Photo via Atomic Taco/Flickr.

Photo via Atomic Taco/Flickr.

Advantage Rent A Car will be placed in Chapter 11 bankruptcy Tuesday, after its new owners logged huge auction losses and questioned the book value of 24,000 vehicles acquired from Hertz last year.

Hertz sold its Advantage brand Franchise Services of North America (FSNA), after the Federal Trade Commission (FTC) ordered the sale as a condition of Hertz purchasing Dollar Thrifty. Advantage and Dollar compete in the low-cost segment of the market.

Simply Wheelz, a unit of FSNA that does business as Advantage Rent A Car, acquired the vehicles and a master lease agreement that required Simply Wheelz to bear the residual value risk of the leased fleet.

In June, Simply Wheelz began selling Hertz vehicles via Manheim auctions and booked losses on the sales. As of Oct. 25, Simply Wheelz had sold 5,295 vehicles at auctions and lost an average of $1,633 per vehicle. The total loss reached $8.6 million, according to FSNA.

Following the auction sales, FSNA said it requested that Hertz provide information about the "significant difference" between the book value of the Hertz vehicles and the fair market value.

"Despite repeated requests, Hertz has not yet provided the company with such information notwithstanding the view of the company that Hertz is contractually obligated to do so," FSNA said in a statement.

FSNA has been in talks with Hertz and three other parties to purchase the Advantage car rental business and to obtain additional financing. FSNA has ruled out a sale back to Hertz because the FTC may not approve it, according to FSNA.

Advantage operates in 33 states including airport locations serving 60 of the top 70 airports in the United States.

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