Good morning and welcome to Localiza's webinar. The third quarter results demonstrate the consistency of our execution. We combine growth, commercial excellence, efficiency gains, and disciplined capital allocation, which translated into double-digit growth in net revenue, EBIT, and net income. This performance contributed to the continued recovery of the company's return, with a ROIC spread of 6.4 percentage points in the first nine months of 2026. We ended the third quarter of 2026 with consolidated net revenue of BRL 12.3 billion, EBIT of BRL 2.5 billion, and net income of BRL 1 billion and 125 million, up 29.1% compared to the third quarter of last year, adjusted for the effects of the Green IPI on industrialized product production. Our financial discipline is also reflected in the strength of our balance sheet and comfortable leverage ratios.
As part of our strategy, we seek to protect the ROIC spread price into Fleet Rental contracts by hedging the interest rate curve used to price rental for the term of the allocated capital. Accordingly, of our BRL 33.1 billion in net debt, approximately BRL 24.7 billion is hedged through swap instruments at an average fixed rate of 12.6% plus the funding spread. The remaining BRL 8.3 billion is exposed to changes in the CDI rate.
During periods of greater volatility, the strategy provides greater predictability of returns and represents an important relative advantage. In the automotive industry, intensifying competition and promotional activities with entry of new brands, models, and technologies, combined with the still restricted credit conditions, continue to put pressure on vehicle prices and fleet residual values. In a period marked by higher depreciation, elevated interest rates, and lower activity levels, the quality of execution becomes even more important.
In Fleet Rental, our pricing policies already leave us ahead of the depreciation curve, despite the recent decline in car prices, creating some level of cushion to reach our target return. In Rent a Car, the recent increases in interest rates expectation, combined with the higher depreciation, will require price adjustments going forward. Our focus will remain on enhancing customer experience, cost efficiency, productivity gains, and above all, rigor in capital allocation, directing resources toward opportunities, adequate, and sustainable returns. In light of this context, we continue to act on several fronts, maintaining conservative assumptions for residual values in Fleet Rental, continuing to restore Car Rental rates, expanding sale capacity and commercial excellence in Seminovos, strengthening commercial relationships with new market entrants, seeking to increase the share of electrified vehicles in our fleet under competitive commercial terms.
We ended the quarter confident in the company's ability to capture market opportunities and maintain a trajectory of solid results and adequate returns, even amid an uncertain macroeconomic backdrop and still elevated levels of depreciation and interest rates. We thank our customers, shareholders, partners, and employees for their trust. For details on the results, I'll hand it over to our Investor Relations Director, Nora.
Thank you, Rodrigo, and good morning, everyone. On page three, we will begin with the Car Rental division in Brazil. In Q3 2026, net revenue reached BRL 3 billion, an increase of 16.5% compared to Q3 2025. This performance was driven by a strong 10.6% growth in rental days and an increase in the average daily rate. Daily rentals to individuals benefited from greater fleet availability to capture demand during July's school break, as well as public holidays, while the corporate rentals maintained a growth trajectory in both volumes and price, also supported by the demand associated with the election period. On page four, we present the average daily rate of BRL 157.9, up 5.2% year-over-year, and the utilization rate of 82.4%, the highest level of the past five years, and an increase of 1.6 percentage points on a year-over-year basis.
This combination reinforces our commercial excellence and the efficient management of pricing, fleet mix, and productivity. Moving on to page five, we present the evolution of Fleet Rental. Net revenue totaled BRL 2.4 billion in Q3 2026, an increase of 6.8% compared to Q3 2025, supported by growth of approximately 10% in the target light vehicle and car subscription segments, partially offset by the lower revenue from our reduced exposure to severe use contracts. Growth in the targeted segments mainly reflects strong contract origination, supported by the company's commercial strength and excellence, as well as strong value proposition of our solutions. In addition, during the quarter, we continued to increase the rental rate to reflect the prolonged higher interest rates and depreciation environment.
