Investing
The Investment Approach to the Car Rental Agency
November 17, 2017 by admin · Leave a Comment
Summary: Investing in the car rental industry does indeed have its cons, but its pros definitely outweigh the negatives. Here’s why.
It doesn’t take an expert to know that the car rental industry faces a wide array of misunderstandings and biases. Most investors have had some type of negative experience during their rental experience and have drawn similar judgments about the industry as a whole.
Misconceptions
Setting aside all of the negative – or positive – experiences that people have had with renting a car, the rental industry is actually a great business for investors. Generally speaking, most bankers and investors tend to stay away from the automobile industry due to the last 30 years of trouble it’s gone through. However, the level of travel drives car rental revenue. And, since travelling has exponentially grown over the past years, revenue is also on the rise.
Another concern many investors have with the rental industry is the fear of bankruptcy. For numerous years, it was an actual discussion between various parties. Additionally, as you already know, it became a reality. However, in the car rental industry, manufacturers honored their contracts for repurchasing and continued to sell to rental fleets. As you can see, car rentals continue to be an important customer for all automakers.
The Essential Financial Roles
The car rental industry is a combination of both finance business and rental service. It stays away from the manufacturing aspect and foreign competition, as you’d find with major automobile manufacturers. It’s an essential service and plays a critical role in the transportation network. It’s likely that investors that “ride it out” may come out with recurring revenues, depending on the travel volume. Another positive about this is that it cannot be outsourced to countries, nor can it be saturated by the Internet – it’s an industry that’s here to stay and will continue to grow.
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