As a systems guy, I find this situation quite interesting in the way in which it exposed interlocks in the car rental pipeline that were previously not visible.
What I hadn't appreciated was that Car Rental companies had constructed a model where they bought new cars, rented them for a couple of years, and then resold them. The car would depreciate of course but as a bulk car buyer they got the cars at a discount on dealer cost because, well they bought more than the average dealer did. So when they depreciated they didn't lose as much value as you and I might experience if we bought a car, held it for two years, and resold it to a dealer (worst case) or another buyer (best case).
So the rental agency simply tracked how much the car would "lose" in value over its working lifetime, plus the cost of needed maintenance (generally relatively low), and offset that with income of renting it out. So the math was something like (making up numbers here) $5,000 of depreciation loss against say 400 rental days at $50/day or $20,000 of rental income. Say $1000 for maintenance during those 2 years and you've got $14,000 of "gross income" into the company, per car to pay employees and operating costs etc.
Now this makes sense and it is a fine business model, but an interesting quirk is that revenue is directly proportional to the number of 'working' cars you have out there bringing in the bucks. More cars, more income. And if you buy the car on credit there is an interest expense sure but you don't use up working capital to bulk up your fleet and boost your income.
As a result, car rental companies were carrying a HUGE amount of debt pre-pandemic which was all in car investments.
Then BOOM, the black swan of a pandemic hit and air travel stopped for all intents and purposes and now rental car companies are sitting on fleets of cars where they have to make the monthly payment on the debt but those cars aren't earning any income. This burns money in a hurry! So they did the only thing they could do, and sold off their fleets for the most part so that they could retire all that debt. Some, like Hertz, were already in Chapter 11 bankruptcy when they did that. Late 2020 was an excellent time to buy a car from one of the rental companies because they were really motivated to get them off their balance sheets.
And this then is the fun part. So the pandemic also put a huge blip in the supply chain. And since every single car company had switched to "just in time" manufacturing where they don't stock parts to make cars, they expect a smooth flow of those parts from the supply chain to feed their assembly lines, had to stop making cars. They had no parts. What is more, the humans in the pipeline like truck drivers, container crane operators, container ship crews, freight forwarding staff, Etc. were quarantining or not working because of the pandemic risk and those are jobs you cannot do "remotely" no matter how much you might want to. So the supply of new cars dried up, and won't untwist until the entire chain is back up and running at capacity again.
So now the pandemic is "less scary" because smart people have vaccinated themselves and they start traveling again. And those people want to rent cars. Which is great for rental car companies, except they cannot rebuild their fleets because there aren't any cars to buy.
And this adds the second fun twist, if you bought a car new in 2019 (as I did), and it is the kind of car rental companies might rent (which mine is), you get letters from the dealer in 2021 offering to buy it back from you for more than you paid for it!
What is more, when you see all those cars that are going to be 'totalled' by the insurance company because they were under water in the southern part of the US or on the east coast, those cars used to be sold for pennies on the dollar in "salvage sales" in which salvage dealers would recover parts and/or do enough repairs to resell them with a salvage title. The bidding for those cars is much more intense given the demand by rental car companies for stock, any stock, to boost their fleets.
It is a remarkable example of a system where the parts are interconnected in non-obvious ways that has a non-intuitive response to shocks to the system. As with most "emergent" systems like this one though, sending a shock through it does two things; it illuminates these previously unseen inter dependencies, and it tends to kill off weak players.
What is more, when you see all those cars that are going to be 'totalled' by the insurance company because they were under water in the southern part of the US or on the east coast, those cars used to be sold for pennies on the dollar in "salvage sales" in which salvage dealers would recover parts and/or do enough repairs to resell them with a salvage title. The bidding for those cars is much more intense given the demand by rental car companies for stock, any stock, to boost their fleets.
Well, the thing about flood-cars is they can look and drive fine but really merit being called totalled - having been submerged makes corrosion inevitable in a much quicker time frame. All of the electrical parts will go bad in X time frame.
Maybe these can be kept going long enough to bring value to companies but it seems like you'll have a lot more car renters on the side of the road than normal.
"Water can ruin electronics, lubricants, and mechanical systems. It may take months or years, but corrosion can find its way to the car's vital electronics, including airbag controllers."
I exclusively buy newer used cars and keep them forever because 1) I want to suffer the pain of buying a car as rarely as possible 2) I want to let someone else take the big up-front depreciation hit that comes with that intoxicating new car smell.
Every car from a dealership these days comes with a CarFax and these have become mostly useless as a buying tool ever since they became a car sales tool. However, they do often give you some insight into where a car has been via registration and title changes.
I keep a record of recent hurricanes and where reports of flooding happened. If I'm looking at a car, the first thing I want to look at is the CarFax to see if it's ever been out of state so that I can cross-reference it to my hurricane/flooding list. If there is any indication that the car might have been in the same state at the time that a flood happened, it's an immediate hard pass. Doesn't matter if there's no visible evidence of being a flood car, doesn't matter if the title is green. Some outfits are very good at cleaning up flood cars to look close enough to normal that the average joe can't tell the difference. All flood cars are supposed to get a salvage title but a lot of them slip through the cracks. It doesn't take a lot of searching to find anecdotes from burned buyers online.
I have passed on several cars that looked like great deals but came from flood zones and possibly passed through the hands of a few unscrupulous auctions, mechanics, and dealers on their way to my region.
It's been a hot minute since I last saw a "barely used" car going for an appreciable discount over a brand new one. Even today you may be able to find a better deal on a new car where the dealership isn't adding a scalping fee.
For the reliable cars like Honda Civics and in-demand ones the 1st year depreciation wasn't actually all that much compared to buying it new with a good dealer discount, urban legends notwithstanding.
Same here, we bought a new Subaru Crosstrek the end last year. Looking at the depreciation curve we found that the car didn't really depreciate more the first couple years than it did later years, so going for a new one made a lot more sense than I initially thought it would.
Same with my Subaru Forester! My car got totaled so I needed a new one. Used Forster that were 2-3 years old with 30k miles were selling for 24-26k with loan interest rate of 1.9 or so. I ended up by a brand new Forster xt for 28k with 0 interest loan from Subaru. Only cost me 2k more to get brand new car with full warranty vs a car that was 3 years old. Made back the difference in interest rate. I took a 5 year loan because why not no interest. I was never underwater on the car as put decent amount down.
I like it. I kinda wish I got the touring for eyesight for adaptive cruise control. But it came with leather and I was just not going to deal with leather. Though the outback XT is pretty good as it is 2.4 ascent engine so no premium.
