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I want to buy a used car, but found many used cars were formerly owned by rental car agencies. Many websites and articles warn against buying former rental cars, because people renting these cars often mistreat them.

But from a financial point of view, I notice that rental agencies sell cars within the first two years, during the time when they depreciate the most. I figure many large rental companies will have mathematicians who calculate the best time to sell. Does the fact that they sell the car during this time suggest that they know the car's cost of further maintenance or other costs will be higher? Or is there another reason they sell at this time, which has a calculated advantage to them, but which is less than ideal statistically for me, the purchaser?

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    I once returned a car that the agent put a "sell" tag on the key when I handed it in. I had just crossed into 30,000 miles on the car. My guess is that's all there is to it. – user662852 Jul 25 '17 at 17:00
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    Anecdotally, I've purchased a couple of used cars that were labeled as "fleet vehicles", and have never experienced any difference in their quality or performance. – GalacticCowboy Jul 26 '17 at 14:25
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    I know someone who worked for a truck rental business, and the typical policy was to put the trucks up for sale once they hit a certain mileage, speaking to user662852's comment. – NeutronStar Jul 27 '17 at 15:34
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    Most any car will at least go 100k even if the engine and transmissions have been beaten up (unless its a sports car). Most rental cars are sold with 30-50k miles on them. For a car that costs around 25k new, that means you're probably looking at buying something that is 8-12k cheaper from the rental company with well under 100k miles. For that much savings you could pretty much put a new engine and transmission in. – Ian Jul 27 '17 at 17:16
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    Actually, rental car agencies don't get hit as hard with that "drive it off the lot" depreciation because they get the best possible prices -- because they are the easiest customers. No government red tape, they want thousands of one thing (unlike dealers), and they're very amenable to buying up slow selling models. Chevy Celebrity line on the verge of shutting down from low sales, GM calls Hertz' buyer, who regularly reads AutoWeek and is not surprised by the call. – Harper Jul 27 '17 at 18:29
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My mother worked for one of the major American car rental companies. She talked about this topic with me and my answer will summarize the talk.

Does the fact that they sell the car mean during this time suggest that they know the car's cost of further maintenance or other costs will be higher?

Or is there another reason they sell at this time which, has a calculated advantage to them, but which is less than idea statistically for me, the purchaser?

There is much more to the price equation. A premium rental car company (one that only rents fairly new, nice cars) has a certain image to maintain to protect their perceived value. A new-ist car also, besides the point of the image of the general company, commands a better rental price.

Many Web sites and articles warn against buying former rental cars, because people renting these cars often mistreat them.

This is a bad argument you've read. If former rental cars are in bad shape, the price will reflect that. If they are priced the same for the same miles ridden, they have equivalent wear and tear. In other words, the relative price of the car determines whether rental cars are more heavily worn not random people's opinions on the internet. People on the internet are mostly wrong. Irony intended.

From the single company I have as reference, I also don't see that as relevant. There are company and governmental regulations to keep maintenance up. I clean my car once a year. Change the oil twice. Replace my wipers every eighteen months. And so forth.

The maintenance cycles required for rental cars may (and this is just speculation) negate the gradual extra degradation that drivers may have on rental cars.

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    Some users trash rentals. youtube.com/watch?v=0YGn3ZyyejE – Hannover Fist Jul 26 '17 at 0:03
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    Trashing a rental doesn't necessarily mean ruining the body. It can be running the engine really hard, and reducing life later on, which won't be visible in a typical inspection. – whatsisname Jul 26 '17 at 0:32
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    I am in the USA, and my last car purchase was a former rental 2009 model. Ask the seller if you can take the car to a mechanic for inspection. if they say no, don't bother, if they say yes, DO IT. a reputed mechanic will help you negotiate price. my engine had a very small oil leak, seller knocked the $300 off the price for repair costs. I saw the history of the car, the agency had done frequent maintenance, and inspection. this car was in amazing condition minus the leak, and i love having a reliable car for almost the first time in my life. the rental agency won't let trash be sold. – NOP Jul 26 '17 at 1:49
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    I'm not quite convinced that sellers price used cars to reflect their working condition. In some cases sellers have been known to price used cars to reflect what the customer can visually determine about their working condition (and not any latent or hidden problems) – Darren Jul 26 '17 at 13:18
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    This looks like the efficient market hypothesis, but with the assumption that asking prices are somehow efficiently priced. I'm not sure how the used car asking price "market" matches the requirements for that hypothesis to be reasonable. – Yakk Jul 26 '17 at 14:37
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Many Web sites and articles warn against buying former rental cars, because people renting these cars often mistreat them.

