(Bloomberg) -- That sensible, used 2014 Toyota Camry with the gray cloth seats, slate exterior and low miles may still be a good choice. But it’ll cost you more than it used to.
And that’s good news for car-rental companies, whose shares rallied after Edmunds said used-vehicle prices in the first quarter were the highest on record. Analysts for the car-shopping website found the average transaction price for a used vehicle was $19,657, up 2.2 percent from the same period last year and a 17.6 percent increase from the the same period in 2013.
Hertz Global Holdings Inc. surged as much as 11 percent, while Avis Budget Group Inc. gained 5.1 percent. Car-rental companies’ profitability can hinge on the value of the vehicles in their fleet, some of which they sell in the used market or at auctions after they’ve finished with them. Automakers also buy some cars back after a fixed period of time. Correspondingly, used-car website Carvana Co. rose as much as 7.4 percent and was headed for its highest closing price on record.
“With rising fuel costs breathing fresh air into this segment, subcompact and compact cars are finally retaining value again,” Ivan Drury, senior manager of industry analysis at Edmunds said in the release. The company attributed the increase in prices to a growing supply of more valuable near-new vehicles coming off-lease and a greater demand for vehicles of all sizes and ages.
As recently as last year, investors panicked over the then-falling price of used cars. After one precipitous drop in a used-vehicle price index in March 2017, Hertz shares lost one fifth of their value in a week as warning signs mounted. While this one headwind may be abating, Hertz and Avis still face a difficult road ahead, with weak car-rental rates and growing competition from car-sharing and ride-hailing businesses such as Uber Technologies Inc. and Lyft Inc.
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