I got the touring and it’s definitely nice. The problem is that you can’t replace the head unit since the Harmon Kardon speaker system needs an extra amplifier. That means I don’t have CarPlay. Makes me sad.
The ACC is a bit spiky. Could use some easing. But with everything on it’s not too bad in rush hour traffic when I don’t feel like taking the motorcycle out. Feet on the floor and it takes care of everything.
Yes, if you calculate the depreciation based on getting a pretty good deal rather than paying the list price, the fabled thousands you lose as soon as you drive off the forecourt mostly vanish.
If GP is like me, it's related to buying used higher end and/or "luxury" brand vehicles. In my experience, my previous 2 vehicles were 2 and 3 years old respectively and cost roughly ~60% of sticker price.
Yep, this is what I've experienced last two times around looking at Acuras, Lexus, etc. Maybe it's different with trucks, SUVs, and non-luxury brands, but the new cost of a mid-tier Acura is at least 50% more than one with 20K miles off a 2-3 year lease. This was always the sweet spot for these cars as they were in perfect shape and still had pretty decent "certified warranties".
I'm due for an upgrade, but if my choice is between a full price $40K new sedan or a 3 year old one for $38K (instead of the $26K I'd expect to pay a few years ago), then I'm more than content to just keep my ten year old Acura, knowing I'll need to spend $500/yr on repairs as it starts showing its age.
My local dealer (pre-covid) had a deal where basically you paid $1000+ a month, and got your choice of which luxury vehicle you wanted. Swap em in and out like old school Netflix. No idea how successful it was, but I don't hear anything about it anymore.
Looks exactly like a lease except they cover a few more things like tires? And even then, it says they cover cases of "excessive wear" which implies something wrong with the vehicle which the warranty should cover in either case.
Is there any real difference besides the fact that you can order it online and that it appears much more expensive?
To answer my own question, looks like they include the insurance and they do pay to replace the tires if needed and you can cancel after 5 months, I guess.
I'm thinking more along the lines of how car companies can recapture the money that the second owner is saving by buying a used vehicle.
For example instead of selling a car, selling a license to use the car to the first owner and then deactivating features or throttling performance if/when they resell the car.
GM currently tracks 100+ variables of your car over the life of usage (thanks on star!) and then calculates a resale price and offers to buy it back or gives you a certain deal when trading in.
Ford does something similar but is easily defeated by changing the stereo. The APIM tracks your driving habits locations and ecu vars which is captured and uploaded to Ford when you take the car in for service (don’t know how this works in their newer 2019+ cars since they are also connected 24/7 like GM)
Yeah for me when we were buying our next minivan Honda it was more important that we didn't end up buying the first cars in a generation refresh. The first year of a generation tends to have more bugs than others. New vs like-new doesn't matter for the big reliable mass produced cars.
Yeah the last two times I bought a car I just bought new with the plan to ride it out until it started becoming unreliable. Well, the first one I totaled instead so it didn't totally work out, but the second one is paid off and still running great, plus I know it has been maintained to a reasonable standard.
I've done that with my wife's last two cars but in both cases we ended up spending a lot before we replaced them. This time we will swap them out a little earlier.
Simply put, the ask-bid spread on barely-used and/or CPO cars are huge (read: they buy really low and sell really high). Dealers make a lot of money this way.
My 2014 Ford is now selling for the same price I bought it for. I have only put 10k miles on it in the last 4 years. Tempted to sell it and wait for the recovery and pickup a new car at bargain basement prices
> 1) I want to suffer the pain of buying a car as rarely as possible
It is not that bad as of 5 years ago. You can email various dealerships and ask them to contact you if they are willing to sell at $x. If you are more desperate, you can ask them to email you their best offer. I was in and out in about 2 hours, just filled out forms based on what was discussed in the email and browsed on my phone in the meantime.
You can even see the inventory online at the car brands' websites. Although that may have changed in the last 18 months due to extreme imbalance in supply and demand.
I would have walked out. But the emails I sent always made it clear I am only discussing total price, inclusive of everything. The few that were not able to clearly respond to my emails, I ignored.
I have only bought 2 cars in my life, the same way, so my data set is not extensive. But I did get the idea from reading about it on forums, so I presume others are getting it done the same way.
Actually, Costco has a program where the total out the door car price is set and non negotiable and I would assume the dealer would not want to screw you as that could cause you to report them to Costco and then Costco to sever ties with them.
What I did is start at the Costco price and email a bunch of dealers and let them know I am interested if anyone wants to beat that price.
How did you find out the Costco price? I tried this and it only told me the dealer who was their designated Costco liason, but, absurdly, wouldn't show me the price.
Yes, the dealer contracted with Costco has to give you the price, but I believe the benefit is that the dealer will not yank you around with various options and up charges or last minute surprises. They should be able to email you an out the door price per whatever agreement they have with Costco and you should be able to shop that around at other dealers.
Of course, this may have changed due to recent circumstances.
Ask for “out the door price”. It makes it an apples to apples comparison. For my last car, 30 minutes of phone calls to the “online sales manager” pretty much zeroed in on the lowest price I would get in my area, and this matched the KBB forum prices I was seeing.
Or… just by a Tesla. I hate that I am a fanboy, but I am. Great sales process, great car.
Bingo. I thought I finally had the procedure down last time around. I found similar models, sent them my terms over email, and let them know I wouldn't put up with games and would walk the minute I detected any BS.
Several dealers seemed to know the type of customer they were dealing with, and for the most part, played things straight.
A month or two later when I was reviewing my account on the credit company's site, I discovered some sort of financing charge for $1500. I have no idea how they managed to slip it in - maybe I could have got it removed if I complained. But at that point, the sale was made and the creditor would blame the dealer, the dealer would blame the creditor, and it wasn't worth the fight.
They just cannot be trusted - it's inherent in their business model and how the various teams (sales, financing, etc) all earn their commissions.
…$1,500 is not worth the fight? All you have to do is ask them to prove where you agreed to it. You either missed it when you signed the paperwork, or they are stealing from you.
> All you have to do is ask them to prove where you agreed to it.
I'm sure I did "agree to it"... on page 18, paragraph 3, subsection 4 - right there in the 6pt font where it states I understand I'm liable for applicable dealer-financing surcharges, etc. which can be applied at some later date.
The big dealerships have learned to cut out the bullshit. They make money on volume, turning cars off the lot quickly, rather than trying to maximize profit on each sale individually.
CarFax gets data from state governments. If you move to Georgia, you'll register your car in Georgia, and the DMV will tell CarFax. Then the CarFax history will contain 'registered in Georgia on xx/xx/xxxx.'
