Motor trade recession may effect holiday car rentals

Thankfully a credit crunch, recession or even, dare we say it, full blown depression will hopefully only happen a few times during the average person’s lifetime if we are lucky. In reality during an economic downturn, although the headlines are startling and hard hitting, if your job is safe and you are not planning on moving house then you can be fairly immune to the more extreme effects. The headlines however will always keep the mind fully concentrated on the hardships which may face people less fortunate. When we hear of mass redundancies and cut backs we feel bad but unless it affects our world directly or that of friends or relatives we tend only to carry on as usual. The car business has had some fairly spectacular negative headlines and for an industry which most agree has made great strides in modernising and improving, it seems ironic that it has been one of the biggest casualties with many associated businesses folding and lots of people losing their jobs right across the car trade landscape.

Of course solutions like the scrappage scheme have given a useful shot in the arm and the fact that used car sales have bounced back so spectacularly have made only the smallest of headlines outside of the trade press. Because, let’s face it, as far as the national press are concerned good news in a credit crunch just confuses the masses. People visiting a retail business will be encouraged to take advantage of the misfortune of that particular business because the depressing headlines tell them that the business is on its arse then they will do so.

Perhaps one of the strangest things about credit crunch in relation to the car trade is just how far reaching its tentacles stretch. For instance, despite the fact that we have less money in our pockets, most of us still have a desire to get away from it all and lay on a beach abroad if only to escape the aforementioned depressing headlines.

This brings me to the point of this little piece. With European based car hire companies no longer having access to the same credit lines they have previously enjoyed, and the manufacturers no longer willing to sell to them direct, they have no longer got the capacity to cater for the amount of tourists who wish to hire cars during their holiday. The problem lies in the fact that when they originally source their cars a lot of them are arranged under “guaranteed buyback”. This means, under the terms of the agreement that at the end of the term the supplier gets the car back at a pre-agreed price. Under normal circumstances this may be re-negotiated but, with the value of used cars going through the roof, the supplier wants them all back so they can move them on for a tidy profit. Add this to the fact that the normal credit lines are being squeezed, suddenly we are left with hire car companies with not enough cars to supply demand. This, of course, means prices will rise and ultimately many local established hire firms will cease to exist.

Many holiday makers just wishing to enjoy a break in the sun will have to do a lot of walking or learn to decipher a bus table written in a foreign language.

Perhaps that camping holiday in Devon maybe the best option after all.