On page six, the average daily rental rate reached BRL 110.6, an increase of 6.3% year-over-year, and the utilization rate reached 96.9%, up 2 percentage points, and reflecting greater productivity and operational efficiency, as well as the lower exposure to severe use contracts. Moving to page seven, we present the evolution of Seminovos. During the quarter, we sold 87,850 cars in Brazil, an increase of 16.4% year-over-year, maintaining a pace close to 90,000 cars per quarter. Net revenue in Brazil totaled BRL 6.8 billion, up 16.5% compared to Q3 2025. The sales pace support the optimization of the Car Rental division's fleet life cycle and enhances the company's flexibility to adjust its vehicle mix. On page eight, we present car purchase and sales volumes. Following strong fleet additions in the second quarter this year, we reduced purchase volumes in Q3.
We purchased 89,811 cars and sold 87,850 cars, adding 1.9 thousand cars to the fleet, which resulted in a net investment of BRL 1.8 billion in the quarter. The average age of the fleet sold by the Car Rental division declined to 18.8 months from 21.3 months in the third quarter of last year, while the average age of the operating fleet ended the period at 7.8 months, a reduction of 27.1% year-over-year, contributing to the efficiency gains and lower maintenance and preparation costs per car. On page nine, we show average purchase and sale prices. In the Car Rental, the last 12 months average purchase price was BRL 86.7 thousand, while the average selling price reached BRL 74.6 thousand, resulting in a replacement CapEx of BRL 12.1 thousand per car.
In Fleet Rental, the average purchase price of BRL 100.3 thousand, while the average selling price reached BRL 81.1 thousand, resulting in a renewal CapEx of BRL 19 thousand per car. Page 10, we show the end of period fleet. We ended this quarter with 672,000 cars in Brazil, an increase of 6.3% compared to Q3 2025, expanding fleet availability for rentals. On page 11, we present consolidated net revenue, including Mexico, which totaled BRL 12.3 billion, up 14.4% year over year. Rental revenue increased 12.5% to BRL 5.5 billion, while consolidated Seminovos revenue reached BRL 6.8 billion, up 16%. Page 12, we present consolidated EBITDA of BRL 4 billion, an increase of 13.7% compared to the adjusted third quarter of 2025. In the Car Rental division, the EBITDA margin remained above 67%.
Year over year, rental revenues increased BRL 429 million, reflecting the higher average daily rate and number of rental days, while costs and expenses increased by BRL 156 million, explained by higher personnel and technology expenditures, as well as advertising costs, partially offset by lower maintenance and preparation costs per car. In Fleet Rental, EBITDA margin reached 78.7% in the quarter, representing an increase of 5.3 percentage points compared to the adjusted EBITDA margin of the third quarter 2025. The quarter's margin was positively impacted by increasing the average daily rate, greater maintenance and cost efficiency, lower allowance for doubtful accounts, improved fleet utilization, but also higher level of tax credits. As a result, Fleet Rental net revenue increased BRL 155 million, while costs and expenses declined BRL 88 million.
Seminovos posted a margin of 1.6% in Brazil, reflecting the more challenging price environment for new and consequently used vehicles, as well as lower SG&A dilution. On page 13, we present the evolution of annualized average depreciation per car. Throughout the quarter, new and used vehicle prices were impacted by new launches, model year changes, and a competitive environment with more intensity promotional activity. Against this backdrop, we continued to adjust vehicle depreciation rates, which totaled BRL 8,757 in the Rent a Car division and BRL 9,231 in the Fleet Rental division. The sharper sequential increase in the Rent a Car depreciation reflects the shorter asset cycle compared with the Fleet Rental. We observed spreads between purchase and sale price between 7%-9% over a 15-month cycle, compared with a spread of 18%-20% over a 32-month cycle. In response to this dynamic, we will continue to advance the rental repricing process.
