 500+ miles comparisons, electric vendor X model Y > gas same vendor X model Y ... without exception (well so far at least).

We can drive any car for free (we keep at excess capacity, kinda how the supply systems work), nobody on staff rolls off with a gas car these days. Conservatives, liberals, doesn't matter, EV is just better tech.

I still claim the iphone of the electric isn't here yet. Tesla is a good blackberry, but there's something else coming ... don't know when don't know from where but the trajectory is obvious. Even the 2015 -> 2020 improvements are like moore's law level strides ... it's certainly coming soon.

You can be a late adopter on moore's right hand side of the chasm curve and be a holdout for a while, I know I am ... that's fine ... but the gears are already spinning on this one.


The very base model Jetta is <20k. Most standard packages will take it above that.

Of course. That's true for all the cars. You have to use something as a comparator though.

If you compare it to other cars without the hype but a comparable EV range, say a Hyundai ioniq (33k), Chevy bolt (36) or the Nissan leaf (32), the model 3 (40) is in the same range albeit at the high end. It also has the best range of the lot of them.

Maybe you're claiming all the other electric cars like, say, the Buick Velite or the Kia Soul EV have some hype price premium too. I really don't think most non-car people have ever heard of those models though so I doubt they can pump the price based on hype.

To claim it is like a Mitsubishi mirage at 15k is disingenuous.


In Denmark a used Tesla retails for approx $200k (DKK 1M).

Actually would be interesting to replace an existing rental company with tons of physical locations, especially since the margins to buy the cars decreases upfront cost of the otherwise premium vehicle. Low maintenance and high resale value are a bonus.

Just wouldn't work though with the baggage from the rest of the existing business.


The compact car thing is interesting. It seems like business travelers still rent compact cars or medium sized sedans 90% of the time in my experience.

I haven't rented for business in a few years, but every time I did the difference in cost between a "compact" and a few sizes up was trivial, perhaps two or three dollars a day. I generally jumped up to the largest sedan size because the cost was negligible and the cars were typically much nicer. Additionally, if they were out of that size, they'd bump you up to an SUV for free.

All this to say, at the pricing I've seen there is very little reason for someone renting a car to choose to rent a compact. The rental company can always upgrade people who booked a compact into a larger car, but if you have too many compacts you're screwed.


It’s probably due to corporate travel policy on rental car. Most of the time it’s limited to certain class of vehicles, and it’s a hassle to upgrade depending on the company policy (screen capture price comparisons, director/VP approval, etc.)

As an individual I tend to get the smallest car I need. I don't want to pay the extra costs of gas for a larger car. Thankfully, smaller cars don't have the embarrassing acceleration they did 5-10 years ago. I'm probably one of the few who prefer smaller cars; they're more nimble and easier to park.

They often seem surprised when I turn them down when renting.


But in the very rare case I want an SUV or a Cadillac sedan or something, the rate is bloody insane -- something like 4-5x the cost for a vehicle that costs less than double to purchase than a smaller car.

I guess maybe a Navigator depreciates more quickly than a Camry, and that's what you're paying for, given the rapid turnover of their fleets?


Luxury-type cars are also inelastic in price. If you're the type that will rent a Cadillac, you'll often do so at any price.

I don't know. Maybe I'm not the target market, but I often think "hey, I wonder if i can get something a little nicer.." and then am blown away at the multiples of price.

For SUVs, usually it's been considering a ski trip or something, so, yeah, I can see where people are "stuck".

I use Sixt whenever I can because they actually have nice european cars. Hit or miss in the US (I once got a Camry when I was trying to get an Audi A3; the Camry's a bigger car of course but I don't need a big car).