Rental cars are typically driven by people over 25, these are typically people with some financial means (air travel, credit card). Additionally, rental cars are subject to frequent inspection and likely to be on tighter maintenance schedules than many owners would keep. So while some people may drive a rental harder than they would their own car, it's not typical, and not likely to result in some hidden damage that makes a rental less desirable (all else being equal) on the used-car market.

Does the fact that they sell the car mean during this time suggest that they know the car's cost of further maintenance or other costs will be higher? Or is there another reason they sell at this time which, has a calculated advantage to them, but which is less than idea statistically for me, the purchaser?

Rental companies buy at incredible volumes, as such, some manufacturers have programs where they will buy back used cars from the rental company at a set price and/or time. Other incentives are guaranteed depreciation, wherein the manufacturer will make up the difference if the used vehicle doesn't sell for a set percentage of it's purchase price after a set amount of time. Outside of these incentive programs, rental companies also get substantial volume discounts, and they typically are buying base models which hold value better than their higher-trim counterparts (according to KBB market analyst). So the conventional wisdom about depreciation doesn't really apply. The timing of their sales is primarily based on their purchasing arrangements and their desire to keep an up to date fleet, not on projected maintenance/repair costs.

The best you can do with any used-car purchase is to test-drive, get a pre-purchase inspection, and review whatever history is available.

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    +1 For the demographics of car renters. I drive them extra carefully because I know even minor damage (that I might even ignore on my car) will require a full price repair on a rental car. – trognanders Jul 26 '17 at 0:04
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    +1 for the pre-purchase inspection. That can save a lot of headaches and you may even be able to negotiate its cost into your purchase price. – Laconic Droid Jul 26 '17 at 0:06
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    Additionally, rental cars are subject to frequent inspection. Never had one from Avis that didn't need 5-10 PSI added to the tires to match what it says on the door panel. – Kaz Jul 27 '17 at 20:13
  • @Kaz if someone's car purchasing budget is so tight that they need to consider the state of the tires to try to save a few dollars, the state of the tires is probably not the biggest issue they need to worry about. Tires are just a consumable item, like gasoline! – alephzero Jul 28 '17 at 0:13
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    @alephzero Not sure what you're referring to. PSI is North American jargon for pressure (pounds per square inch). I regularly see low tire pressure when renting a car. That's a basic maintenance item being overlooked that doesn't require opening the hood; it doesn't inspire confidence that they're doing other things according to the schedule. – Kaz Jul 28 '17 at 3:02
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Many Web sites and articles warn against buying former rental cars, because people renting these cars often mistreat them.

Many of those are also written by unqualified individuals for publication on blog farms and encourage all sorts of odious financial practices. That's not even considering the interests of who is paying to advertise on said blogs-- I'm sure their interests align with making sure you always pay top dollar for a new car. Because those icky used ones are so mistreated!

Never trust financial advice published on the internet (or in the media, for that matter).

Edit: One caveat on further thought-- never, never buy used vehicles from government auctions (impounds, asset seizures, old police cars, etc). Anybody irresponsible enough to go to jail or abandon their car long enough to lose their assets likely isn't a responsible owner of such, and cops and crooks alike do absolutely beat the snot out of police cars.

When it comes to government-owned vehicles (police cars, schoolbuses) municipal governments are notoriously stingy and will squeeze every last minute of use out of them before putting them on the market. If you're buying a government vehicle, assume it's being sold because it has intractable problems.

But from a financial point of view, I notice that rental agencies sell cars within the first two years, during the time when they depreciate the most.

Bingo.

I figure many large rental companies will have mathematicians who calculate the best time to sell. Does the fact that they sell the car mean during this time suggest that they know the car's cost of further maintenance or other costs will be higher? Or is there another reason they sell at this time which, has a calculated advantage to them, but which is less than idea statistically for me, the purchaser?

