Car hire price rises

Why have car rental prices shot up in the past year? 

Car Hire - Why have prices risen so much? There is a logical reason and it's not just the car hire firms being greedy.

Car hire prices this year have rocketed not just in Benidorm but throughout the rest of the world.   Prices in most areas are now well in access of 40% more compared to pre pandemic prices.   It would be easy to quickly blame the Car Hire companies for being greedy and trying to recuperate lost sales from the previous two summers.  The truth is a little more complicated.

Pre Pandemic, car manufacturers used to have a great relationship with car hire companies - Car Hire companies created a demand for the latest models straight off the production lines and essentially provide prospective customers with test drives of the most recent models of various cars.  Offering test drives has always been an important part of sales for any car manufacturer.  Many customers enjoy the experience of driving a brand new hired car, and in turn then look for the same model when due to buy again.  To be part of this obvious sales advantage, manufacturers were selling cars to hire firms at massive discounted prices.  This discount was sufficient to enable the car hire firms to not only generate income from the hire of the car, but to actually make a profit (or at least a refund of the expenditure) from the re-sale of the car in post rental period.  

The price of hiring a car therefore only needed to cover standard business expenses such as Staff wages, office costs etc.  Remember the cost of maintenance would still mainly be covered under the warranty  

This all changed with the Pandemic.  The demand for car hire, collapsed with the tourist industry.  No point hiring a car if there is a travel ban   Instead most companies needed an injection of cash.  This could only be achieved by reducing the size of their fleet and selling cars fast, in a market were the demand is not so high. 

There was also a reduction in the demand for new cars coming off the production lines, not just from the hire companies, but from the public in general.   This in turn has further knock on effects For example, Manufacturers of computer components essential to car production, turned their attention to making components for home computers were there was a higher demand with people working from home.  This immediately slows down the production of new cars as the components become unavailable for long periods of time.  

Car Hire Price Rises 

The pandemic seems to be nearing an end, but now we have a new Crisis in Ukraine.  Ukraine are one of the worlds biggest producers of car components.  Those factory are not producing any products at the moment for obvious reasons. 

The culmination of all of this is that any cars that are being produced at the moment, the manufacturers need to get the full price.  No discounts for the hire companies and therefore no discounts for you as the hirer.  

The hire companies now hire from a much smaller fleet of vehicles and need to attract the best prices possible for those vehicles.  Increasing the fleet sizes is not an option as the car manufacturers cannot meet the demand.  Some Car hire companies have already resorted to buying from the local dealers.

The situation is likely to improve again in the future as things slowly return to normal, but in the meantime it looks we have no choice but to accept that for your next holiday at least, the cost of hiring a car will be expensive

Our advice therefore is, if thinking of hiring a car it may be better to act fast as prices are more likely to rise than fall over the next few months.  Select an option that allows a free cancellation should we be pleasantly surprised with unexpected reductions.  

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