John Healy, managing director and senior research analyst at Northcoast Research, gave the annual car rental industry Market Outlook on April 14 at the International Car Rental Show in Las Vegas.
Photo: Martin Romjue / BBM
The state of the automotive and rental car markets and broader economy now comes with a spreading caveat: Circumstances may change by the time you read this.
That summed up the annual rental car industry and “Market Overview” on April 14, officially starting the agenda of the International Car Rental Show in Las Vegas. Led by John Healy, managing director and senior research analyst at Northcoast Research, the presentation looked at rental fleet levels, rental rates and pricing, and the direction of the used car market as the key drivers of rental car industry profits.
Uncertainty Defines 2025 Market
Except this year, tariff threats, lurching stock markets, slowing international travel, and potential disruptions in global automotive production colored the industry outlook.
“When I was putting this slide deck together over the last week or two, it went through several iterations, primarily because things were changing daily,” Healy said. “I can only appreciate how difficult it is to be in your shoes, in managing a business like this, where you’re constantly trying to figure out: Who will rent cars, but now you’re trying to figure out, should I buy cars? Should I sell cars? Should I hold on to cars? Those are difficult questions to answer.”
Such questions are impossible to answer without tariffs factoring into the conclusions, he said. “You need to take a stance about what will happen politically with tariffs and how long those will last.”
Customer demand and rental fleet levels are the lifeblood of the rental car industry, said Healy, detailing an array of market signals, indicators, and trends.
Travel Signs Flattening
In the first indicator, real-time government data of TSA screenings show 2023 screenings surpassed those of 2019, hitting a post-COVID high and closing the chapter on the effects of COVID on travel.
In 2024, the rates of increase slowed, which is a yellow warning sign for what the industry could see this year, Healy said. Screenings in the second half of 2024 were up only 4% compared to the second half of 2023.
Data is not consistent enough yet for a strong conclusion for 2025, but year to date, TSA screenings have reached about 2.3 million, at 8.1% above the 2019 level, but are flat compared to YTD last year.
Consumer sentiment shows softness on the commercial side so far this year, but not on the leisure side, Healy said.
“It’s not a surprise given all the uncertainty creeping into the news headlines,” Healy said. “The fluctuations and gyrations of the stock market are probably not good for people considering if they will travel this summer.”
Rental Fleet Levels Even Out
In rental fleet purchases, sales levels are like those a year ago, with rental car operators buying about one million cars annually, which is 10% above levels in 2022 and 2023, Healy said. “That’s a good sign the industry is moving towards more discipline and not aggressively chasing some of the deals available in the market in January and February.”
But if consumer sentiment and corporate travel are lagging indicators, the industry may buy more cars than needed for steady fleet usage, Healy said.
Given uncertainty over fleet costs and consumer behavior, the stock values of publicly traded Hertz and Avis are coming under pressure, he added. In the last 60-90 days, the two global rental car giants have taken large write-downs on their fleets—a sign of more to come.
Pressures Pushing Rental Prices Downward
When looking at rental rates and pricing at the top 25 U.S. airports, which serves as a proxy for the wider car rental industry, average rental prices are down by single digits compared to Q1 last year, Healy said.
“Looking out 45 to 60 days and tracking the same pricing in those markets, what we’re seeing is that pricing curves are steeply lower,” Healy said. “That suggests the industry fleet levels are probably a little bit too heavy,” along with the slope of price repairs.
During the last 24 months, more car rental branches at airports are seeing more months with negative pricing pressure than positive on a year-over-year basis, Healy said.
Tariffs Taking a Toll
Investors and banks servicing the rental car industry are asking more questions about tariffs and consumer confidence, as well as their anticipated effects, Healy said.
“You have to inform your view of policies and tariffs to know what will happen in the marketplace and what will likely happen in the next 60-90 days.”
Although the recent tariff pause could mean steady prices from OEMs during the next 90 days, the possibility of more to come will make the automotive market volatile, Healy said. Tariffs in some form could remain in the market and determine if the car rental industry is over-fleeted.
Remarketing and Fleet Acquisition Strategies
As a result, vehicle auctions are ready and willing to take and sell cars, said Healy, citing a recent investor call with four major independent auction owners. In the last few weeks, the auctions have seen a 500 to 700 basis point increase in auction usage.
“I think cars are starting to catch fire a little bit, and dealers, whether they’re being short-sighted or aggressive, are trying to get their hands on inventory,” Healy said.
Rental car operations seeing negative pricing YTD and running a fleet below the best usage level could lock in healthy gains by selling under-rented vehicles into the used market now, Healy said.
He advised rental car companies to be nimble and prudent in committing to any 2026 MY purchases for their fleets in an unpredictable tariff environment.
“You can sell off (vehicles) to get to an adequate level of (fleet usage) in the business and ride it up because the last thing you want to do is buy a car that’s 25% more expensive than it could be a week(s) later, while you could rent out a car at about 100% usage for three or four more months,” Healy said.
Operators should also figure out which OEMs have more production and parts sources in the U.S. versus those depending on foreign sources and taking on more tariff exposure, he advised.
“The other thing to be mindful of is how these manufacturers handle the tariff situation,” Healy said. “If tariffs stay in place for more than 90 to 120 days, and you are negotiating [fleet] purchases, will you ask if they are spreading the tariffs across their entire vehicle portfolio? Or just among certain makes and models of vehicles?”
Looking ahead to 2026 and 2027, rental car operators shouldn’t add fleet even if the market shows a slight increase in demand, Healy said. For example, a 2% increase in demand does not translate into a 2% increase in fleet vehicles and could result in over-fleeting.
Latest Trends at the Big 3 RACs
At Hertz and Avis, rental days are flat year over year and RPD (revenue per day) is slightly down amid higher fleet costs but slower vehicle depreciation levels, Healy reported. That could result in the rental car giants being able to tap “the honey pot” of more vehicle equity to compensate for financial challenges.
At privately held Enterprise, length of rentals (LORs) among insurance vehicle replacement customers appears to be easing off the 18–19-day levels of the COVID era when car repairs took longer due to supply chain problems and labor and parts shortages, Healy said.
The average LOR before COVID was 10-12 days. Enterprise’s off-airport business is normalizing this year with average LOR moving toward 16 days and possibly 14–15-day levels if the trend continues. That could result in Enterprise shifting more fleet from neighborhood off-airport locations to on-airport ones in the next two years.
Travel Booking Behavior Shifts
Leading indicators from the airline and hotel sectors hint at weaker travel activity with more questions about business and consumer confidence, global currency fluctuations, and political viewpoints all influencing travel.
“We’re seeing bookings come in much closer to the date of travel,” Healy said. “We’re not seeing growth out there like we had been. You’re even now starting to hear about luxury and high-end travel (stay) bookings coming in slightly shorter. If the airlines and hotels are seeing it, then I expect the rental car companies also to see it.”
Healy wrapped up the presentation with some quick takes in response to audience questions:
- Short-run demand for vehicles looks to be increasing as consumers push forward vehicle demand by two to three months to avoid tariff-driven higher prices. That could be a good run for dealers and auctions selling cars this spring, Healy said.
- 25% import tariffs will likely stick, but will they be around in the fall? How an OEM distributes tariff costs should determine a car rental company’s spending policy.
- Used car market: 2025 will be a bottom market for late model vehicles coming to market due to a decline in off-lease returns. 2026 off-leases will be up by 40%. But if the used car market is strong, consumers will keep them, or dealers will sell them, resulting in lower off-lease supply.