Flew into Seattle once, got a massive brand-new Volvo S90 sedan with all the bells and whistles for like $60 a day, same price other places wanted to charge me for a Camry. I'm sure if I had asked for a Cadillac from Hertz it would have been $400+ a day, and less desirable to me. shrug


I agree with you, but the places don't hold a lot of the luxury cars in inventory for this reason too. As you noted the depreciation is too large to accomodate this kind of strategy. Once in awhile you do get a deal; I flew into San Diego on a friday evening and had a mid-sized car with Enterprise, and they went into the upgrade pitch. I was half-listening until I heard they'd get me in a 7-series BMW for $5/day. I asked them to repeat it and sure enough, that's what it was. It was a rare weekend where convertible BMW's didn't rent out, so they slashed prices for a 3 day weekend rental.

It's rare but it happens. It does show that they usually rent out of that stock though at the crazy prices you do see, otherwise you'd expect to see those cut-rate deals more.


> All this to say, at the pricing I've seen there is very little reason for someone renting a car to choose to rent a compact.

I can think of roughly 2 MM possible reasons[1] in conjunction with 1 regulatory constraint[2] that might suggest an investment in a fleet of compacts may not have been an entirely reckless business decision at the time...not that I would have swallowed that pill myself...just saying.

[1] https://en.wikipedia.org/wiki/United_States_Department_of_De...

[2] https://www.defensetravel.dod.mil/Docs/perdiem/JTR.pdf Ref. § 020209


Also, car manufacturers force large rental companies to buy certain mixes of cars. For example crew cab pickup trucks are a horrible category for rental companies but they still purchase them every year. To get the insanely low prices they get on their vehicles they have to play by the manufacturers rules.

It's B2B in a commodity market where competition abounds. Manufacturers like Mazda, Hyundai, etc. don't have crew cab trucks in their lineup, so is doesn't make sense that a corporation would choose to sign a contract in good faith with a manufacturer that "forces" unwanted liability on its books in exchange for volume if executives of the former didn't perceive overall net outcome as favorable.

I never said the net outcome wasn’t favorable. I said certain categories underperform other categories by a wide margin. You are assuming the goal is to maximize RPU when he actual goal is to maximize the delta between purchase price and resale price.

My whole point is that a lot of what goes on in rental doesn’t make sense unless you view it at as a business that generates used cars.

However, I doubt you really care and were more interested in making a pedantic point about how contracts are voluntary agreements between rational actors.


As a business traveler, I only rented a compact car from Hertz and it was awful. I always go for medium sized now.

Rental car companies play game with the categories. Just a couple of months ago they tried to convince me a Camry is a full-size car and gave me a Corolla for my mid-size reservation.

I’d agree with their judgement. But I think it’s very subjective. Different parts of the world have different averages.

To me the Toyota range is like this:

- Yaris: compact

- Corolla: mid sized

- Camry: full size


Serious question but what is the advantage of getting a bigger car while on a business trip?

For a personal car I get it, as a bigger car is able to carry more people/objects but for a business trip I typically only have a small suitcase.

Every time I was given full size while on business I almost felt like it was a hassle more than anything else. It is more difficult to park in tight spots if I end up going to city centers.


If you are on highways, being in a small car is a safety risk, especially if the other cars on the highway are bigger.

I rented extensively when I was in management consulting and put 30k miles annually driving home on weekends. I can be a safe driver, but i'm also put at risk by other drivers who are not safe drivers. In those cases, you want physics working for you.

A more detailed answer: https://qr.ae/pNyaFd


So basically it's an arms race and we should keep arming ourselves with ever increasing cars to stay safe until we ourselves become a 'danger' to others? I feel super unsafe cycling in cities next to giant cars with poor visibility.

I get your safety concerns but why for the highway? There are no cars coming from the other direction so accident risk is pretty small. At least in Europe accident are way more common in cities then on high speed Autobahns.


In most cities where I have been, there is traffic congestion and speeds are usually low, most accidents are fender-benders. It is inconvenient to get into bumps, but not life-threatening.

On highways, at least in the US, the average speed is 65-70mph. You'll see some drivers doing 90 or more regularly. At 90mph, if you are in a compact car, if a truck or SUV hits you, there is a high chance of major injury or death.

