Jan 11, 2024 - Business

Hertz selloff could be a good time to buy a cheap used EV

Image of three white Tesla Model 3s parked in a Hertz parking garage.

Hertz is selling 20,000 EVs like the Tesla Model 3. Photo courtesy of Hertz

Hertz is offloading some 20,000 electric vehicles (EVs) from its rental fleet, which means now could be a great time to buy a used EV at a good price.

Driving the news: The rental car giant said in a regulatory filing Thursday that it will sell roughly a third of its global EV fleet, citing repair costs and weak demand.

  • Hertz will use some proceeds from the sales to buy gasoline-powered models.
  • The about-face comes about two years after Hertz struck a high-profile deal to buy 100,000 Teslas (about 20% of its U.S. rental fleet) as part of a broad electrification effort.
  • "We may have been ahead of ourselves," CEO Stephen Scherr told CNBC.

The big picture: Used car prices have been falling since a pandemic-driven shortage in 2022.

  • In 2023, used car prices fell 7%, but pre-owned EV prices were down 22%, per Cox Automotive, mostly because of the cascading effect of Tesla price cuts on new models.
  • Hertz's big inventory liquidation will likely add to that downward pressure.
  • Plus, a newly enacted federal tax credit on used EVs could make for some enticing deals.

Details: While pre-owned cars are typically sold to dealers at wholesale auctions (if they're not sold privately), Hertz lists its older rental vehicles directly on its own website.

  • When Axios checked Thursday afternoon, there were nearly 350 Teslas available at prices up to $39,850.
  • Only 17 were priced below $25,000, which is the cutoff to qualify for the tax credit.
  • The cheapest model for sale was a 2021 Model 3 Standard Range with about 81,000 miles for $22,600. With the $4,000 tax credit, the final price would be $18,600.
  • Some were going for as little as $14,000 after the tax credit earlier this week, according to Electrek, but those are already gone.

Yes, but: Rental cars are notoriously beaten up, so buyer beware.

  • Plus, there's the question of how long the battery on a used EV will last.
  • EVs haven't been on the road long enough to know for sure, but most automakers say the batteries should last for 15-20 years.
  • In a 2023 study, market research firm Recurrent said it seems EV batteries are holding up well, with very few of them needing replacement even once the typical eight-year, 100,000 mile warranty period ends.

What they're saying: "It's a real opportunity for savvy buyers to take advantage," Recurrent CEO Scott Case tells Axios.

  • "These cars are all less than 4 years old — their batteries have a lot of life left even if there are a lot of miles on the odometer."

Reality check: EVs accounted for only about 1% of the used vehicle market in 2023, according to Cox Automotive.

Of note: An Uber spokesman said the Hertz decision won't affect the availability of EV rentals accessible to Uber drivers under a separate agreement.

  • EVs on the Uber ride-hailing network have doubled in the past year, he said, with 74,000 drivers going electric in North America and Europe.

Note: Cox Automotive's parent company, Cox Enterprises, also owns Axios.

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