Moving on to page 14, consolidated EBIT reached BRL 2.5 billion, up 11.3% compared to adjusted third quarter 2025. Car Rental EBIT margin was 42%, while Fleet Rental reported 53.7%, an increase of 4.6 percentage points year over year. The consolidated rental margin, including Mexico, ended the quarter at 45.7%. On page 15, we present net income of BRL 1 billion, BRL 125 million, an increase of 29.1% compared to the adjusted net income of Q3 2025. The BRL 254 million increase in the net income of the period reflects the increase of BRL 486 million in EBITDA and lower income tax rate, partially offset by higher depreciation and net financial expenses. To present free cash flow, debt, and ROIC spread, I will hand it back over to Rodrigo.
Thank you, Nora. On page 16, we present free cash flow. In the nine months of 2026, the BRL 9.7 billion in cash generated by rental activities was consumed by negative net fleet CapEx of BRL 7 billion due to the addition of approximately 16,000 cars to the fleet and investments of BRL 318 million in other fixed assets, partially offset by BRL 683 million increase in accounts payables to vehicle suppliers. As a result, cash generation before interest and other items totaled BRL 3 billion. On page 17, we present the change in net debt, which ended September at BRL 33 billion, an increase of 6.5% compared to the year-end of 2025 debt. On page 18, we show the debt profile. Throughout the year, we continue to consistently pursue active debt management, extending duration, and reducing funding cost spreads.
We ended the quarter with BRL 11.4 billion in cash, sufficient to cover approximately 109% of the maturities through 2028. On page 19, we present the composition of the net debt. 75% of the company's net debt is hedged through swap instruments, with duration aligned with that of Fleet Rental contracts. The hedge portion of BRL 24.7 billion carries an average rate of 12.6% per year, plus the funding spread. Only BRL 8.3 billion, or 25% of net debt, is exposed to interest rate fluctuations. This strategy demonstrates the company's prudent management and helps mitigate interest rate volatility while preserving the profitability of Fleet Rental contracts. On page 20, we present the improvement in all leverage ratios year over year.
The net-to-fleet value ratio declined from 60%- 56% in the third quarter of 2026, while the net debt-to-EBITDA ratio ended at 2.12x , and the financial expense coverage ratio increased to 3.33 x. Finally, on page 21, we presented annualized ROIC for the first nine months of the year at 16.3%, with a spread of 6.4 percentage points over the after-tax cost of debt. The improvement in company's key performance indicator reinforces the consistent trajectory of restoring returns, even amid elevated interest rates and depreciation. We are now available for your questions.
We remind you, for the Q&A, we recommend signaling your interest in participating via the Q&A icon at the bottom of your screen, indicating your name, institution, and language. When called upon, a prompt will appear on your screen to activate your microphone. To submit written questions, use the Q&A icon at the bottom of your screen and enter your name and institution before your question. Our first live question is from Lucas Marquiori from BTG Pactual. We will open the audio so you can ask your question. Please, Lucas, you go ahead.
Thanks. Thanks, guys. I have two questions. First one is on, how large do you guys think is the
Lucas, we lost your audio. Are you still there?
Yeah, can you hear me?
Yeah, now you're back.
Yeah, I rejoined as a panelist, sorry. First question.
We lost you again.
Please, Lucas, go ahead.
There you go. I think it is okay now, right?
Yep.
Yes.
Sorry, sorry, the confusion. First question is on the pricing gap on Rent a Car. How much do you guys think is necessary for the price increase to offset the higher depreciation and also some sort of higher cost of capital next year as well, and what is the pricing strategy there? I am assuming there are different layers of price increases that needs to be tackled in different divisions on Rent a Car. Just some comments on pricing strategy and the price gap that needs to be tackled on next year. Second question, guys, just to confirm a message that you guys left on the release and also confirmed here at the call, that you intend on strengthening the partnership with some new coming OEMs, especially for electrified electric vehicles.