Same if you take the car for service to a shop in New Jersey; if the shop participates with CarFax then the record will include 'oil change and tire rotation @ (shop name), NJ w/ 3,300 miles' or something roughly along those lines.
Everyone who thinks they're smart by reading /r/personalfinance has figured this "hack" out. You're not saving much of anything by buying newish used cars unless you're buying the things that moneyed buyers flee from (Ford Foci, Chrysler 200s, other stereotypical fleet sedans from non-premium manufacturers), no a Camry/Accord do not meet these criteria.
I buy 6-7 years old around with around 100k miles. A car that was $40k will sell for $15k of less. Saves so much money that I can easily put new interior, upgraded entertainment, new wheels etc and still come out way ahead.
Cars made in the last 2 decades by most manufacturers tend to be very reliable, even well past the 200k miles mark.
As for maintenance, just find a trustworthy Indy mechanic and never go back to a dealer again. Compared to family that always leases a new car, there really isn't much difference in repair downtime. New cars tend to have a lot of bugs to work out that have already been addressed in a well used car.
My Indy mechanic is very good and very fast. Although it’s a little pricey. When I pulled in to get a new tire, he had 12 people change out all the tires. The good news is, they took less than 7.7 seconds. The bad news is, they charged me $14,000 and I still lost the race.
For example for a few years Chevrolet Silverados were made with "cat eye" headlights. Those trucks hold their value far more than chevys with rectangle headlights, all other variables being equal.
I haven’t looked at carfax in a while, how granular is the location data? I thought it just reported state, in which case you simply never buy a car that has been on the south or east coasts?
I buy new, end-of-year sales models. Drive them and sell them for a slight loss 2-3 years later to Car Max.
For example, let's say the new car is $50,000. I wait until it's $42,000 or whatever, buy it, keep it for 2-3 years, and sell it for say $37,000. I've done that 4 times now. I don't understand the business model of Car Max, to be honest. There seems to be a lot of people who believe used cars are good deals, I guess.
You are not coming out ahead. Buying a new car will have long term benefits compared to someone’s used car which may or may not have issues depending on the reason they sold it so soon.
Also, if you can’t deal with the “pain” of buying a new car every few years you must find a lot of things really painful.
> You are not coming out ahead. Buying a new car will have long term benefits compared to someone’s used car which may or may not have issues depending on the reason they sold it so soon.
Most people sell their new cars due to an expiring warranty period. Second most people sell their new cars due to the needs of a growing family. The third most people sell their new cars due to a changed financial situation. The fourth most people sell their new cars because they want even newer cars.
'Build quality dissatisfaction and reliability' is the fifth most common reason to sell a new car; or rather, to introduce a single-owner car to the used car market.
I had a JD Power infographic from ~2013 that listed the reasons, but am having trouble finding it.
Unless things have changed since 2013 signifigantly, most used cars that just exitted the factory warranty -- and sometimes factory maintenance umbrella -- have a lot of life left in them.
Aside from that, a car that is a few years older has a significant price advantage on parts -- a feature that is attractive to capable DIYers and mechanics.
And further aside from that -- if you're in the market for a used luxury brand car (Lexus/Infiniti/BMW/Audi/Mercedes/Porsche/ETC) , buying used allows one to side-step the dealer imposed major dealer-markup fees.
Example : the E92 M3 MSRP from from 2009 was about 70,900~ USD. The dealership markup in North Hollywood was 30.5k. In 2010 that same car was worth ~67,000 USD on the used market.
Many of these cars had less than 20,000 miles at the time of sale; buying a card with mileage that low is worth a 35,000 dollar discount to many people.
Alternative view; a car that is in decent shape from a first owner, especially if that person put on mostly highway miles and had the first 50+k miles of maintenance paid for is definitely not a lemon.
Anecdotally: bought a 2004 bmw from the original owner with 123k miles in 6 years. 7 years later. 185k miles, original clutch. (I'm also a mostly highway miles driver, but this also includes track days)
Here cars are leased on 3-4 year cycles, so its typically best to aim for one of those.
Most people leasing cars do it for fashion reasons, so they are normally getting rid of the car to upgrade to the next shiny thing, not due to problems.
If they can keep them going a year or even two it might be worth it for them in the current supply crunch - food for thought. These won’t be sitting in someone’s garage 90% of the time, they’ll be on the road.
That said, not looking forward to having to rent a car and dealing with mold or more frequent breakdowns on the side of the road!
I can't help but notice how weakened this entire process is as a result of revolving around money. In terms of manpower and expertise, none of these changes really need to happen, but since everyone is chasing a buck as a matter of survival, a bunch of stupid stuff occurs.
I don't have any brilliant solutions to bring about the Roddenbury-style economy, but it is infuriating to look at a scale problem you describe and trace the major causes back to the money. Are the cars going to vanish if the debts aren't paid for a year? Are the physical Hertz buildings going to crumble if the banks aren't satisfied? No, currency changing hands has nothing do with reality passively changing shape! And here we are, watching people sell off rental car fleets because assets will be seized unless the money changes hands in the right way.
> are the cars going to vanish if the debts aren't paid for a year?
No, but the retirees who depend on the income from bonds packaged from those debts will be screwed. Also, cars might not vanish but they do depreciate regardless of whether money exists. That's still a cost incurred by the rental company even though no money changes hands when it happens.
Ultimately the car companies were overleveraged and were forced to exit before their "positions" in cars became profitable. There's nothing short of the state propping you up that can solve that.
Even the Soviet Union had money and had to deal with economical realities. One of the reasons they collapsed was because of increasing grain production deficits causing an imbalance of trade. You can't legislate your way out of the market because the market's invisible hand will always show eventually, even if you can stave it off via state control of everything.
Yeah, but the retirees depending on the income is just a second-order effect that's also screwed up due to money. Retirees don't depend on money changing hands, they depend on crops getting grown, shelter being refurbished (or built), and defense under the law. The only reason people agree to do all of those actions for the retirees is that money changes hands.
I'm not necessarily saying that I think money is a bug. It might be a feature. But the "market's invisible hand" relies on people being more motivated by their wealth stash than their behavior. If everyone chose to keep doing the same physical actions they're doing today except we stopped swapping money, nothing observable in reality would change; people would die at the same rate, food would be stored at the same rate, etc.
"The economy" is in reality a giant standoff where every member of the standoff would just stop maintaining society unless they get paid for it. The grocer could theoretically choose to continue to man the store 12 hours per day, and then the doctor could theoretically choose to treat the grocer when he gets sick, and the truck driver could theoretically choose to ship the medication from the plant to the hospital, and the floor worker could theoretically choose to...