You are right there are no cars coming from the other direction, but i've seen cars get bumped from the back, then spin. I've seen cars bumped from the corner by a driver who clearly did not check their blind spot, and the small car spins.

The small car is at a huge disadvantage, especially in the US where there are massive trucks and SUVs all over the highway. There is also bullying by bigger cars/trucks on highways where they expect small cars to get out of the way and/or drive defensively.



> Serious question but what is the advantage of getting a bigger car while on a business trip?

It's an upsell. If you perceive it as better, it's useful to you. But, if you like small cars, they are annoying to park and the clerk will give you a funny look when you say you like the small car better.


>Serious question but what is the advantage of getting a bigger car while on a business trip?

Ride quality, comfort and features usually go along with vehicle size. I've also heard that taller/wider people have problems fitting into smaller cars.


Yeah, I'm curious if a Camry is mid-sized what a full size is. Taurus? Those things are absolutely massive. My Ford Focus feels big, honestly, but maybe that's because I live in a relatively urban area with pretty tight street parking?

Toyota's full-size sedan is the Avalon.

Car categories have agreed-upon definitions; what rental companies call them is usually a size up or two from the manufactuer's (canonical) names.

For Toyota, the Yaris is sub-compact, the Corolla is compact, the Camry is mid-size, and the Avalon is fullsize. For Chevy, the Spark, Sonic, Malibu, and Impala fill the same roles. For Honda, it's the Fit/Civic/Accord (they don't make a full-size). For Nissan, it's the Versa/Sentra/Altima/Maxima.


The Honda full-size equivalent is in the Acura lineup in the US. I don't think I have ever seen an Acura at a car rental place though.

One time I had the option in the lot between a Malibu and Impala, and figuring out which one was "better" in person was pretty tough. The overall length difference per Chevy is 7 inches, which seemed largely irrelevant in person. I guess if it all went to the back seat leg room then you have a distinction for a certain market.

For reference, Sonic can be up to 35 inches shorter than a Malibu (depending on style).


I thought the Impala was a Malibu with a bigger engine?

No. It's a totally different car. The Impala is (as previously mentioned) 7" longer - 201 vs 194.

Compared to the compacts I’ve rented... a Corolla is pretty mid-size

Compared to a 2000-ish model Corolla, a 2020-ish Corolla is pretty much mid sized.

The latest Camry is 4,880 mm long while the latest Corolla is 4,640 mm. For comparison, the Mercedes-Benz C-Class is 4,686 mm while the E-Class is 4,923 mm.

The problem with those cars is that the windshield is raked so much that a lot of the front length is wasted. It's why our cadillac xts feels tiny compared to the chrysler 300 it replaced. And damn I want another 300 lol.

A lot of this and some other design inefficiencies are due to modern EU pedestrian collision safety mandates and testing, which I think is a fair compromise to make, and they have since been adopted in some other places as well but they long affected most North American vehicles due to global standardization.

https://www.caranddriver.com/features/a15118822/taking-the-h...


Was it the 2005-2010 Chrysler 300? Because that car actually shared a bunch with the Mercedes-Benz E-Classes. They apparently for example copied the W211 suspension for the 300.

I wonder if this will affect the Hertz graduate research fellowships. I'd guess probably not.

Don't think the Hertz Foundation has much direct ties to the company (though not 100% sure), despite both being started by the same person.

Renting out your own car exists in the UK, there are a few platforms that do that. I wonder if that done right is the future, more decentralised form of car rental. After all there are a lot of cars parked on the street idle for long periods.

Even though Elon Musk seems to be believe people would do that, I doubt that. Who would want to clean out their car every time they leave it? Then inspect it for damages when they need it again? Always be forced to plan ahead when they need the car, because otherwise someone else may have rented it? It's even less convenient that just using a "floating" car sharing service.

Compare what the average Joe pays for a car and what the likes of Enterprise pay. It may become a niche but could never scale beyond that.



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