Rental car companies latest to seek TARP funds  

Posted by: shilpz in , , ,


Feel that breeze? It's the draft coming through the front door. The door that was opened a crack to let in the banks and Detroit Three but has been pushed wide open. The latest industry to claim distress is from another automotive sector, the rental car business. Yes, The Wall Street Journal is reporting that rental car agencies are now seeking Troubled Asset Relief Program funds, too.

The backstory goes like this: As the economy has tanked, business and leisure travel has slowed and demand for rental cars is now at its lowest point since the 1970s. The agencies aren't selling off their used fleet vehicles as easily, either, so times are tough indeed at the rental counter. That's why Enterprise, Avis, Budget, Hertz, Dollar, Thrifty and others are asking Congress to let them tap into TARP money. The House of Representatives has already added a clause that would allow the government to back loans for rental-car companies and other fleet buyers, and now the issue goes before the Senate.

The thinking behind all of this is that America needs the Detroit Three to sell more cars, so allowing fleet purchasers easier credit will result in additional sales by the thousands. Critics suggest that what the plan fails to consider is that fleet sales tend to be extremely low margin sales that don't add much to the automakers' bottom line. Further, if fewer people are renting these new cars, it doesn't make sense for agencies to be buying them in the first place. Thus, opponents believe that most rental companies are more likely to forgo updating their vehicles in favor of maintaining their existing fleet. Us? We just want to see more Hertz ZHZ Corvettes available on the cheap.

This entry was posted on Saturday, January 31, 2009 and is filed under , , , . You can leave a response and follow any responses to this entry through the Subscribe to: Post Comments (Atom) .

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