How Does the Amazon-Hertz Deal Affect Dealers?

TL;DR

The Amazon-Hertz partnership lets Hertz market used rental cars directly to consumers through Amazon, potentially earning retail prices while reducing auction and dealer involvement. Its immediate impact may be small, but rapid expansion to other rental fleets could tighten dealers’ used-car supply, pressure wholesale auctions, and reduce opportunities to earn profits from financing, warranties, service, and parts.

Transcript

About a quarter century ago, Amazon said it wanted to sell anything and everything a person would want to buy online. Since then, revenues have grown 38,000% every time it sells a new product. Even veteran rivals fear getting Amazon. I would never bet against Amazon. They effectively have unlimited resources. Up until recently, one of the ve... Read More

Key Insights

• Amazon is functioning as a highly developed listing service for automotive sellers, not as the vehicle owner or direct retailer. Buyers can complete paperwork and secure financing through its digital showroom, while Amazon keeps no inventory and does not control final vehicle delivery.
• Hertz is seeking more efficient ways to resell vehicles and lower fleet costs after several difficult years. The company filed for bankruptcy in 2020, relisted in 2021, described a critical transformation in 2024, and reported its best quarter in two years during Q2 2025.
• Direct-to-consumer sales can give Hertz retail pricing while avoiding wholesale discounts, auction fees, and other transaction friction. Hertz already sells through its website, 45 United States sales locations, Carvana, AutoTrader, Cars.com, and a rent-to-buy program, making Amazon an additional channel rather than a complete replacement.
• Rental companies can acquire vehicles more cheaply because they purchase large quantities from automakers and receive discounts. Stair-step incentives can increase the per-vehicle discount as purchase volume rises, giving major fleets a cost advantage when they later compete with dealerships in the retail used-car market.
• Dealers rely on wholesale auctions for about 20% of their used vehicles, while rental companies provide about 5% of auction supply. If Hertz and other commercial sellers increasingly bypass auctions, dealers could face fewer available cars and more constrained access to inventory customers want.
• The immediate effect of Hertz’s Amazon partnership may be negligible across the entire dealership market. One estimate says distributing Hertz’s fleet across new and used dealerships equals roughly one or two vehicles per dealer, or about 2.3 vehicles when counting only new-car dealers.
• Amazon’s larger opportunity may be consumer data and digital advertising rather than vehicle margins. Its digital advertising business generated $56.2 billion in 2024, and automotive shopping activity could provide information that supports more precisely targeted advertising to prospective buyers.
• A lost used-car sale can cost a dealership more than the vehicle’s immediate margin. Dealers may also lose financing, warranty, service, and parts opportunities, with service and parts producing nearly half of the profits at major publicly traded dealership groups described in the transcript.

Questions & Answers

Q: How does the Amazon-Hertz used-car partnership work?

Amazon gives Hertz another online channel for presenting used rental vehicles to consumers. Amazon does not hold the inventory or sell the cars itself. Its platform operates as a digital showroom where shoppers can handle paperwork and arrange financing. The remaining step, taking delivery of the vehicle, stays outside Amazon’s direct control, making the arrangement closer to an advanced listing service than conventional Amazon retail.

Q: Why does the Amazon-Hertz deal worry car dealerships?

Dealers could face direct competition from Hertz for consumers and reduced access to used vehicles. Hertz can acquire cars at fleet pricing and market them directly at retail prices instead of sending them to dealers or wholesale auctions. Dealers that lose those vehicles may also lose the chance to sell loans and warranties, retain service customers, and generate parts and repair profits.

Q: How could direct Hertz sales affect wholesale car auctions?

Direct sales allow Hertz to bypass auctions, seek retail rather than wholesale prices, and avoid auction-related fees and friction. Rental companies account for about 5% of vehicles entering the auction market, while dealers obtain about 20% of their used inventory from auctions. If more commercial fleet owners adopt direct consumer channels, auction companies could process fewer vehicles and dealers could encounter tighter supply.

Q: How large is Hertz’s used-vehicle supply?

Hertz has about 560,000 vehicles in its fleet and resells a couple hundred thousand cars each year in the United States, representing several billion dollars of inventory. Rental companies generally sell vehicles after approximately 18 to 20 months of rental use. Hertz also said that, as of September 2025, 80% of its fleet was less than one year old.

Q: Will the partnership immediately cause major losses for dealers?

The immediate effect may be limited when measured across the entire dealership market. One estimate distributes Hertz’s fleet to roughly one or two vehicles per new and used dealership, or about 2.3 vehicles when only new-car dealers are counted. Hertz is also adding a customer channel rather than completely cutting dealers off, so the current arrangement alone may not materially transform supply.

Q: Why could the Amazon-Hertz model become a larger threat later?

The model could expand quickly if the initial Hertz program succeeds and Amazon offers similar arrangements to other rental companies. Hertz represents about half a million vehicles, while the total rental fleet is about 2.5 million. Broader participation could redirect more relatively young used cars away from auctions and dealers, creating stronger competition for inventory and direct retail customers.

Q: How are dealerships adapting to tighter used-car inventory?

Dealers increasingly source vehicles from consumers instead of relying on expensive wholesale auctions. Nearly three quarters of their cars come from trade-ins, and dealers acquire nearly 10% directly from people outside a trade-in transaction. This practice grew sharply during the pandemic when new and used vehicles were scarce, helping dealers secure inventory without bidding against competitors at auctions.

Q: Why are used-car customers valuable beyond the initial sale?

A used-car buyer can generate several dealership revenue opportunities beyond the vehicle margin. Dealers may sell financing, loans, warranties, service, and replacement parts while building a continuing customer relationship. Service and parts produce nearly half of the profits at the major public dealership groups discussed, so losing the retail transaction can also eliminate the chance to retain that buyer for future service.

Summary & Key Takeaways

• Amazon provides Hertz with another digital channel for reaching used-car buyers. Amazon acts as an enhanced listing and shopping platform rather than holding inventory or selling vehicles itself. Customers can complete paperwork and arrange financing online, but vehicle delivery remains outside Amazon’s direct control and occurs through the automotive retail network.

• Hertz benefits when it sells former rental vehicles directly to consumers at retail prices instead of accepting lower wholesale prices through auctions. Hertz operates a fleet of about 560,000 vehicles and resells a couple hundred thousand annually in the United States through its website, physical locations, Carvana, listing sites, and rent-to-buy programs.

• Dealers face two connected risks: direct competition for retail customers and reduced access to auction or direct-purchase inventory. The immediate numerical effect may be negligible when Hertz vehicles are distributed across dealerships, but expansion to other rental fleets could intensify an existing battle for profitable, relatively young used vehicles and associated customer relationships.