Is that a difference from the hybrid-prone strategy that we used to see before, or you guys are now kind of willing to go for plug-in electrified vehicles a little bit more and into a larger share of your fleet right now going forward? Just to confirm this change, please. Thank you.
Thank you very much, Lucas. Regarding the first question, the price increase, just to remember, we have been doing this since 2021, right? Since 2021, we almost increased 100%, 97% to be more precise, our rates in Rent a Car. So that shows you how the company can actually pass through prices as necessary, okay? And that is the reason we can do that, is that first of all, total cost of ownership, which is by far our biggest competitor in most of the segments in Rent a Car and in Fleet Rental, also increases in terms of the cost, right? So that is why this is one of the criterias that we use. The second is that all our competitors are subject to the same scenario.
In the situation that we are facing right now, okay, we have a kind of a benign competitive environment here that allow us to keep continuing passing through these prices. Having said that, of course, with the increase of the expectation of interest rates and the depreciation, we need to continue to do that in Rent a Car specifically, right? So we are estimating a high single-digit requirement in terms of price increase going forward to offset some of these parameters. In terms of the second question about the partnerships with electric vehicles, first, when you look at our criteria to purchase cars, we look it from a return perspective, right? Irregardless if it is a ICE vehicle, a hybrid, or a full electric vehicle.
Having said that, as the Chinese, both full electric and hybrid, increase their participation in the overall market, it is natural that their participation in our portfolio increases as well. But the actual percentage of fully electric hybrids and other entrants here will depend on the conditions that we can get from them. I also would like to remind that we closed, right, its public agreement with BYD for a two-year purchase agreement here that we are already putting that in place.
Just to build on what Rodrigo just said, Lucas, you have to remember that next year, the import duty for the kits will increase and be fully reinstated to 35%, and we, at the same time, should see the local production gaining traction. We become an important partner, which is why we help them to dilute their fixed costs, so we expect to increase in the volume of purchase on those cars. We didn't change the strategy related to hybrid or electric vehicles. It's firstly hybrids, but we are willing to add more electrics, especially in the ride-hailing segment, as well as subscription, where we see the highest demand for this kind of product. But I think the key message here is we find a positive trend towards adding electrified cars to our fleet.
Super. Thank you, guys.
The next question is from André Ferreira. We will open the audio so you can ask your question. Please, André, go ahead.
Hi, good morning. Thanks for taking my question, and congrats on the results. I wanted to cover two topics here. First, on depreciation. Specifically in the Rent a Car, it rose 6% quarter-over-quarter, right, on a per-car basis, which is double the first half base. My question, I guess, is, does the current level fully reflect today's market conditions and your forward expectations, or should we expect further step-ups? Also, looking into 2027, with a potential economic slowdown, all amid aggressive competition among automakers, how do you see this spilling over into used cars, and what would that imply for depreciation rates next year? The second question on the effective tax rates of 11%, beyond interest on equity, what drove the BRL 80 million additional benefits? Does it relate to the Locamerica court decision or something else?
What can we expect in a recurring base? Thanks.
Thank you, André. Regarding the depreciation scenario, I'll take just a step back here, that we have been preparing ourselves for exactly this scenario, right? We're executing with excellence here. I'll give you an example. In Fleet Rental, we are pricing this deflationary scenario for over two years now, right? We also hedged our debt. Our Seminovos capacity is increasing. We give us a lever to optimize the car life cycle, which is a tool for us to reduce the impacts of depreciation as well, right? So on. Despite the fact that we are increasing the provisions for depreciation, we can see that the results are double digits in revenue growth, more than BRL 1 billion in profit, 24% ROE, and ROIC spread increasing, right? What we see in Rent a Car, so nothing that is happening is a surprise. So, that's what I would like to start.