It seems like you're focusing on a loss of money as a "stick" (punishment) and saying we could ignore that and just keep operating as usual. But it's also the "carrot" (motivation) signalling the demand and value placed on the activity by others.
In the end, aren't all the money and ledgers are just a way to simplify the ridiculously complex trades required to make modern society work? We don't want to have to exchange sacks of rice and live chickens when we see the doctor and he doesn't want to have to get those chickens converted into barley or whatever it is the medical supply company owner wants this week.
If you remove this signal, you don't just remove a threat of stagnation. You also remove efficiency signals to curtail under-valued work. Just as easily, the participants could do other absurd things instead. The grocer could keep performing shelf-stocking actions while the shelves and back storage area are empty. The doctor could decide they prefer to drive around in an empty delivery truck, while the truck driver decides to sit in the clinic and talk to patients about the weather. Etc.
>You also remove efficiency signals to curtail under-valued work.
I'd argue that the typical diffuse ownership structures you find in most consumer-facing businesses today has the same effect, if not as absolute. The people who see the economic signals and they people with on-the-ground knowledge are split up: a sort of business logic hemispherectomy.
Money itself isn't the bug. It's the ability to abuse money to disconnect yourself from the real economy. How easy it is to abuse money depends on how it is designed. When people save money perishable goods like food are sitting on the shelves waiting to be bought, then money will outstay its welcome. The food is gone but the money is still there.
“Only money that goes out of date like a newspaper, rots like potatoes, rusts like iron, evaporates like ether, is capable of standing the test as an instrument for the exchange of potatoes, newspapers, iron and ether. For such money is not preferred to goods either by the purchaser or the seller. We then part with our goods for money only because we need the money as a means of exchange, not because we expect an advantage from possession of the money. So we must make money worse as a commodity if we wish to make it better as a medium of exchange."
— Silvio Gesell, “The Natural Economic Order”
> make money worse as a commodity if we wish to make it better as a medium of exchange
This describes inflation, in so many words. That's why central banks targeting a low level inflation is an excellent idea - it makes people spend money, rather than save. Spending can include investment to stave off inflation's effects - which, in turn, makes for increases in productivity over all.
> But the "market's invisible hand" relies on people being more motivated by their wealth stash than their behavior.
Nobody has found a better way, though they often try.
> "The economy" is in reality a giant standoff where every member of the standoff would just stop maintaining society unless they get paid for it.
That's an immutable fact of human nature. Even cradle to grave propaganda doesn't change it. It's much better to swim with that current than against it.
> Nobody has found a better way, though they often try.
This I agree with.
> That's an immutable fact of human nature. Even cradle to grave propaganda doesn't change it.
This I disagree with. Past societies saw far more social cohesion at points than our modern one. Especially on certain smaller scales, people were more willing to assist one another in the act of remaining alive without being compensated financially.
For instance- many people now think it would be unreasonable to help a friend move without some form of reward (money, food, etc.) This sort of value exchange for reward would be considered disrespectful in many past cultures and even some present cultures. Unwillingness to work without immediate reward not an immutable fact of human nature.
Helping out your friends and locals now and then is also normal human behavior. But it does not extend to running a society that way, and never has. It is rooted in building a network of mutual obligation, a common trait in small communities. It's not really considered a "reward" or payment.
> Unwillingness to work without immediate reward not an immutable fact of human nature.
Yeah, it is, as no society has managed to make that work as an organizing principle. Even the Israeli kibbutzen have failed. Altruism rarely extends beyond family and close friends, and even then, it isn't reliable.
Altruism basically means you are working for favors instead of money. However, people are much more likely to default on favors owed to you because it is harder to compare the value of one favor to another, and this creates opportunity to return a favor that is worth less than the one you were given.
The weird thing about reciprocity (exchanging favors) is the value of the favor is rarely considered. For example, the exchange of pizza for help in moving.
Of course, if you're too cheap over too long a period, people may stop doing favors for you.
This is sort of a reply to several of your comments in this thread about how we could still do all the things we do if money didn't exist. Your point reminds me of something a co-worker once said; he pointed out that "profit" is another name for "inefficiency." That is, in another context or agnostic of value-judgements, the difference between input and output which forms "profit" would be looked at as an inefficiency or defect in any other system.
On the one hand, yes of course the economy is all about specialization and then exchanging the fruits of specialized production between people. This last can happen via money, or barter, or a dictator (benevolent or not) confiscating everything and redistributing it, or some mix of the above, and maybe other methods.
One of the hard problems here is what to specialize in and to what extent. This is a hard problem to solve even in a static economy, and even harder if circumstances keep changing...
The "standoff" description seems to assume a static economy. If circumstances change, maybe we as a society need a grocer for only 4 hours a day but could use an extra half-shift truck driver. But how to discover that?
I have absolutely no idea how or even if that could be discovered, which is why my original comment was more about expressing frustration than offering a solution.
I do know that several things going on currently will make it more impossible to discover: increased financialization of commodities, outsourcing, destruction of culture via removal of differentiating markers, etc. If any society is going to discover the half-shift truck driver economy, they're going to be one that is almost entirely self-sustaining and committed to perpetuation of itself, not one that is leveraged up to the eyeballs, suffers from a total lack of manufacturing expertise within its component citizens, and relies on cheap foreign labor to make everything.
>No, but the retirees who depend on the income from bonds packaged from those debts will be screwed.
I agree that retirees are wholly dependent on others to work for them and therefore I recognize their right to save for retirement. However, if your investment/savings turn out to be worthless then that is on you. It's better to signal these failures as soon as possible so that people are aware of the risk.
Think about it this way. You acquire "healthcare coupons" during your working age and then all the businesses accepting "healthcare coupons" have shut down. The coupons are worthless. Yet when you replace "healthcare coupons" with money, people insist that even if there aren't enough workers to work in healthcare, that money must maintain its value and they should even be owed more than they saved even though there is nobody to provide those services. This is why inflation is a necessary evil. It tells you what's really going on in the world. People will present inflation as theft but the truth is that your money is losing its value because it should be losing its value.
Just because e.g. gold is free of inflation doesn't mean that there will be healthcare services waiting at the start of your retirement to accept that gold. It's just pure speculation.
Money is not really the root cause though, any more than tcp/ip is meaningful interpersonal communication. It's just a signal.
They sold their fleets because other people (the buyers) wanted them more, in the short term. Now they want to buy because they want a fleet again. It's a time horizon problem, or perhaps an uncertainty problem - how were they supposed to know how long the pandemic would last? Or perhaps a premature optimization problem because the business was predicated on a pandemic not happening. But I don't see it as a money problem, any more than a tcp/ip problem.
