Be prepared for recently vaccinated customers eager to get back to their lives. They’re going to need personal transportation — will you be ready to serve them? - Photo via Q000024/PxHere.

Be prepared for recently vaccinated customers eager to get back to their lives. They’re going to need personal transportation — will you be ready to serve them? 

Photo via Q000024/PxHere.

How are you feeling these days? Better than in April or May, I’d suspect. Month over month, the U.S. car rental industry is incrementally clawing its way back. You know it’s been a crazy year when you’re happy your revenue is only off by 30% in November compared to last year. But hey, that’s better than April, when business was off 85%. 

Congratulations. If you’re reading this, you’ve adjusted your fleet, staff, and operations to meet the challenge of the most disruptive year in your business. What’s next? Welcome to 2021. We’ll call it the Recovery Year. 

Next year will be a tale of two halves. In the first half, a resurgence of COVID-19 cases will put a chill on travel in some areas, though local business and local leisure rentals will make up some of the business from lost air travel. But with vaccines apparently widely available by June, the third and fourth quarters of 2021 could be gangbusters for everyone. 

With all normal projections out the window, planning 2021 won’t be easy. Here are some factors to guide you:

Upside Down Fleet Patterns

Fleet cycles are upside down from normal patterns. Spring in-fleeting was put on hold due to the virus, followed by a summer sell off into the crazy-hot used car market. During fall’s normal de-fleeting period, operators acquired vehicles to meet increasing demand. 

Once-tight new car supply is easing somewhat. Franchisees and established independents have leverage with OEMs and won’t have problems acquiring fleet, but smaller rental companies will have to get in line behind dealer retail. 

That means smaller companies will have to work harder for units in the local market, though they may not find the usual dealers who’ll part with end-of-month inventory to up sales numbers. Brokers may be able to help. 

Knowing the market is still hungry for used cars, one Florida affiliate operator is offering to sell his local dealers two of his used rental units if they’ll sell him one new car.

Smaller operators could also look to buy used fleet in Q1. There will be no basement bargains, however, as strong demand in the recovery and lingering supply issues will keep wholesale prices firm throughout 2021.  

Whatever your fleet needs, start planning immediately. If by the end of the second quarter we’re anywhere near back to normal, it’ll be a scrum for rental units. 

Constricted Lending Environment

A major fleet supplier/lender and a few smaller rental lessors exited the U.S. market in 2020, while existing lenders have tightened their criteria and are lending in smaller increments. Like fleet supply, the larger, established rental companies won’t be too troubled, but the smaller ones looking for a foothold will struggle. 

If you’ll need to fund fleet for the ramp up, over-communicate with lenders — the good, the bad, and the ugly. They all know that balance sheets are suffering across the board. In times of economic shock, they’re judging how operators are reacting to market conditions to decide which clients to fund. 

Talk to lenders now, not when you urgently need cash flow.

Looming Tax Liability

With the sunset in 2018 of like-kind exchange (LKE) as a tax deferment strategy, in its place some car rental companies have taken advantage of 100% bonus depreciation. But similar to LKE, that only works when the fleet is growing, because the tax bill is put off only if you’re buying more vehicles. With this year’s unprecedented fleet constriction, some smaller and medium-sized rental fleets are facing additional multiple millions of dollars in tax liability. 

Without legislative intervention, this could sink some companies just as they’re digging out of the pandemic’s hole. Though the bill won’t come due until 2022, consult your tax accountant now to see where you stand and to devise a mitigation strategy. 

The Changing Customer

Out of necessity, the pandemic has forced new efficiencies in business processes. It’s also produced heightened awareness of customer care. Car rental has responded with enhanced sanitation protocols and contactless rentals. But will they stick around post pandemic?

The operators who switched to EPA-approved disinfectants for COVID-19 will likely continue, as those products are already in their supply chain. However, the hard-to-scale operational processes such as virus-eradicating fog machines will fade along with the gimmicks like the “sanitized sticker” on every car door seal. The plastic screen shields at counters now ubiquitous in retail will likely remain. 

One Midwestern franchisee is seeing a relaxation in customers’ edginess surrounding the potential for infection, yet he’s not loosening his sanitation processes. That’s smart, because in a commoditized market, anything you can do to make your customer feel welcomed and safe will become your differentiator. Maximize that advantage.

With their physical health on the line, you can forgive customers if they’ve seemed a little more entitled this year. The Florida operator is seeing a spike in “friendly fraud” chargebacks, in which customers are disputing credit card charges (and receiving temporary credits) merely because they weren’t satisfied with the service. To mitigate chargebacks specific to toll charges, he created a video that explains toll charges visually to run on his in-store monitors. 

“Contactless rentals” might be car rental’s catchphrase of the year. In many cases it became a labor-intensive necessity of the moment, while other operators are gladly incorporating it into their business models forever. 

Perhaps the pandemic won’t accelerate dispersed, on-demand rentals en masse as quickly as hoped. But it has motivated meaningful process improvements: “I would never have dreamt to send a text message to a customer for a rental extension,” mused the Florida operator, “and have them sign a new contract that automatically downloads back into my software with an updated active rental agreement.”

Pandemic-driven efficiencies in retail such as store curbside pickups won’t go away. Customers now expect more efficiency in their lives. Look to continually implement even small improvements that digitize the rental process to meet their needs.

Survivor’s Market

If you can make it through the first two quarters of 2021, you’ve proven yourself a survivor. You should be in good shape. With Hertz’s store closures and the Advantage/E-Z bankruptcy, as well as the closures (unfortunately) of many small independents, the competitive landscape will be to your advantage. 

While we’ll likely be in a depressed business cycle for the next few months, start planning for summer 2021 immediately. We will soon see news reports of happy people exiting medical clinics waving their vaccination papers. When that happens, they’re going to come looking for personal transportation — be ready to serve them. 

About the author
Chris Brown

Chris Brown

Associate Publisher

As associate publisher of Automotive Fleet, Auto Rental News, and Fleet Forward, Chris Brown covers all aspects of fleets, transportation, and mobility.

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