As travel resumed in the United States earlier this spring, all eyes were on airfares and hotel rates to see if they would fall to boost demand or spike as airlines and hotel firms tried to recuperate even a little portion of their COVID losses. For the most part, car rental costs were under the radar. But not any longer. Why are rental cars so expensive in 2021? Well, the unexpected rise in domestic travel in the United States has resulted in supply and demand difficulties, sending rental vehicle costs through the sky.
According to statistics compiled by Jefferies, a New York investment firm, the average daily rental cost of a vehicle touched a new high of $63.75 last month, a 50% rise in specific locations. According to data on summer reservations, with prices for August already going above $100 per day, many visitors may expect to pay more than double the price that they would have paid before the pandemic. With the economy reviving, customers are stuck in the middle of high demand and limited supply.
Since 2015, the Wall Street analyst has been gathering daily automobile rental rates from all the leading rental firms, including Avis, Hertz, and Enterprise. He claims that he has never seen U.S. rental expenses climb as high as they are currently in that period.
According to Fox Business Network, car demand has been ramping up for months because of a microchip scarcity and increasing copper consumption. However, availability has decreased as rental vehicle businesses reduced their fleet to minimize costs during the pandemic.
Several other reasons also complicate things: Americans are making record amounts of road vacations, driving rather than flying, and renting vehicles rather than utilizing cabs and Ubers. Furthermore, individuals are taking more internal excursions, even to San Juan, Puerto Rico, which has also had significant supply difficulties.
This uptick has put a strain on automobile rental firms. Traditionally, car rentals have been an afterthought, trailing only hotels and airline tickets. However, renting a car is becoming increasingly expensive as demand outstrips supply. As said, many rental businesses sold off their fleets for cash to withstand pandemic lockdowns that halted worldwide travel last year. Now that freshly vaccinated Americans are ready to travel again, vehicle rental companies struggle to replenish their fleets.
According to industry sources for the travel news, supply chain issues, exacerbated in part by the microchip shortage, have sent new car prices soaring, and car-rental companies, which buy their cars in large quantities and at a reduced price from manufacturers, have been pushed to the back of the line because of fuzzy availability. According to Labor Department data released last week, the new car scarcity has also driven the price of used cars and trucks skyrocketing by 29.7 percent in the previous year through May.
Travelers should know the automobile scarcity and book rentals well in advance this summer. In fact, in certain places, the scarcity is so severe that tourists are renting cargo vans and trucks instead of renting automobiles.
Airline and hotel prices have also risen. When the pandemic still impacted America in the early months of the year and travel had still been almost halted, airfares and hotel prices were still inexpensive. However, they have been going up, up, and up in recent weeks. According to estimates, leisure travel costs are nearing levels not seen since 2019.
With the United States entering peak summer travel season, with tremendous pent-up demand, it is wondered if Canada will face a similar problem when it comes to rental vehicles when tourism resumes here.
Canada sees comparable trends as the United States. The worldwide chip shortage, which has hampered new car supply throughout the industry when demand is already strong, is a significant contributor to the problem.
Canadian travel firms advise their customers on rental vehicles that if they are planning a trip, they should reserve a vehicle as soon as possible. In search, providing flexible travel dates and branch pickup locations may also assist in broadening the alternatives.
Will rental car prices go down in 2021? Unfortunately, it is tough to receive a suitable response to this question. With rising demand and limited supply, it is impossible to bring everything back to life simultaneously. Furthermore, businesses must resurrect their income while also making a profit here and there. As a result, it is hard to anticipate a reduction in rental car rates very soon. Therefore, only reserving ahead of time and flexible dates can strike a beneficial travel deal for passengers to some extent.