I think quacked's point was that sometimes it's not a very good signaling system. Neither is TCP/IP in some cases, and sometimes neither are cytokines (to use a biology example). These are all evolved systems, to some degree; maybe they're the best we can hope for, but we should still keep an eye out for "version 2.0".
It's not even that I think it's realistic to expect version 2.0, although I would really like that. It's more that it's impossible to get many people to even admit that the current system is flawed in a way that is technically controllable.
It is insane to me that we all have to shrug and admit that "well, we can't fix X problem because the money's not there" over and over again, when we have all of the labor hours and intellectual capital to do whatever we want as a collective species organism. With the right coordination, we could make every city look like a Miyazaki lake town. Or Disneyland. Or an exact copy of ancient Rome. We could scan every person alive every year and see whether or not they've got cancer. We could clean every river and every lake. We could send everyone a Nintendo Switch. That whole "bullshit jobs" memo gets circulated on HN all the time; how much of us could do actually cool shit if we didn't have to worry about paying for other people to help maintain society for us? I don't know, but it sure is frustrating watching Hertz sell off their fleet because their board is more worried about its share price than it is about whether or not Hertz, a car rental company, can rent out cars. (And I'm not blaming them for it- they're deadlocked in the same standoff everyone else is.)
> it sure is frustrating watching Hertz sell off their fleet because their board is more worried about its share price than it is about whether or not Hertz
More like worried about bankruptcy and going out of business.
I don't know, if you look at "money" as the wider financial system, then maybe it is a root cause.
Another commentator downthread mentions the fragility vs efficiency tradeoff, and that's certainly something encouraged by financializing the economy. By making it possible to easily switch between stocks and flows (capital/income in this case pay in full / pay debt) and encouraging whatever makes firms look good in the short term, the financial system helps cause this kind of thing.
We get towers built higher but not necessarily safer.
The financial system is very efficient, and allows tuning and scaling to an extent never before possible. That allows folks to squeeze pennies or build leveraged business models that previously would have not been possible.
Which is great, when things fit the model (the stocks or bonds involved pay retirees longer, make people wealthier, etc), but also allow people to build much higher castles of cards than they previously could have before something toppled them over.
Panics, crashes, defaulting on debt, etc. have been around as long (and probably longer) than we have historical records, but wow does the modern system take the cake for scale!
It's a whole system of problems but it's not a hugely complicated system, at least not compared to all the bandaids that are necessary if you do not address the problems at their root.
Sure, I agree having a financial system predicated on growth causes a whole lotta problems. I guess I define "money" more narrowly as we could use it as a component in a very different system.
If you're a rental company, looking at ~$0 income for the next year, and the need to pay for, maintain, and garage their car fleets, then you're top priority is to shore up the balance sheet and keep your corp afloat. What the car buyer's market will be in 18mo is a more distant concern.
The whole issue is the general prudence of taking on debt. It's a question of efficiency. Too little and you miss out on opportunities to produce and grow, too much and you're super-fragile.
Over-indebted companies is a very Anglo (US/UK) and Japanese thing. There are plenty of companies in continental Europe (Germany, Italy, France) who operate with much less debt than their US counterparts. A good example is Aldi. They have no debt on their balance sheet anywhere, not even for inventory. By the standards of American business culture, that is 100% absurd.
I'm really not sure who's right. It's optimization vs survival.
> "A good example is Aldi. They have no debt on their balance sheet anywhere, not even for inventory. By the standards of American business culture, that is 100% absurd."
Firstly, Aldi is a private company (actually two entirely separate private companies, ALDI Nord and ALDI Süd, who share the brand name). So AFAIK they do not publish annual financial reports like a public company would be required to do. So how do you know there's no debt on their balance sheet?
Companies House filings for ALDI Süd's UK subsidiary, ALDI Stores Limited, do show debts and interest expenses so it's certainly not correct to say they "have no debt on their balance sheet anywhere"[1]
There's also a question of just how fragile they truly were.
Sure the pandemic messed them up, but that was really a once in a generation at most event. If thats what it took to sink your businessz I wouldn't call it very fragile.
I also think they and their creditors made poor decisions.
Selling your only operating assets in order to balance the books is a suicidal move no matter the industry. It's selling off your only way of making money. It's like a software engineer selling their workstation when times are tough.
The problem with climate change is that 'once in a generation' events are now happening more like once a decade - I would not expect this to be the last global pandemic causing major whiplash in demand and supply in our lifetimes.
I'm honestly curious to find out whether most of us will even still be driving cars powered by fossil fuels by the time the next pandemic hits - as tech goes, it's only been around for a few generations. People will find other transit solutions if cars themselves get phased out. Or maybe we'll still have 'cars' with something dramatically different going on under the hood that car owners of today would barely recognize.
Dying now and cashing out is better than burning money for a few years and cashing out for less then.
They paid down their debt on the cars, but they have lots of other financial obligations and operating costs that will be ongoing if they continue to operate, and they now have a hugely diminished capacity to make revenue.
> I can't help but notice how weakened this entire process is as a result of revolving around money. In terms of manpower and expertise, none of these changes really need to happen, but since everyone is chasing a buck as a matter of survival, a bunch of stupid stuff occurs.
Resiliency against interruptions costs a lot of money: warehouses to store parts, logistics to rotate these parts, paying suppliers for these parts earlier than the parts are needed, waiting until you have enough cash to buy stuff outright...
The core point is: governments, businesses and individuals have historically always had these costs - but at least the Western world has been enjoying a couple decades without major interruptions like war on the home territory, oil crises or the looming threat of the Cold War getting hot (and causing interruptions as a result), which means everyone got incredibly complacent. After all, when there are no interruptions to expect in the near term, why spend cash in the near term to guard against them?
And so, when Corona hit, everyone got hit.
> Are the physical Hertz buildings going to crumble if the banks aren't satisfied? No, currency changing hands has nothing do with reality passively changing shape!
The existing buildings may not go crumbling, but planned/under-construction buildings are getting put on hold when the banks' income stream vanishes and as a result of that, in turn, the workers can't work, ... <insert recursive ripple effects here>.
Right, I certainly don't disagree with your analysis, but your recursive ripple effects all aren't caused by physical laws, they're caused by people refusing to work because they can't guarantee that other people in turn will work for them, which is all that money is- a representation of a guarantee in exchanged goods or services.
In a theoretical closed-loop 3-person model, the farmer grows, the doctor treats, and the builder builds. The farmer can feed the other two, the doctor can treat the other two, and the builder can build for the other two, and in a micro-community they don't really need to pay each other. As we increase the number of people participating, the likelihood that each person would choose to work without being paid drops. That's why we see such degradation in economically affected areas; everyone could just work all day cleaning up, patching up buildings, etc. but they don't, because no one's paying them to do so.
