To try to sustain residual values on used cars, several marques have decided to scale back the number supplied to rental fleets.
But as public demand for rental cars grows, rental firms are finding they have to keep their vehicles longer in response, meaning higher mileage and even lower residual values.
Industry experts have been privately concerned about the number of manufacturers reducing the volume of cars they supply to rental firms. They fear this could lead to shortages in the future, especially as the number of cheap flights throughout Europe increases.
A spokesman for Hertz was more reserved on the impact of sales reductions, but acknowledged that something would need to be done in the future.
He said: ‘There’s a big rise in daily rental and as that continues to increase in popularity there will be a need to ensure that sufficient vehicles are available to meet demand. But it’s too early to say what the impact will be.’
Des McCann, head of UK operations at Budget Rent a Car, said the firm was examining its options and had yet to have discussions with manufacturers.
He said: ‘Increasing the length of time we hold cars is just one possible solution. There are a number of other alternatives that we are reviewing at the present time.’
Jim Burrell, senior vice-president of European operations at Enterprise Rent-A-Car, believes the situation will change. He said: ‘The global business environment is always changing and the motor industry is no exception. That means there will always be peaks and troughs in the supply of vehicles.
‘We have worked hard to develop relationships with our manufacturers, so that we can obtain all the vehicles we need. This has helped to minimise the impact of a cyclic market on us and, more importantly, on our customers.’
But manufacturers insist they must limit short-cycle business to avoid flooding the used car market and damaging values.
Keith Hawes, director of fleet and commercial vehicle operations for Renault UK, confirmed the firm was scaling back its rental sales.
He said: ‘We see the rental market as an important marketing tool in terms of exposure and test drives.
‘We also use the rental market to satisfy our own requirements for courtesy and replacement vehicles. In terms of volume, this strategy has achieved a lower than national penetration in the rental market, where we consider the costs of entry and resulting potential residual impact to be far too high.
‘Therefore in 2005 our volumes and our customers have remained consistent with 2004 and we do not see this changing in 2006. If anything, in 2006 volume will reduce versus 2005.’
A spokesman for Vauxhall said: ‘As part of our business plan for 2005 we took the strategic decision to significantly reduce our short cycle business, including that to our rental customers.
‘We’ve negotiated terms for this year with our rental customers to that effect and will be fulfilling those contractual arrangements throughout the year.’
However, Ford said it would not be changing its rental business. A spokeswoman said: ‘We’re really committed to the rental business and residual value management is really important to Ford.
‘Ford Direct and our Used Approved Car scheme is doing a cracking job and we’re not planning on pulling back on rental at all.’
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