It doesn't take a PhD to realize it's bad for business if your model revolves around renting out 1970s rustbuckets that run the risk of breaking down and leaving customers stranded in inopportune or dangerous places. Uhaul in particular has a terrible reputation for this, and it shows in the condition of their trucks-- relics of the 90s, all of them. Uber won't let you drive for them if your car is older than 7-10 years for the same reasons.

Yes, as a car ages, the chance of having to make repairs increases. Rental agencies are in the business of renting vehicles, not running service centers and garages. It's more aligned with their core business model to just dispose of cars once they've squeezed the most reliable years out of them and amortize the vehicles' depreciation across the tax deductions and fleet pricing they enjoy when buying new ones.

This gets them out of the service game and lets them focus on their core business-- procurement and rental. There's no calculated "time-to-lemon" that they're trying to skirt here; they're just trying to avoid having to make any repairs whatsoever.

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    +1 - big rental agencies can't afford to have their reputation tarnished by cars breaking down from minor things like spark plugs failing and batteries going dry. It just makes sense to stick to vehicle mileages and ages where those sorts of things are extremely rare, especially since they can capture a lot of the depreciation losses. – Jeutnarg Jul 25 '17 at 19:41
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    There is this company: rentawreck.com – gnasher729 Jul 25 '17 at 21:38
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    Absolutely, blog farms post lies to increase clicks on the page's ads (new car ads are obviously very lucrative) or because the links in the article are themselves affiliate links. it's called content marketing. Much of the content is written in Bangladesh or India for a nickel a page, using a word processor that coaches them to create a particular "keyword density". If the English is a little awkward, or uses couched language, or repeats keywords unnecessarily, or it looks like it was written by a 13 year old, that is why. – Harper Jul 27 '17 at 18:38
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    @Jeutnarg also as a customer if my car is less than a year old and it breaks down I am assigning most of the blame to the manufacturer vs the rental agency. All I need from the rental agency is an expedient replacement to maintain good standing – nvuono Jul 27 '17 at 18:42
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    "Never trust financial advice published on the internet" seems a bit harsh. Never? That would include this advice. :) – WiredPrairie Jul 28 '17 at 16:51
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I've been told by staff in my local car hire agency that they get such big discounts that they actually make money selling the cars, so they replace all their cars every six months (in the UK the number plate indicates when the car was registered, in six month periods).

This suits the manufacturers, because it means they can offer a lower-cost product to price sensitive customers, while charging more to people who want something brand new.

For example, you could buy a brand new Fiesta for £14,000 or a 6 month old version of the same car with a few thousand miles on the clock for £12,000. This means if you only have £12,000 then you can afford to buy a nearly new Fiesta, but if you can afford a bit more then Ford will happily take that off you for a brand new Fiesta. Ford sell an extra car, and if the car hire company only paid £11,000 then they make some profit too.

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    £2,000 feels like the sort of discount you ought to get on a delivery mileage car, not a six-month old car that's probably been driven pretty hard. – Martin Bonner Jul 26 '17 at 13:03
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    I based those numbers on the list price on the Ford site and some listings on AutoTrader. Even if the numbers are a bit off, the concept still makes sense. – thelem Jul 26 '17 at 13:40
  • your point is good. I'd say the £12k probably gets haggled down to £11,5k, and the rental car agency realistically paid £12,5k. Cars are expensive over there, that's like half of Mr. Bingley's annual fortune! – Harper Jul 27 '17 at 18:47
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The rental industry is seasonal. They purchase additional inventory (vehicles) for their busy seasons and sell the extra inventory afterwards.

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There a huge differences between different car rental agencies.

A premium car rental agency will sell a car which is working very well and quite far from the verge of breaking apart. They don't want to take the risk that one of their premium customers paying premium rates receives a worn-looking car which runs less than absolutely perfect (or even breaks down). They need to keep up their premium reputation. These premium agency also have a major marketing impact for the car industry. That's probably the main reason why they receive such massive discounts (see thelem's post). Obviously, the Mercedes Benz AMG Edition rental car will have a lasting impression on the driver (and the people not renting it, but seeing the boastful ads of the car rental company). So both the car industry and the rental company want this lasting impression to be a perfect one.

