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buying Hertz Forced To Sell 185K Cars in Bankruptcy

18:58  30 july  2020
18:58  30 july  2020 Source:   autoweek.com

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As expected, the Hertz rental company is about to flood the used car market with 200,000 Chevrolet Impalas, Nissan Versas and Toyota Corollas. There are probably a few juicier cars in there, too. As the rental giant navigates its bankruptcy it will shed almost half its fleet to repay the $650 million to creditors.

a car parked on the side of a building: Hertz selloff is still just a small percentage of the total used car market. © Cindy Ord - Getty Images Hertz selloff is still just a small percentage of the total used car market.

The deal still needs to be approved by a court, but if it does, Hertz will have to unload the vehicles by the end of 2020. The deal allows Hertz to keep a paltry 900 bucks from each vehicle, but that would add up to about $164 million for the company if all 182,500 vehicles are sold.

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The $650 million is actually only about half of what it needs to pay, but the bankruptcy deal also allows for greater flexibility in making good on the debts.

The two main questions at this time are: Is this good for us, the consumer, and is this good for Hertz, the company.

Well, in June new car sales fell 30%, according to J.D. Power, while used vehicle sales jumped 17% above pre-pandemic forecasts.

“Thanks to a shortage of new vehicle inventory, more automakers and dealers have leaned into promoting attractive certified pre-owned programs, which might be driving more typical new car shoppers into the used market,” said Jessica Caldwell, Edmunds’ executive director of insights to The Detroit Bureau.

Interest rates on used car loans are down as well. According to Edmunds they’re at the lowest rate since January 2018. The annual percentage rate fell to 7.8% in June, compared to 8.3% in May and 8.6% a year ago. And remember, the used car market is about twice as big as the new car market, according to insights and analytics company McKinsey.

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The pandemic, for many reasons, made used cars a more attractive purchase. Demand is up. Which means prices are up. But extra supply is about to follow. However, Hertz’s 200K cars are just a tiny portion of the market, which was 39 million strong in 2018.

“Any time you add supply to the market it is going to put downward pressure on prices. While a Hertz bankruptcy would do just that, we are now in a much better place than we were a few months ago. We have seen a dramatic recovery in used vehicle sales after bottoming out back in March. Between April and May we saw total used vehicle sales recover by over one million units, returning close to the historical average for used vehicle sales. Given that this average is typically around 3.5 million vehicles, adding 200K units into the used market would not represent a flood, but rather an additional 6% units,” said Nick Woolard, Director OEM & Affinity Partner Analytics at TrueCar.

“So, the overall impact will be somewhat muted,” he continued. “However, there could be outsized impacts on specific segments that will bear the brunt of the impact. For example, recent model year vehicles with relatively low mileage will likely see the largest impact. There could be an impact on new vehicle sales as well, but low inventories in today's current environment provide an offset."

Now, what can we do to get you into a slightly used, massively abused Impala today?

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