CAR Car Rental · Travel · Fleet operator · Cyclical · Thesis updated August 5, 2026

Better fleet costs drive margin resilience

Q2 2026 vehicle depreciation and lease charges fell to 19.4% of revenue, down from 20.9% a year ago.
Americas Adjusted EBITDA grew 8% to $237 million despite a 2% volume decline.
Consolidated Adjusted EBITDA reached a healthy $286 million for the second quarter.
The International segment saw EBITDA contract 11% to $73 million on higher operating costs.
Management continues to focus on fleet rotation and gaining better pricing on used car sales.

01 Running thesis

Proving the fleet cost strategy

Avis Budget is demonstrating structural margin resilience. The Q2 2026 results strongly validated the bull case, as management delivered on its projection that fleet depreciation would turn into a tailwind. Depreciation and lease charges dropped to 19.4% of revenue, driven by higher gains on vehicle sales.

This operating leverage allowed the core Americas segment to grow Adjusted EBITDA by 8% despite a 2% drop in rental volumes. The company is proving it can manage its fleet to yield pricing power while lowering per-unit costs at the same time.

The bear case shifts from basic unprofitability to volume risk and international execution. Global rental volumes fell slightly in the quarter, and the International segment saw EBITDA contract by 11% due to higher operating costs. If the consumer weakens, Avis will rely heavily on used car market stability to maintain margins.

Finn's view is balanced. Execution on fleet rotation is clear, but overall financial health remains weak. The next phase requires maintaining pricing power and resolving the cost pressure in the International segment.

Jul 2026▲Q2 2026 results validated the bull case, with fleet depreciation falling and Americas Adjusted EBITDA up 8%. Focus now shifts to soft volumes and lower international margins.

Apr 2026▲Q1 2026 showed better operating signals, with revenue per day up 3% and vehicle utilization at a record 70.1%. The loss was still wider, so the next test is whether lower depreciation turns those signals into EBITDA.

Feb 2026→The 2025 10-K confirmed lower per-unit fleet costs helped the year, especially outside the Americas. It also added a $518 million EV-related impairment and made the Waymo Dallas launch a clearer 2026 catalyst.

Oct 2025▲Q3 2025 filings showed higher Adjusted EBITDA in both Americas and International, mainly from lower per-unit fleet costs. That raised confidence that the fleet rotation was working.

Jul 2025▲Q2 2025 results gave stronger proof that lower fleet costs were helping EBITDA. Management also introduced Avis First and the Waymo partnership, adding longer-term options.

Jul 2025▼The same Q2 call added near-term supply concerns, including OEM delivery delays and a recall affecting 4% of the Americas fleet. Those issues could limit peak-season fleet availability.

May 2025▲Q1 2025 management commentary said per-unit fleet costs came in better than expected and that no further charges were expected from that fleet strategy shift. That strengthened the cost-recovery story at the time.

02 Business model

Rent cars, manage the resale risk

Avis Budget makes most of its money by renting vehicles to leisure and business customers through the Avis and Budget brands. Customers pay daily rental fees. Many also buy add-ons such as damage waivers, liability coverage, and convenience services.

The hard part is the fleet. Avis buys or leases vehicles, rents them out, then sells or rotates them. Profit depends on the rental price, how often each car is used, interest costs on vehicle financing, and the resale value of the car when Avis is done with it.

The company recently shifted strategy to aggressively accelerate the rotation of its fleet, disposing of higher-cost vehicles. The goal is to normalize per-unit fleet costs. The company is also testing ways to stretch the model with Avis First, a premium service, and a partnership with Waymo for autonomous vehicle fleet management.

03 Product portfolio

Brands, add-ons, and new bets

Cash cow

Avis

Avis is the main brand for higher-service car rental customers, including business and premium leisure travelers. Its pricing power matters because revenue per day is one of the key profit levers.

Cash cow

Budget

Budget serves more value-focused renters. It gives the company scale across airports, local markets, and price-sensitive travel demand.

Steady

Ancillary products

Damage waivers, supplemental liability insurance, and other add-ons increase revenue per rental. These products can help margins when rental pricing is under pressure.

Growth engine

Avis First

Avis First is a premium, concierge-style service with newer, lower-mileage vehicles and curb-side service. Management planned availability in over 50 markets by the end of 2025.

Steady

Customer app and direct bookings

The company launched a new customer app in October 2024 to increase direct reservations. Direct bookings can reduce dependence on third-party channels.

Option

Waymo fleet operations

Avis plans to support Waymo's autonomous ride-hailing service in Dallas, with an initial public launch planned for 2026. The opportunity could be large, but the financial terms are not yet clear.

04 Business segments

Mostly Americas revenue

Americas76%modest

International24%flat

Segment mix is based on Q2 2026 revenue. The Americas segment generated $2.29 billion, and the International segment generated $710 million. The Americas segment drives the bulk of the company's profit and fleet cost exposure.

05 Risk factors

What could break the turn

Used vehicle market volatility

High impact · Medium odds

Avis depends heavily on selling vehicles at decent prices after renting them. The Q2 2026 margin improvement was driven partly by higher gains on vehicle sales. If used car values weaken, those gains could disappear quickly.

We watchWatch gains or losses on vehicle sales and per-unit fleet costs in quarterly filings.

International cost pressures

Medium impact · High odds

In Q2 2026, the International segment saw EBITDA contract 11% despite flat revenue, driven by increased operating and administrative expenses. If these cost increases are structural, they will offset gains in the Americas.

We watchMonitor International segment operating expenses and Adjusted EBITDA margins.

Volume declines and consumer weakness

High impact · Medium odds

Global rental volumes were down 2% year-over-year in Q2 2026. If the consumer weakens further, price elasticity may cap revenue per day gains, forcing the company to rely entirely on cost cuts.

We watchTrack total rental volume growth across segments in the back half of the year.

Fleet supply disruptions

Medium impact · Medium odds

Avis previously faced a massive recall affecting 4% of the Americas fleet, preventing the sale of high-revenue vans during peak season. Lingering recall effects or OEM supply chain delays could constrain availability.

We watchLook for updates on recall resolution and unavailable vehicles in the Q3 peak season.

New bets lack profit details

Low impact · Medium odds

Avis First and the Waymo Dallas partnership could expand the business. But investors still do not know the target mix, margins, or contract economics. If these projects add complexity without profit, the upside case weakens.

We watchWatch for Avis First margin data and Waymo revenue or EBITDA contribution after launch.

06 Quick answers

In one breath

How does Avis Budget make money?

Avis Budget rents vehicles through Avis and Budget and sells add-on products like damage waivers. It also tries to profit from managing the fleet well, which means buying, using, and selling vehicles at the right time.

Why is fleet depreciation so important for CAR stock?

Depreciation is the loss in value of a vehicle while Avis owns or leases it. When that cost rises, rental profits can disappear fast, even if demand is decent.

What changed in Q2 2026?

Fleet depreciation dropped to 19.4% of revenue, and the Americas segment grew EBITDA by 8%. This proved the company's fleet rotation strategy could work, even though total rental volumes fell 2%.

What is the Waymo partnership?

Avis plans to provide fleet operations for Waymo's autonomous ride-hailing service in Dallas. The initial public launch is planned for late 2026, but the revenue contribution is not yet clear.