A holiday car rental agency may have much lower standards. They often don't have recurring customers. They don't rent premium cars to premium customers but cheap cars to cheap customers.They don't receive the discounts the premium agencies receive. And they will milk their car to the max. You will notice that they windows fall out of the car when you bang the door shut. You will find that opening the door will be more difficult than breaking into the car. The seats may be stained - at least in the spots where some of the upholsters is still present. On the plus side, if you are lucky, the heating still works. On the minus side, you might not be able to turn it off. Water might leak into the car when it's raining, but that's not much of a problem as it will drain out through the holes in the bottom. No fear that water might rush in through these holes when driving though a puddle - the engine will not start during humid weather, so that's a non-issue.

In any case, car rental customer might have mistreated the car. The engine has most probably not been run in. However, this appears to be less than an issue with modern car than it has been in the past. And very very few rental car drivers think that they really have to absolutely emulate Michael Schumacher just because they drive a car which is not their own.

And anyway, that is a risk you take with about any used car.

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    Are we talking Eastern Europe here? Rent-a-wrecks are practically extinct in the US, cheap old cars are too expensive to maintain at scale. – Harper Jul 27 '17 at 18:49
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    "The engine has most probably not been run in" - since when did anybody need to "run in" the engine in modern cars? I can't speak for the junk that US car manufactures produce, of course - the worst built and most unreliable cars I have ever owned in the UK, in 40+ years of motoring, have had Ford or GM name badges on them. Over the years I've hired several (non-US) hire cars with less than 1000 miles on the clock - and one with only the delivery mileage. For my current car (bought new) the manufacturer's recommendation for the first oil change from new was after 18,000 miles. – alephzero Jul 28 '17 at 0:16
  • The manufacturing of engines has improved since the 1950s and 1960s. Yet, it is still recommended to run in the engine for the first 1000km (meaning that you should use only two third of the maximum allowed rpm and avoid full throttling). The friction inside a new engine is higher than in an engine which has run for some time. Full throttling and redlining will shear off more material than necessary. Which can lead to a higher oil consumption and maybe less reliability when the engine reaches a high age. Brakes need to be run in as well. – Klaws Jul 28 '17 at 7:44
  • Some reviews about some car rental company where you can rent VW Beetles (looking to be in good shape) and other cars (cough) in less good shape: yelp.com/biz_photos/rentadora-isis-cozumel-2 --- Mexico City will, according to Donald Trump, be part of the US soon, so this is relevant. – Klaws Jul 28 '17 at 8:26
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    I can agree with this... having rented a car one holiday that had an ants nest somewhere in it... driving along watching ants parade across the dash and out through the screen seal that they'd eaten a passage through... the rental company said 'meh' – matt Jul 28 '17 at 12:11
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Every car model/type has a know interval when things need maintenance or replacement. This info comes mainly from the manufacturer and the rental companies use these info to determine how long and at what rate a car should be rented (I mean in total, not rented to an individual) This is easiest calculated with a long term rental (3, or 4 years time. Leasing business) But is also used for short term rental. There is a point in time were a car gets to have more maintenance and replacements then before. The rental company will always try to sell the car just before big replacements or maintenance are necessary. Of course your local mechanic can also now when those big 'events' need to take place. So he can know what to expect the next kms. I'm talking about foreseen replacements and maintenance (like every x km replace drive belt, replace oil ... I'm not referring to the exceptionals. These latter are the risk the rental companies take during the rental period.

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I bought a car from a small rental agency at a nice discount from either used or leased market price and drove it happily for over a year (had to sell due to moving). There was a minor issue I discovered but it was not expensive to fix.

In my experience, the worst cars on the market are former leases. People abuse them knowing they will be rid of the car by the end of 3 years. People drive them like they wouldn't drive a car they own, the leasing company does the least maintenance possible, etc. yet the price is close to the used market because it is "certified".

As other commenters posted, quality rental companies want new looking, reliable cars so they tend to refresh the fleet soon at a relatively low mileage. And since renters are responsible for damage, the interior and exterior of these cars is usually in a very good shape.

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