I am not naive enough to believe that any amount of propaganda or state control could fix the money problem, but I am frustrated to be willing to participate in such a theoretical economy with no outlet for it besides helping people in whatever free time I have.
The problem you are talking about is rigidity. Contracts are just promises and predictions. Reality is always different. This is why we let people go bankrupt and write off their debt, to add the necessary amount of flexibility to account for the real world being unpredictable.
Following pieces of paper down to their very letter will make people abandon perfectly fine businesses. A lot of profitable businesses would have to shut down if they had to pay extortionate interest rates.
Positive interest rates simply reward short term thinking. Let's imagine a hypothetical scenario where interest rates are 5% (don't confuse this with the federal funds rate) across the board but it's only the rental car companies that have been hit by covid. A bean counter would see that shutting down the rental car company and using the capital for something else would be a better idea than to keep the rental car company. Next year everyone wants rental cars and the returns increase above 5%.
The point is that we make decisions in the present yet most of the money is going to be earned in the future. What we need is patience and patience means low interest rates, as close to zero as possible and maybe negative if we want 0% inflation.
I don't know man.... it actually seem rather smart to me.... Like the smartness of an organism trying to cope as well as it can with disruptions in the environment. What would you like to do it better without causing huge waste of resources? I am not sure there is much I can think of....
Isn't the reason the shortages persits due to the chip shortage caused by a few non-financial disruptions to the highly concentrated chip makers, like a fire? How would barter or communism or whatever isn't money fix that? By being more wasteful all of the time?
Keep in mind this isn't really a serious problem. Cars still exist, and can even still be rented, they just smell a bit. That's it. Smelly cars. First world problems!
if you bought a car new in 2019 (as I did), and it is the kind of car rental companies might rent (which mine is), you get letters from the dealer in 2021 offering to buy it back from you for more than you paid for it!
I'm in this situation and it's getting strange if your car is leased. Carvana and the like were offering me thousands more than the buyout amount. Like $5,000 at one point.
But now the automakers and their banks are shutting off 3rd party purchases, meaning the only parties that can buy the car off the lease are you and the dealer. And the dealer has no car on-hand to replace the one you plan to sell back, or if they do they want thousands over MSRP because that's what the market is bearing. So it's a wash.
Interesting. I just sold my off-lease car to Carmax for $6k more than the buyout. When I was at Carmax, they had me call BMW financial services on speakerphone because they wouldn't give carmax the final payoff/lienholder information. That must have been what was happening.
There are a lot of interesting anecdotes on /r/askcarsales about this.
One consensus is that Carvana/Vroom/Shift are buying cars at a loss to try and capture market share. Carmax has more of a track record so they might be getting a better shake like your experience. It could also be you calling personally that unlocked the lien, where the other companies don't work that way.
Some manufacturers like Volvo aren't letting you out of the lease early unless you're leasing another Volvo.
> One consensus is that Carvana/Vroom/Shift are buying cars at a loss to try and capture market share.
They absolutely are. Where I live, these companies are (and have been before COVID) paying well above market rates for newer used cars from private sellers. On the flip side, all of your typical auto sales rags and sites that used to have listings from private sellers and used car dealerships are now mainly carvana listings.
Even if you don't want to buy out your lease, buy it out anyway and then sell the car to your dealer (or another dealer). Check the numbers first of course, but you'll likely pocket several thousand dollars.
In certain states you will owe the sales tax on the entire residual amount. This tax is skipped when you let the dealer assume the buyout. But in the past 6-12 months some banks are adding massive amounts to the buyout price when the owner isn't the one making the purchase.
When you read the fine print, the residual value only applies to the owner. The bank can charge whatever it wants to everyone else, or deny the purchase altogether.
In 2017 I rented a car for a day in Auckland, New Zealand, for $30. It was from a quirky "dings and dents" car rental, and the car was indeed quite lovely besides having a few major cosmetic crinkles in the door panels. The one employee working there was nice enough to drive us to the airport after, and he explained that they owned all of their inventory outright. He said that the other rental companies all leased or financed their inventory, and they struggled to keep enough cars rented out year round while also dealing with large seasonal demand peaks. Their company, meanwhile, had very low overhead for their size of inventory, and could weather arbitrarily long dry spells without worry.
A company I am familiar with that build electronic equipment went with just-in-time inventory for it. When they had some unexpected sales, they ran out of resistors, and had to quote months of delay to the customer. Naturally, this cost them a lot of sales as customers went elsewhere.
It got so bad that one of the engineers on his own dime stocked his desk with resistors and other small parts.
Okay, that is pretty crazy. I mean resistors aren't that big after all :-). Of course when the great resistor/capacitor shortage hit I looked into building a manufacturing plant in the US. It would have been surprisingly affordable however I was warned off by all of the environmental hate that would come my way if I tried.
Yeah, stopping your assembly line due to having ordered 312 resistors and you needed 313 is just - plain - madness. But that's what they did, and took a big hit to the bottom line because of it.
Part of the problem stemmed from rating employees on how successful they were at JIT inventory. You get what you rank for, not what makes sense.
Yes, however a weird side effect of the environmental laws in the US (and California in particular) is that you can use the state to incur so much cost to the builder to show that it would be clean, creates a huge sunk cost you have to pay back before your manufacturing plant is making any money.
It doesn't make a lot of sense, and sadly there is no equivalent of "recovering court costs" from the people who exploited the law to shut you down.
Resistors!? Unless they were particularly specialized ones, the first THT resistor I picked on digikey had about 1.5 million in stock (and Digikey is profoundly not a particularly big-boy market)
The lead times are absolutely horrific though. And I do worry that fast PC parts (specifically GPUs) may be this price for a while.
The inventory people were not allowed to buy more inventory until the monthly buying time came around again. It was not an external issue, it was entirely internal.
"Just in time" is great for finance people, but not a healthy scheme when you consider life does not run on tracks. It is a bet that sometimes you win, but sometimes you lose.
One thing that has never made much sense to me is that you can most of the time (at least pre-pandemic) rent a car for cheaper than you can rent a bike (as a tourist in a city), with cars costing an order of magnitude more. I'm not sure if it's car rental that is/was crazy cheap or bike renting that is a rip-off...
Might be because of different utilization rates. Cars can be rented 7 days/week between biz (weekday) and consumer (weekend) travelers, and across all seasons of the year. I’m guessing bikes get rented on weekends (30% of days) during the summer and spring (50% of days).
