The rental car industry is running in a stable operating environment so far this year, but owners, executives, and managers gathered at the International Car Rental Show heard repeated warnings that the second half of 2026 could face more challenges, with rising inflation and fuel costs affecting travel demand.

John Healy, automotive analyst at Northcoast Research, provided the annual rental car market and economic outlook on May 14 during the ICRS event in Grapevine, Texas. He has been analyzing the industry for 16 years.

Drawing on public company data, airline commentary, and broader automotive research, Healy asserted that fleet discipline instead of aggressive growth will likely determine the revenue and profits of car rental operations this year.

Healy described the rental business as one driven by three primary variables: fleet size, rental days, and rate per day.

Of those, fleet management remains the most controllable and relevant factor. Demand mostly stems from consumer and business decisions about when, where, and how to travel, which all influence fleet levels, usage, and rental rates, he said.

Healy noted that inflation readings had moved higher again after moderating through much of 2025, while fuel prices had risen sharply in recent months. He cited Midwest fuel prices near $5 per gallon as evidence that the increases were no longer isolated to coastal markets.

Traveler Behavior Holding The Line

Despite those pressures, consumers have not cut back drastically on driving to places. Overall vehicle miles traveled remained positive year over year, and March marked the highest reading on record for that month, up 1.6% from the previous year.

Still, Healy cautioned that airlines may pressure rental car demand based on recent public comments from United and Delta. Major carriers, facing rising jet fuel costs, are hinting at reducing capacity while increasing airfares.

“When I think about 2026 from a demand standpoint, I think it could be much more challenging than we thought two months ago,” Healy said.

Meanwhile, fleet restraint across the industry has helped preserve pricing power. 

New rental vehicle sales overall are down about 5% this year, while rental fleet purchases declined about 4% in the first quarter and 10% in April.

 That reduction in fleet growth, combined with relatively stable demand, has led to stable pricing. He pointed to recent results from Hertz and Avis, where lower fleet costs, steady rental days, and stronger pricing produced improved earnings performance.

TSA passenger travel data also remains one of the industry’s most closely watched indicators. Healy described TSA screenings as a direct proxy for travel demand because travelers passing through security are likely flying somewhere, with many renting cars at their destinations.

First-quarter TSA volumes were up about 2% year over year, an improvement over 2025 trends. April was flat, however, and May traffic had softened by about 2% at the time of the presentation.

“That may be the sign that the demand side of things, maybe at the margin, is starting to break a little bit,” Healy said.

Enterprise’s Macro Indicator

Healy detailed Enterprise Holdings and the relationship between airport and off-airport fleet allocation. He described Enterprise’s off-airport business as structurally different from that of airport-focused operators because collision-replacement rentals generate demand peaks during colder-weather quarters, when airport rentals typically weaken.

During the pandemic and vehicle shortage period, average replacement rental lengths rose dramatically, climbing from historical averages of 12 to 13 days to more than 18 days. That required Enterprise to commit more vehicles to the replacement business, likely limiting supply in airport markets.

Now, however, Healy sees that dynamic reversing. Used-vehicle prices are moderating, insurance companies are increasing total-loss declarations, and accident frequency appears to be declining due to advanced driver-assistance systems and improved vehicle safety technology.

He cited declining roadway fatalities and lower insurance-related accident costs as evidence that collision frequency is softening nationwide.

If replacement rental periods continue moving back toward historical norms, Healy estimated Enterprise could eventually shift about 100,000 vehicles back into airport operations over the next several years.

“That business is not going to be as sweet anymore,” Healy said of the collision-replacement segment.

Off-Lease Variables Mount

Another major issue is the coming wave of off-lease vehicles returning to the market. Healy projected that off-lease supply could grow 15% to 20% annually over the next several years as pandemic-era production disruptions cycle out of the system.

Likewise, many of those vehicles are returning with negative equity, meaning consumers are less likely to purchase them outright at lease end. That reluctance pushes more vehicles into wholesale remarketing channels, increasing used-vehicle supply and potentially pressuring residual values.

Healy warned that the used-vehicle market, which has generated sizable profits for rental companies in recent years, may begin normalizing.

“My guess is everyone’s fleet costs have been a bright spot in their business the last three or four years,” he said. “I think it suggests there is a normalization coming.”

A New Role For EVs

Electric vehicles were another point of discussion during audience questions. Healy acknowledged that many of the upcoming off-lease returns will be EVs, but he argued the impact still matters because those vehicles compete for the same consumer demand and parking space as internal-combustion vehicles.

He suggested that lower-priced used EVs may increasingly serve as entry-level transportation for budget-conscious buyers, although he questioned how aging batteries and long-term residual values will affect financing and ownership economics.

Leisure Versus Business Travel Trends

On the demand side, Healy expects leisure travel to outperform business travel in 2026, even if consumers shorten trips or choose lower-cost destinations. He pointed to upcoming events, including the World Cup and America 250 celebrations, as potential travel tailwinds that could support domestic road travel and rental demand.

However, he urged rental operations to avoid overexpansion.

“I just don’t see a lot of reason to be increasing or taking the phone call from the person that wants to sell you incremental cars that you haven’t committed to this year,” Healy said during the Q&A session.

Healy characterized the airport rental business as a mature, low-single-digit growth industry domestically, with long-term EBITDA (earnings before interest, taxes, depreciation, and amortization) margins for large operators typically settling in the mid-to-high single digits outside extraordinary periods like the pandemic.

Hertz Reshapes Mobility

Healy described Hertz’s newly created “Oro” business unit as one of the more notable developments in the structure of mobility services.

The unit combines Hertz’s traditional rideshare rental business with emerging fleet-management services tied to autonomous vehicles and transportation platforms.

Hertz is positioning itself to support autonomous fleets by charging, cleaning, and maintaining vehicles overnight before redeploying them into service the next day, Healy said.

The car rental giant has begun recruiting drivers directly onto its payroll in select markets, combining vehicle access, insurance, and labor into a bundled rideshare operation.

While Healy said the long-term economics of those programs remain uncertain, he believes rental operators possess infrastructure that future mobility companies will need.

“None of them have the ability to clean, cradle, and care for a vehicle,” Healy said of autonomous technology companies. “I think that’s where all of you come in.”

Autonomous vehicle expansion is accelerating, he added. Waymo is expected to enter 11 markets by year-end, while evaluating 20 additional markets.

The broader future of mobility, however, remains unsettled. Autonomous vehicles, subscription models, rideshare integration, and fleet services all continue to evolve, with companies still experimenting with it before committing to fixed business models, Healy said. “There’s a lot of dating happening, but not a lot of marriages yet.”