A rental car can cost modest money one week and several times as much the next in the same city. The volatility comes from how fleets are planned and repositioned.
Fleet size is decided long before demand is known
Rental companies buy or lease vehicles months ahead under agreements with manufacturers, and the size of the national fleet is essentially fixed once those commitments are made.
Within that total, vehicles are allocated to locations based on forecast demand, so a city's supply for a given week is set well before anyone knows what demand will be.
When a forecast is wrong, there is no quick correction. The company cannot conjure vehicles, and it cannot easily park unwanted ones without incurring cost.
Moving cars between cities is expensive
Repositioning requires either paying a driver, hiring transport, or offering one-way rentals at a discount to let customers do the moving.
Each option costs real money per vehicle, and the cost is incurred whether or not the vehicle earns anything on arrival.
The result is that supply responds slowly to a demand shift, and prices absorb the imbalance in the meantime because they are the only variable that adjusts instantly.
Utilization is the number that drives pricing
A rental fleet carries its costs whether vehicles are rented or sitting, so the operating goal is keeping as much of it on the road as possible.
When forecast utilization for a period is low, rates fall quickly to fill vehicles, because revenue from a discounted rental exceeds nothing at all.
When utilization approaches full, rates rise steeply, since the last vehicles available are worth whatever the remaining demand will pay.
Resale value ties fleets to the used car market
Vehicles are held for a period and then sold, and a large share of the economics depends on what they fetch at resale.
When used vehicle values are strong, companies can run smaller fleets profitably by selling more aggressively, which tightens rental supply.
When resale values fall, holding vehicles longer becomes attractive, supply loosens and rates soften, which is why rental pricing tracks the used market with a lag.
Booking flexibility matters more than in other travel
Most rental reservations carry no prepayment and no cancellation penalty, which makes a booking a low-cost option rather than a commitment.
Because supply and price move so sharply, an existing reservation can be rebooked if rates fall, and holding one costs nothing if they rise.
That asymmetry is unusual within travel, and it exists precisely because the rental business needs bookings on the books early enough to plan the fleet.