- [Narrator] Americans are traveling again

but if your summer travel plans involve a rental car,

be prepared for long lines and sticker shock.

- I think it's all over the country.

There isn't one area where you can find a cheap rental car.

- Using a car right now is expensive,

whether you're buying it or renting it.

- [Narrator] According to the travel website Kayak,

rental car prices in the first two weeks of June

are up 89% for the July 4th weekend,

compared with the same dates in 2019

and as much as 300% in some places.

But even if you decide to pony up the additional cash

for a vehicle,

many reservations are simply not being honored

by rental agencies

and travelers have reported showing up at rental counters,

only to be turned away

because there aren't enough cars on the lot.

So why have rental cars become so expensive?

And how long can we expect these high prices to last?

- It's a pretty classic supply and demand issue.

There are not a lot of rental cars to go around

because these companies downsized their fleets

when nobody was using them.

At the beginning of the pandemic,

travel of any kind really collapsed,

but particularly air travel,

which the rental car companies rely on very heavily.

And so there was this situation

where they had to react very quickly

to a very rapid drop in demand.

- [Narrator] For months, the pandemic transformed airports

into ghost towns, which in turn wiped out

about 2/3 of the rental car business.

- What happens is all of the rental car companies

react quickly, sell off their cars

before they lose too much value.

Downsize their fleets, cut costs, downsize their staff.

I mean, find every way to pinch pennies

and stay alive really.

It was a make-or-break moment for these companies.

- [Narrator] To survive, many rental car agencies

sold off large parts of their fleet.

- It was a great time to sell cars too

because new car production still hasn't normalized.

So they sold a lot of cars

to build cash flow

but then they also sold cars

in order to right size to demand.

And so you had a double whammy

in terms of supply getting cut.

And then you also had Hertz go bankrupt.

(pensive music)

- [Narrator] In May of 2020,

Hertz filed for bankruptcy

but Mazari sees a silver lining in the disruption.

- COVID was a blessing in disguise for this industry

because it created pricing discipline

and supply discipline.

These companies basically had to cut their fleet size down

by 35%, so this was a dysfunctional oligopoly.

Supply was never tight.

- [Narrator] This summer, consumer demand has returned

and now a new problem has arisen.

There's an extreme shortage of new cars.

- When demand came back,

it did not trickle back.

It came back almost overnight

and you have these companies

that have right sized themselves

to a market that basically wasn't using them before.

And they just weren't prepared.

- We're also hearing is that these companies

are so desperate to get fleet

that they're buying cars in the used car market,

which is in the auction market.

So don't be surprised if you get into some rental car

that has a lot more miles on it.

- [Narrator] Exacerbating the car shortage issue

is another shortage: semiconductors.

Automakers have said the production

of new vehicles has been slowed because of chip shortages.

- New car production with a chip shortage

isn't gonna normalize until Q4.

So for these companies, it's gonna be very tough

to add fleet back this year.

And so this year, pricing's gonna remain very high.

- [Narrator] In separate statements

to The Wall Street Journal,

both Hertz and Enterprise acknowledged

that customers might have a tougher time securing a rental

because of the spike in demand.

Enterprise wrote,

"While still below pre-pandemic fleet levels,

our fleet is not down significantly.

A key challenge right now

is the global chip shortage,

impacting new car availability."

Hertz wrote, "The microchip shortage

is also affecting the car rental industry

but Hertz is working closely

with our automotive partners

to add new vehicles to our fleet

as quickly as possible while also moving vehicles

to the areas with highest demand."

(dramatic music)

If you have to rent a car this summer,

Mazari recommends booking early and booking backwards.

Typically, travelers book flights or hotels first

but that strategy won't work this year.

- You essentially, you just have to book in advance

and kind of pay up for it

and be prepared for that, if you're lucky enough to get one.

(dramatic music)