- Hertz EV depreciation has increased by 89%, reaching $537 per car, per month
- The car rental agency is committed to selling off 30,000 of its EVs by the end of 2024
- Used car buyers can snag one of Hertz's pre-owned Tesla Model 3s for under $20,000
Hertz's pioneering of EVs as rental cars seemed foolproof—less maintenance and a lower total cost of ownership are two things that any company competing in the rental space strives for. But as Hertz quickly found out, its grand experiment went horribly wrong. It's now become a giant clearance event, where everything must go.
The company's fire sale on EVs has been ongoing for months. The goal? Sell off at least 30,000 EVs—which include cars from Tesla and other brands like Polestar—by the end of the year. Ultimately, Hertz wants to retain only enough vehicles to satisfy the demand of the renters who are actually booking trips in battery-powered cars to avoid hefty hits on depreciating inventory. Now, after a weak earnings report, Hertz is accelerating its sale of Tesla models.
Hertz is currently selling its surplus Teslas on its website. At the time of writing, it's possible to get into one of the former rental cars for under $20,000, not including the $4,000 federal tax credit on used EVs. So that means a high-mileage Model 3 for around $15,000. Worth it? We'll let you be the judge.
Hertz plans to continue its purge through 2025, which means a continued attempt to stop the bleed while used EV values continue to slip. Fortunately, that magic number seems to be anywhere between Hertz's observed low of around $20,000 to the magic tax credit number of $25,000, so at least the losses appear to be somewhat predictable.
How did it come to this? Back in 2021, Hertz decided to "go green." The rental car agency would start adding EVs to its fleet, beginning with a pledge for a massive order of 100,000 Tesla Model 3s. While Hertz never actually reached that number, the idea in itself was a smart move. Customers loved it and the company, in theory, only had to pay for simple fixes like tires and washer fluid—that's the whole EV shtick, after all, fewer moving parts means less upkeep.
However, Hertz began hurting with the rest of Tesla buyers once the electric automaker began slashing prices overnight which sent depreciation skyrocketing and sparked Hertz's huge sell-off.
One of the ways the Hertz's value is measured is with its assets—you know, its cars. The problem is, that when you invest in tens of thousands of cars at peak pricing and the manufacturer drops the price drastically multiple times during ownership, your company loses a lot of money very quickly. In fact, Hertz estimates that EV depreciation across its fleet is up 89%, amounting to a staggering $537 per car, per month.
It's not just new car prices and slowing used EV demand that's driving things. It turns out that these Teslas aren't exactly saving money like Hertz planned, either. Repair costs have been an issue, and it turns out that Hertz-owned Teslas were getting into a number of collisions, leading to high restoration costs and lead times.
These issues combined have resulted in millions of dollars in losses over the last four quarters and convinced Hertz's new CEO to sell off the vast majority of its EV fleet.
One of the bigger unknowns is where this leaves the EV and car rental industries. Both seem to be at odds since the Hertz deal and now things are playing out like a messy divorce between the two. Eventually, as EVs become more popular, car rental agencies will need to find a way to better manage a fleet of EVs and taper the expectations of losses. Perhaps this is a preview of what's to come—or maybe just a teething issue of businesses learning how to change with the times.
Either way, it spells out some good deals for anyone in the market for a used rental car.
