Why Hertz Is Selling 20,000 EVs
In a surprising reversal of its ambitious electrification strategy, Hertz made headlines in early 2024 by announcing the sale of approximately 20,000 electric vehicles from its U.S. fleet. The rental giant is actively replacing these EVs with gasoline-powered cars. This move represents a significant shift for a company that once promised to order 100,000 Teslas. For consumers and industry watchers, the decision signals deeper issues regarding fleet management costs, repair logistics, and the current state of the used car market.
The Financial Reality Behind the Sell-Off
Hertz did not make this decision lightly. The company took a roughly $245 million non-cash charge related to the incremental net depreciation expense. While environmental goals remain popular in corporate press releases, the math simply stopped working for the rental agency in the short term. The primary drivers for this massive liquidation boil down to two specific financial pressures: ballooning repair costs and rapid depreciation.
High Collision and Repair Costs
The most immediate pain point for Hertz was the cost of fixing damaged EVs. While electric vehicles require less routine maintenance (like oil changes or timing belts), they are significantly more expensive to repair after an accident.
Former Hertz CEO Stephen Scherr noted that collision and damage repairs on an EV were often about twice that associated with a comparable combustion engine vehicle. Several factors contribute to this:
- Parts Availability: Replacement parts for Teslas and other EVs often have longer wait times and higher price tags than parts for a Ford or Toyota.
- Labor Specialization: Fixing high-voltage systems and specialized aluminum bodies requires specialized labor, which costs more per hour.
- Total Loss Rates: Because battery packs are structurally integrated and incredibly expensive, insurance adjusters are more likely to write off an EV as a total loss for damage that might be repairable on a gas car.
The Depreciation Trap
Hertz bought a significant portion of its Tesla fleet when demand was high and supply was tight. However, throughout 2023, Tesla aggressively cut prices on its new vehicles to maintain market share. When the price of a new car drops by $10,000 or $15,000, the value of every used version of that car drops instantly.
Hertz found itself holding a fleet of assets that were losing value much faster than anticipated. By selling them now, the company attempts to stop the bleeding before the vehicles depreciate further.
Renter Hesitancy and Infrastructure Issues
Beyond the balance sheet, the user experience played a role. Hertz discovered that the demand for renting EVs did not match their supply. For the average business traveler or vacationer, renting an EV often introduced more stress than convenience.
The “Range Anxiety” Factor: Travelers in unfamiliar cities often do not want the added burden of finding a compatible charging station. While Tesla’s Supercharger network is robust, it still requires the driver to plan their route around charging stops.
The Learning Curve: Many renters were driving an EV for the first time. The learning curve regarding regenerative braking, one-pedal driving, and touchscreen-heavy interfaces (specifically in the Model 3 and Model Y) led to higher accident rates. This feeds directly back into the high collision costs mentioned earlier.
What This Means for the Used Car Market
Hertz’s decision to dump 20,000 units created a unique opportunity for car buyers. The influx of inventory forced prices down, making used Teslas more affordable than they have ever been.
Bargain Prices for Model 3s
To clear the inventory quickly, Hertz listed thousands of 2021 and 2022 Tesla Model 3s at aggressive price points. In many regions, prices dropped to between $20,000 and $25,000. This is a massive discount compared to the sticker price of a new unit.
The $4,000 Tax Credit Loophole
One specific benefit of these lower prices involves the IRS Used Clean Vehicle Credit (Section 25E). Under current rules, buyers can claim a tax credit of 30% of the sale price (up to $4,000) for used EVs, provided the sale price is $25,000 or less.
Because Hertz priced many of these base-model Teslas right around the $21,000 to $25,000 mark, savvy buyers could effectively purchase a 2-year-old Tesla for under $20,000 after the tax credit is applied at the point of sale.
Buying Risks: What to Watch For
While the prices are attractive, buying a former rental EV carries risks.
- High Mileage: Many of these units have 50,000 to 90,000 miles on the odometer despite being only two years old.
- Battery Degradation: Frequent fast charging (Supercharging) can degrade battery health faster than slow home charging. Since rental cars are almost exclusively Supercharged, the battery health percentage is a critical metric to check before buying.
- Cosmetic Wear: Rental cars endure harsh treatment. Buyers should inspect the interior, wheels, and suspension carefully for signs of abuse.
The Pivot Back to Gas
Hertz is taking the capital generated from these EV sales and reinvesting it directly into internal combustion engine (ICE) vehicles. This allows them to meet the current demand, which still heavily favors gasoline cars for rental scenarios.
This does not mean Hertz is abandoning EVs entirely. They still maintain a smaller electric fleet and have partnerships with Polestar and GM. However, the strategy has shifted from an aggressive, market-leading takeover to a more conservative approach that aligns with actual customer demand and repair realities. The company is “right-sizing” its fleet to ensure that the number of EVs on the lot matches the number of customers actually willing to rent them.
Frequently Asked Questions
Are the Hertz used Teslas still under warranty? Most Hertz Teslas are 2021 or 2022 models. Tesla’s Basic Vehicle Limited Warranty covers 4 years or 50,000 miles, so many may be out of bumper-to-bumper warranty due to high mileage. However, the Battery and Drive Unit Warranty usually lasts for 8 years or 100,000 to 120,000 miles, meaning the most expensive components are likely still covered.
Where can I find these cars for sale? Hertz sells these vehicles directly through their “Hertz Car Sales” website. You can filter specifically for Tesla Model 3 or Model Y to see inventory at locations near you.
Did Hertz only sell Teslas? While the majority of the 20,000 vehicles were Teslas (primarily Model 3s), Hertz also offloaded other EVs from manufacturers like Polestar and Chevrolet as part of the broader fleet adjustment.
Will Hertz buy EVs again in the future? Yes. Hertz still has agreements in place to purchase EVs from various manufacturers. The company indicated they will continue to buy EVs, but at a slower pace and with a sharper focus on profitability and demand matching.