Magazine for the professional car and truck rental industry.
Issue link: https://autorentalnews.epubxp.com/i/97296
EDITOR���S CORNER FIVE PREDICTIONS FOR 2013 As feet sales and the used car market fnally get back to normal, the land rush for vacated airport locations will produce a ground war on rates. C COMING OUT OF A RECESSION, OEM BANKRUPTCIES, yo-yo fuel prices, natural disasters and historical peaks for used car prices, 2013 might have been characterized as a return to ���normal.��� Yet the fallout from the Hertz acquisition of Dollar Thrifty will prove that this year will be anything but. FLEET COSTS WILL GO UP. BY CHRIS BROWN New car prices will stay high. For its 2013 buy, Avis Budget predicts ���low- to mid-single-digit increases��� in the purchase prices for risk cars. According to one operator, ���It is getting more diffcult to spot a deal as nearly every vehicle out there has seen a dramatic price increase in the last couple years.����� We knew the great used car market couldn���t last. Supply returns to the wholesale market next year; used leases will start to hit in January and higher new car sales will produce more trade-ins. Kelley Blue Book (KBB) estimates that resale values in the frst and second quarters of 2013 will be down 1-2% over 2012, an unusually strong year. ���This is a slight softening, not the edge of a cliff, because supply is still a very real concern for a lot of dealers out there,��� says Alec Gutierrez, manager of vehicle valuation for KBB. ���The residuals are still good, but they���re sliding, so the trick is not to get caught where the residual goes negative against the cap cost,��� the franchisee cautions. The squeeze is on. IT���S GOING TO BE A TOUGH YEAR FOR RATES. Common wisdom says that market consolidation makes prices rise. That won���t happen in the foreseeable future. As part of the Hertz/Dollar Thrifty merger, the Federal Trade Commission (FTC) is forcing Hertz to vacate 26 Dollar or Thrifty airport locations, 13 to the new Advantage, and 13 more to either Advantage or other new buyers. The likely candidates are Fox or Sixt, up-and-comers with plans to expand. With this Balkanization in the discount market, look for a ground war on rates to gain market share. THE ANCILLARY REVENUE MARKET EVOLVES. ���Connectivity,��� the buzz word in our daily lives, will fnally reach the car rental market. Next year may be the frst in which a major rental car com4 Fact Book 2012 AUTO R ENTAL N EWS pany will offer ��� for a fee ��� a device that easily links a smartphone with a vehicle���s infotainment system, so the renter can access music and contacts and talk hands-free. In general, more apps are coming to cars, and RACs will fnd a way to cash in. Conversely, rentals of GPS units will fall as more consumers use smartphones to navigate. THE LENDING MARKET WILL EASE FURTHER. ���Lenders are chasing loan volume. Our rental clients are getting courted every day of the week,��� says one lender, noting that the activity is happening on lines of $40 million and up. ���If you���ve got a reasonable track record, pretty low leverage and some size, banks want your business, but they are tying better rates to higher deposits.��� Medium-sized companies are seeing the renewed competition as well. ���Not only are banks becoming friendlier to deal with but a few new leasing companies with pretty competitive rates��are popping up,��� says one operator, who draws about $10 million for his business.�� The lender predicts that better rates will eventually trickle down to lines less than $10 million, though it may take more than a year. At least rates aren���t going up in the next two years ��� the fragile economy will make sure of that. WATCH OUT FOR THE INDEPENDENTS. The FTC���s required divestitures present opportunities for smaller companies. Now with 62 locations serving U.S. airports and more possible, along with 325 neighborhood locations under the U-Save brand, the new Advantage (owned by Macquarie Capital and Franchise Services of North America Inc.) will become the fourth largest car rental company in North America. Fox has grown from its Western roots into Florida, and is now recognized by the majors as a force to be reckoned with. Fox will win a few of those open airport bids and continue to grow. Sixt, a global player but new to America, has opened seven U.S. airport locations since February 2011. Don���t be confused by Hertz���s label of Sixt as a ���deep value��� brand. From its corporate backbone in Germany and ties to airlines, travel agencies and distribution systems to a U.S. franchise initiative, Sixt has a fag in the sand here.