Used Cars: Should You Buy a Rental Car?

June 25, 2020

It goes without saying that there are many different sources you can use to buy a used car. From Carvana, to CarMax, to the dealer down the street, used cars are everywhere, but one often forgotten source of used cars are rental vehicles. Should you buy a rental car, and if you do, what do you need to know beforehand?

We’ll explore those topics (and more) below. Please bear in mind that I have never worked for a rental car company before. I have, however, spent 43 years in the retail automotive industry having sold hundreds of millions of dollars in new and used cars over my career.

Why do rental car companies sell their fleet?

It comes as little surprise that rental car companies sell portions of their fleet annually. The rental car business (especially pre-pandemic) was a fierce business that required rental car companies to primarily cater to business travelers (with the exception of economy rental car companies). This meant that companies like Hertz, Avis, and Enterprise needed to find competitive advantages that would sway business travellers to rent their cars instead of someone else’s.

This competition led to the practice of rental car companies cycling their fleet every two to three years. Customers would always be in a relatively “new” model year vehicle, and the rental company could also sell the car near the end of the manufacturer’s warranty period. This was a win-win for rental companies, and it also supports the fleet sales operations of major automotive manufacturers.

How do you know if you’re buying a rental car?

From a consumer perspective, it can be hard at first glance to know if you are inquiring about a rental car or not. Knowing if you should buy a rental car first means you need to confirm if a used car was previously titled as one!

There are two ways you can confirm if a vehicles you’re interested in is a rental car:

  1. Ask the dealer where they purchased the car; and
  2. Confirm by looking at the CarFax for the vehicle.

I highly recommend you review the CarFax (not the AutoCheck) of the vehicle to confirm it was a previous rental car.

Now, if you’re purchasing the vehicle directly from a rental car company (Hertz Auto Sales, for example), then you don’t have to worry if you’re dealing with a rental car or not — obviously you are!

What to look for when you buy a rental car

As with any used car purchase, there are a few general “rules of thumb” you should follow. When you’re thinking about buying a rental car in particular there are two things you should “look out for” during your due diligence.

Ask for the vehicle’s service record

If you’re buying directly from a rental car sales department, ask for the vehicle’s service record. This record will show you every single service and maintenance the vehicle has undertaken, and there is no acceptable reason why the seller should not share this information with you.

If you are buying from a dealership that purchased the rental vehicle at auction, then they may not have the full service history of the vehicle. If that’s the case, then you need to ask for …

Ask for repair orders

If you’re buying from a dealer that bought the vehicle from auction, then you’ll want to ask for documentation about what reconditioning they did on the vehicle and all applicable repair orders they filed. Dealers will typically be thrilled to show you this information, because it helps “seal the deal,” and the truth is, it certainly can help.

In order to sell a used vehicle (rental or not), a dealer must ensure that the vehicle passes state inspection. State inspections vary from state to state, however some requirements are the same across the board (ie tread depth on the tires, brake pads, etc.)

With this in mind, if you are able to review the reconditioning purchase orders and repair orders for the vehicle, you’ll have some immediate insight into what you are potentially getting yourself into.

Are used rental cars cheaper than other used cars?

Generally speaking, yes. Rental cars have a stigma attached to them, and because of that they have a lower selling price than other (comparable) vehicles. As an example, this includes service loaners (essentially rental cars that the dealer uses for customers whose cars are being serviced). A service loaner will have a higher asking price than a rental car (it should also have less miles than a rental car), and this is because there is less of a stigma associated with service loaners than there is with rental cars.

If you’re thinking about buying a car, you might enjoy this article: How Much Do Dealers Markup Used Cars?

Used rental cars have lower resale value

It’s important to recognize that rental cars will always have a lower resale value because of this stigma. The cheaper deal you are getting by buying a used rental car means that if you go to sell it in a few years it will be worth less than a comparable vehicle with the same amount of miles that was not a rental car.

As long as you understand this upfront, you should be a-okay.

Should you buy a rental car?

As you can see, there are a lot of factors to consider when contemplating if you should buy a rental car. I would highly recommend you consider rental cars if they fit into your budget, but be sure to secure a pre purchase inspection of any used vehicle you consider buying (unless it is certified pre-owned).

I’ve bought service loaners in the past, but never a rental car. If the CarFax looks good, the dealership can show you the repair orders, and the price is fair, I think buying a rental car can make a lot of sense for you.

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