Rental car companies cut new car orders

Rental car operators have been hit by the same credit problems that car dealers and consumers are facing, and as a result have drastically cut their orders for new cars from U.S. automakers. The rental companies are also finding it difficult to find car dealers willing to purchase their used vehicles, according to a recently-published report.

Automotive News is reporting that orders for new vehicles by rental car companies dropped by nearly 400,000 in 2008, to 1.5 million, which was down from 1.9 million in the previous year. According to an executive with the American Car Rental Association, the decrease was due to the economic downturn and resulting cutbacks in both leisure and business spending.

According to this new report, the used car dealers that typically purchase rental cars at the end of their service life are finding it difficult to secure the credit to make the purchases. What this means is that increasing numbers of rental cars remain unsold at vehicle auctions.

This presents a two-fold problem for U.S. automakers. For those located in Detroit, they normally rely on rental car companies to purchase their left-over stock. On the other hand, automakers are seeing a decline in the residual values as rental operator flood the used-car market when they unload end-of-service vehicles from their large fleets.

Enterprise Rent-A-Car, the largest rental car operator in the U.S., has said that it is reducing its purchases of new vehicles in 2009 to around 400,000 units, which is approximately half of its normal volume.

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