Rough estimates of course, but only 15% utilization (30%*50%) would radically change daily rental prices. Doubt it’s the only reason, but wouldn’t be surprised if it’s factor
Yeah I dunno about there, but the times I've needed to rent a car in various parts of California, it's always an experience:
Usually you sit in a busy room. They call everyone one at a time - because there's a constant stream of people dropping off cars and picking up cars. For the most part, I'd say a car never sat more than an hour between being dropped off, getting cleaned, and being handed off to a new renter.
That has held true every. single. time. I've rented a car. And that goes back as long as I can remember, to when my parents rented cars 20 years ago lol.
This is the same reason airlines are always going bankrupt, and why many pieces of the economy are quite fragile: over optimization.
In the short run, a lot of leverage makes sense, it helps you get a leg up, but if there's a Black Swan, then you're out.
It's a tricky thing because when a business fundamentally depends on those factors and it's hard to differentiate otherwise, well, it's just not fun. You're playing with fate instead of 'going things better'.
I wish they would innovate harder and make things more streamlined and easier. Renting a car is still a bit of a pain, the Car2Go model was nice, but they left my county sadly.
> In the short run, a lot of leverage makes sense, it helps you get a leg up, but if there's a Black Swan, then you're out.
Its probable to me that no steady state exists - that in between each black swan event, given sufficient spacing, the companies that most highly leverage their financials/JIT pipeline will out compete the ones that behave more "rationally" in the interstitial period. The higher coefficient on the exponent just wins (growth maximizing into an empty market) even if it kills every company that does it.
We rented one just yesterday in Germany and it was rather streamlined. Used booking.com. The only thing that made no sense is that they were still harping about needing a credit card. (Just put a bigger deposit on a debit card. Oh and the clerk made an exemption for us.) Pickup administration was 5+ minutes, return was less than 1 minute.
the credit card requirement is because they use a deposit lock instead of a withdraw. which does not work with a debit card.
most german providers use it, because it's less burocratic. taking money for a deposit is generally easier to handle for them.
I'm not even sure if they would be able to hold deposits without a 3rd party that has a license for that.
They put a lock on my deposit card without any problems at all. (As far as I know it used to be that they make an authorization request, but then doesn't "clear" it.)
This (and other supply chain examples) remind me of how TCP flow control works. When going full blast it can transfer vast amounts of data in a giant window, but time out one thing and you get to start from zero, slowly ramping back up over several seconds.
This is why everyone is afraid of major sudden changes. We know that our industrial and commerce systems are nicely oiled to deliver constant outputs, and people like me are afraid that changing any part of it may trigger a cascade of bankruptcies of companies of a certain type, which in turn could provoke a famine somewhere else.
Imagine if all those grains stayed on their fields, it would trigger both parasites to develop where those fields are, corrupting entire valleys for years, while not either being able to feed the people they were aimed for. Which is the food equivalent of your car example.
If anything, the Covid proved to me that the world is much less oiled and tuned for some constant economic circuits than I feared. It is in fact quite reliable, if we don’t mention the debt we’ve put our children in.
Early in the pandemic there was a massive potato surplus. Potato farms in my state were literally giving away potatoes.
Unfortunately, I didn't find out about it until too late. Which is unfortunate; that could have been the perfect opportunity to create a baked potato delivery startup. I would have called it "Tuber".
This spring I got an offer from my local Ford dealer to buy my 2015 Mustang for more than I bought it for. In 2016.
It's insane!
The crunch has abated some, though, and it was only for a short period of time you could get offers like that, but still!
> smart people have vaccinated themselves and they start traveling again. And those people want to rent cars.
Note that this is a very American thing though, because international travel is still banned, which means that Americans are forced to travel domestically, and when Americans go on a holiday, they rent a car, because you rent a car, because you have to have a car, and the idea of not renting a car when on holiday is completely alien to Americans. Normally, most of them would go abroad, and rent cars there, while the domestic car rental market would target non-American tourists, who rent cars less, so there's an even bigger demand for rental cars now than it would be if tourist patterns were back to normal.
> "Note that this is a very American thing ... when Americans go on a holiday, they rent a car, because you rent a car, because you have to have a car, and the idea of not renting a car when on holiday is completely alien to Americans."
When I go on holiday in a European city I wouldn't normally rent a car (unless the holiday involved travel to somewhere outside of the city). But when I go on holiday in an American city then of course you rent a car because it's a hassle to try and get around without one and you're going to miss out on a lot of the "American cultural experience" without a car. (Exceptions: NYC, and perhaps Las Vegas)
So it has a lot more to do with the nature of the destination than the nature of the traveller, I'd say.
That and you can still transmit covid when vaccinated so it's kind of part of the problem to go jetsetting around the globe spreading virus to less fortunate populations.
Systems analysis or business models? For the latter I always find Matt Levine's column over at Bloomberg entertaining. Sadly I don't have a good set of recommendations for systems analysis.
A while back I heard there’s one more piece to the arithmetic: the depreciation expense lowers net income so the rental company is able to proportionally lower taxes this way as well.
I think the connections are actually pretty obvious. Covid was like an atom bomb. No kind of sane invisible hand could have intelligently responded. Which is why the evil fed has very incompetently responded. You could write the same story about the restaurant industry.
A pandemic is not a black swan. Just like Earth quakes are not black swans. There is a Center for Disease Control for fighting pandemics.
We built fragile but efficient (for profit optimization) systems that had a good run. People plan for and about pandemics or at least pretended to, when needed grants.
edit: Black Swans are very very low probable events. Pandemics have been around in human history enough times.
edit2: Here is Taleb on cnbc...pandemic and blackswan.
I think the black swan event is less of the pandemic itself and more of how it played out. If actions were taken and the pandemic was halted early, there would be less impact. At least speaking of the US.
The pandemic has gone on for far longer than it really needed to due to the politicization of safety measures. Several countries were able to nearly beat back the pandemic rather early, but the US is currently sitting in a third or fourth wave due to asinine behaviors of a few state governments.
Yes, a pandemic itself isn't black swan, but just how badly this was fumbled sure seems like it is (at least I damn well hope the next one isn't so badly managed).
Finland’s was quite light touch, apart from the start where bars had to shut along with schools and WFH, ‘lockdown’ here was not in the same league as say the UK or France. There never were and are not now enforceable mask mandates and the more empty parts of the country have been restriction free for most of the year.
Maybe it was luck, a sparse population or of course the often repeated ‘everyone always does what they’re told’ (hmmm). Also it started off well but things have become quite fragmented recently (different agencies issuing rules about different things at different times, in different regions, much to the dismay of anyone trying to plan anything). In short, whilst interesting, there’s not really any useful comparison that you can make between the US and Finland in my opinion.
