Rental cars may still be 'quite pricey' this holiday season as the shortage continues to send prices higher than usual

·3-min read
2020 11 17T094603Z_356102775_RC2X4K9D9A0G_RTRMADP_3_HEALTH CORONAVIRUS SWISS BUSINESS.JPG
The logo of car rental company Hertz is seen at a branch office in Zurich, Switzerland, November 17, 2020. REUTERS/Arnd Wiegmann
  • The rental car shortage that caused prices to skyrocket up to $700 per day is now easing up.

  • But travelers looking to rent a car for their winter holiday vacation may still see high prices.

  • Factors like the ongoing chip shortage are still hindering rental car companies' abilities to regrow fleets.

  • See more stories on Insider's business page.

The summertime rental car crisis that pushed tourists to rent vehicles at $700 a day has eased up, but the car rental headaches may be back again by the winter holiday travel season.

In late spring through the summer, the rental car shortage caused by a "perfect storm" of decreased fleet sizes, the computer chip shortage, and skyrocketing demand sent daily rental prices to extreme highs, pushing some travelers to rent U-Haul vans instead of cars.

At the time, analysts predicted that rental car companies could get some "breathing room" from the shortages by September, when travel typically slows. And while travel - and consequently rental car prices - has predictably eased from the summer travel boom, the rental car shortage is here to stay for another year.

The computer chip shortage that's been plaguing automakers could persist into late 2022, hindering rental car companies from quickly regrowing their strapped fleets after some had to sell off vehicles to save cash during COVID-19.

To combat this, car rental companies have been buying used cars (often at auctions), holding onto vehicles for longer than usual, and reshuffling fleets from locations once dominated by corporate travelers - like Baltimore, Milwaukee, and Kansas City - to leisure destinations like the "sunbelt markets," Chris Woronka, a senior hotel and leisure analyst at Deutsche Bank, told Insider.

Despite these efforts, rental car companies are still operating with less supply than usual for this time of year, and Woronka predicts these companies may not have a full inventory until 2023, he told Hannah Sampson for the Washington Post.

"The supply and demand problems are still real," Matt Clarke, the senior vice president of marketing at travel search platform Kayak, told Insider, adding that rental car prices are still 75% higher than 2019 prices.

Luckily, travel levels typically ease up this time of year. And as a result, the average car rental price is now lower than the high costs we were seeing throughout the summer.

But don't hold onto this good news if you're planning on renting a vehicle for any winter holiday vacations.

Hertz is predicting "demand to be strong during the holiday season and through the rest of the year, especially in popular tourism destinations," a spokesperson told Insider in an email statement, noting that the company is still trying to grow its fleets. And according to data from Kayak, online searches for rental cars ahead of this year's holiday season are already up 230% compared to 2019.

Demand for vehicles typically spikes during Thanksgiving and the last half of December into the first week of January. But Woronka predicts car rental companies won't have their full inventories back by the end of the year.

As a result, rental car prices this holiday season will still be "a little bit elevated versus 2019 levels," he said. "There's still going to be more people during the peak periods that are willing to pay higher prices."

But luckily for travelers, Woronka says these prices likely won't be as high as they were during the summer, although Clarke predicts rental cars will still be "quite pricey."

To avoid being priced out of a rental car, Clarke recommends booking a rental car as soon as possible. Some travelers have also started using an alternative to the traditional car rental company: Turo, which operates like an Airbnb for rental cars.

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