US auto rentals are rising again, and the trend has already caught the attention of car lenders, as the number of car loans in the US has increased by nearly 1,000% over the past year, according to a new report by research firm FourFourtwo.
The latest data, from a new survey of 5,000 auto lending professionals, shows that car rentals were up 6% in the past six months compared to the same period last year, driven by a robust economy and rising interest rates.
The rental market has also expanded, with the number in the U.S. of auto rental loans rose by 1.6% to $7.2 billion, while auto loans for other types of vehicles grew by 3.2%.
While auto rentals have risen in popularity over the years, the recent boom has come at a critical time, as many borrowers are struggling to repay their loans, and as the economy continues to contract.
According to the FourFour2 survey, nearly 40% of respondents say they have taken out a car loan, with many of those borrowers having been unable to repay the loan for some time.
This is largely because they cannot afford to buy a new car or a car repair.
“The auto rental industry has been on a tear in recent years, and it’s a great time to be in it, because we’re in a great place for consumers,” said FourFour52 founder and chief economist David Johnson.
The new study, conducted by FiveThirtyEight and the Pew Research Center, shows a broad shift in auto lending in the United States over the last year.
While the number increased by almost 1,200% in 2014, the pace of growth slowed to about 500% in 2016.
In other words, the number rose by a mere 1.4% in a year.
While car rentals are a relatively new phenomenon, Johnson says there’s a reason for the surge in demand.
“Renters are a growing demographic, and so the auto rental market is very sensitive to the changing economic conditions.
We think the car rental industry is very well positioned to take advantage of that,” Johnson said.
A study released by the US Department of Housing and Urban Development last year found that rental car markets have become “the hottest consumer-driven industries in the country.”
The study also found that auto rental companies are growing at a much faster rate than traditional lenders.
While Johnson says that rental cars are a very lucrative business, he points out that the rental industry can also be risky.
“Rentals aren’t regulated in the same way as traditional businesses.
The car industry has its own set of rules that govern how you can operate and whether you can do things like open shop, so it can be very risky to operate,” he said.
For instance, many rental car companies are owned by non-profits, and their loans are often secured by a loan from a corporation.
Johnson says this can create a very dangerous environment for the consumer who might be saddled with a huge bill.
“It’s not that there are no consequences for people who fall behind on their car payments, but it’s not something that can be controlled by a bank,” he explained.
While the rental car market has been growing, the average car rental loan is only $3,500, and many lenders have been raising their rates to keep up with the rising demand.
As a result, a significant portion of new car loans are being taken out by car rental companies, which can mean that car loans for new cars may not get back on track.
In a press release on Friday, FourFour62 warned that car rental rates are likely to continue to increase in coming years, due to rising interest and inflation.
“Our analysis shows that the auto industry is set to continue growing at an accelerating pace, with auto rental rates projected to rise as much as 25% over this period,” the company wrote.