Objectively the population density of Helsinki [1] is half that of London [2] - and according to google, a tenth of that of Paris.
Subjectively after living in both Helsinki and London it feels like Helsinki is even less crowded.
I would say that there are fewer people who commute in to commercial areas from outside of the city than in London, and the commercial areas such as offices are generally a lot less dense, newer, and more spread out.
Yeah, it's still not 'very low'. The population density of the town I live in, which is not 'very low', is ~400 per square km. The county, which is denser than most of the area of the US, is 12 per square km.
New Zealand is an example. Auckland has an outbreak right now and has relatively severe restrictions again, but the rest of the country has very few restrictions beyond mask use. My life would have been impacted far less had I been in Auckland instead of a big city in the US.
Sure and in my opinion it’s a better system for me personally and if I had an in-person business my balance sheet would prefer it too. All to obscure an incredibly important point that their death toll has been minimal, under 50 as far as I can see. USA is nearing 700,000.
Which Pandemic got resolved in span of 18 months, I would like to know. The medieval ones took decades to burn through the planet and the spanish flu took 50 million+ and last more than 2 years.
Systems built without taking the Pandemic risk into account are the issue here, Pandemic itself we know it was coming.. we also have movies about them.
We also had pandemic plans that got completely tossed out the window. Interestingly if you read them most say to not do any of what we did, including masks.
Also, what pandemics had multiple vaccines delivered in record time? Ones that worked better than was ever hoped for. Even with that, which was the end goal, society seems unable to move on.
The pandemic was definitely extended in the US due to politics.
Every attempt at curtailing the spread was rolled back or defeated specifically due to politics at the highest levels of the US Gov't, from not implementing travel bans as appropriate to blocking masking mandates, to state level gov'ts re-opening economies and lifting lockdowns during surges. The current hot-spots in the US are almost perfectly aligned on US political boundaries.
Even now it continues as masking and vaccination continues to be politicized with one side spreading obviously unfounded FUD around the vaccine and inflammatory messaging that masking children is "child abuse".
Being ‘extended’ 1) assumes we know when it will be over (we don’t yet!), and 2) we can calculate when/if we are through it, and when/if we would have been through it.
It would have required massive, and likely unsuccessful mobilization to lock down travel (both foreign and domestic) enough to actually control Covid aka New Zealand. Considering the land borders and smuggling problems there alone, I think it would have been ultimately futile.
Considering how politically fragmented the country was and still is even before the pandemic, trying it somewhat successfully may also have kicked off a Civil war - not that anyone would have tried that hard.
Vaccination rollouts could definitely have gone smoother, and better programs to manage the rollouts would have also been really nice - but given the situation above, it would only have been a (short) while before Delta or something like it got going anyway and started spreading.
Fewer would have died from COVID probably, but overall deaths may have been similar (more violence during riots? More shooting and civil unrest), and the fear and other issues (socio political strife for instance) would still have happened, just looked different probably. These types of situations are brutally hard.
Overall, I’d give the US a solid ‘C’ grade. Not great, not terrible.
An interesting thing here from a biological standpoint is the assumption that a global pandemic is akin to a "100 year flood". Our understanding of climate suggests 100 year floods will be more commonplace -- will 100 year pandemics be as well?
I actually surprised we haven't had any big ones other than this in lets say past 50 years. It's clear that world is much more interconnected than ever before so pandemics should also be more common. But I wouldn't really even consider this one so big. Multiple percentage of global population hasn't died...
What I hadn't appreciated was that Car Rental companies had constructed a model where they bought new cars, rented them for a couple of years, and then resold them. The car would depreciate of course but as a bulk car buyer they got the cars at a discount on dealer cost because, well they bought more than the average dealer did. So when they depreciated they didn't lose as much value as you and I might experience if we bought a car, held it for two years, and resold it to a dealer (worst case) or another buyer (best case).
So the rental agency simply tracked how much the car would "lose" in value over its working lifetime, plus the cost of needed maintenance (generally relatively low), and offset that with income of renting it out. So the math was something like (making up numbers here) $5,000 of depreciation loss against say 400 rental days at $50/day or $20,000 of rental income. Say $1000 for maintenance during those 2 years and you've got $14,000 of "gross income" into the company, per car to pay employees and operating costs etc.
Now this makes sense and it is a fine business model, but an interesting quirk is that revenue is directly proportional to the number of 'working' cars you have out there bringing in the bucks. More cars, more income. And if you buy the car on credit there is an interest expense sure but you don't use up working capital to bulk up your fleet and boost your income.
As a result, car rental companies were carrying a HUGE amount of debt pre-pandemic which was all in car investments.
Then BOOM, the black swan of a pandemic hit and air travel stopped for all intents and purposes and now rental car companies are sitting on fleets of cars where they have to make the monthly payment on the debt but those cars aren't earning any income. This burns money in a hurry! So they did the only thing they could do, and sold off their fleets for the most part so that they could retire all that debt. Some, like Hertz, were already in Chapter 11 bankruptcy when they did that. Late 2020 was an excellent time to buy a car from one of the rental companies because they were really motivated to get them off their balance sheets.
And this then is the fun part. So the pandemic also put a huge blip in the supply chain. And since every single car company had switched to "just in time" manufacturing where they don't stock parts to make cars, they expect a smooth flow of those parts from the supply chain to feed their assembly lines, had to stop making cars. They had no parts. What is more, the humans in the pipeline like truck drivers, container crane operators, container ship crews, freight forwarding staff, Etc. were quarantining or not working because of the pandemic risk and those are jobs you cannot do "remotely" no matter how much you might want to. So the supply of new cars dried up, and won't untwist until the entire chain is back up and running at capacity again.
So now the pandemic is "less scary" because smart people have vaccinated themselves and they start traveling again. And those people want to rent cars. Which is great for rental car companies, except they cannot rebuild their fleets because there aren't any cars to buy.
And this adds the second fun twist, if you bought a car new in 2019 (as I did), and it is the kind of car rental companies might rent (which mine is), you get letters from the dealer in 2021 offering to buy it back from you for more than you paid for it!
What is more, when you see all those cars that are going to be 'totalled' by the insurance company because they were under water in the southern part of the US or on the east coast, those cars used to be sold for pennies on the dollar in "salvage sales" in which salvage dealers would recover parts and/or do enough repairs to resell them with a salvage title. The bidding for those cars is much more intense given the demand by rental car companies for stock, any stock, to boost their fleets.
It is a remarkable example of a system where the parts are interconnected in non-obvious ways that has a non-intuitive response to shocks to the system. As with most "emergent" systems like this one though, sending a shock through it does two things; it illuminates these previously unseen inter dependencies, and it tends to kill off weak players.