We have two different scenarios here. First, for Fleet Rental. In Fleet Rental, I think we see a much more stable kind of environment, not only because we're already pricing that, but the 36-month cycle actually help us to attenuate these fluctuations. In Rent a Car, as we disclosed, we are seeing now a spread between the cars that we buy and the cars that we sell in a life cycle of 15 months between 7% and 9%. So in that range is probably where this depreciation that we're looking right now will sit, right? So if you go to the high part of this range, so the Rent a Car depreciation at a certain point can surpass the BRL 10,000 per year mark. In the short term here, we are in BRL 8,750, give or take.
So this will continue to increase between this range of 7% and 9% in spread of purchase, okay? And of course, that we are monitoring the market constantly here. If we see something that changes, we are going to tell the market as we see. It is also important to highlight our ability to pass through these prices as the scenario evolves, right? This quarter is a great example. We were able to increase volumes by 11% and 5% in prices, okay? And we are already growing quarter-over-quarter faster than any competitor. So this quarter, we grew 15,000 cars in Rent a Car, and no competitor was able to grow quarter-over-quarter, anything like that. Moving to the tax rates. We have two aspects here. We have a one-off impact associated with the recognition of deferred taxes, right?
And you are going to see that we had an action that was started by Locamerica a few years ago, and that was ruled positive here, that we have a positive impact in the PIS/COFINS and income taxes as well. If you want to complement something, Nora.
No, I think, André Ferreira, just to add up the fact that on a pre-reform, right, tax reform will be implemented next year, so we are seeking for all tax efficiencies we can find, okay? So, we should maintain a level of fiscal things sustained more or less at the same pace, probably until the end of the year.
All right, very clear. Thank you. Have a good.
The next question is from Guilherme Mendes. We will open the audio so you can ask your question. Please, Guilherme, go ahead.
Hey, Rodrigo and Nora, thanks for taking my question. Two questions. The first is a follow-up on the, Rodrigo mentioned the high single-digit increase, price increase to offset the higher depreciation and higher interest rates. Just wanted to confirm that you're talking about 2027, and if this includes any kind of volume increase or it's a price adjustment alone. The second thing is, think about this more challenging scenario for Brazil into 2027. Does it change your strategy in Mexico? Does it make sense to accelerate the business there, or we should continue to see a gradual ramp-up in Mexico? Thank you.
Okay, thank you. Look, our focus is really to continue to reestablish our ROIC spread. The price increase that we need is high single digits here. The volume will be a consequence of the market, but our focus is really the return on invested capital. We believe, as we have been showing consistently, that despite the fact that we are passing through prices here, the volume continues to grow. Most likely going forward, it will grow more modestly, or maybe it will keep constant as it is. But our priority will be really to restore and keep the high ROIC spread and high return on invested capital in a scenario in which probably you have credit restrictions, higher interest rates, and higher depreciation. When you look to Fleet Rental, then we see growth opportunities, okay?
We see actually a counter-cycle effect here in Fleet Rental, because as companies are constraining credits, they tend to outsource more their fleet. Selling their fleet is a means to generate cash, and when the cost of credit goes up, they tend to use our balance sheet more than the balance sheet of the banks. So, while in Rent a Car we see more a price increase with volumes probably growing at a more modest pace, in Fleet Rental, we see opportunities to continue to grow volume as we evolve. In terms of Mexico, I think we have a long-term strategy in Mexico here. This year, the main priority was to confirm our ability into monthly rentals to corporate clients here, which has been successful this year.
It is, of course, every time that we're starting in a new country, it's a tough environment, it is difficult, but the plans continue as originally developed.
Very clear. Thanks, Rodrigo. If I may, a quick follow-up on this ROIC spread focus. When you say the focus is to keep optimizing the ROIC spread with that price increase, you're saying that in 2027, for you to keep the current price ROIC spread, you need to increase by high single digits, or the high single digits increase would lead to even higher ROIC spread?
No, it is to keep the current ROIC spread, okay? Just increase in interest rate for every 100 basis points increase in interest rate, you need, give or take, 2% increase in tariffs to keep the same level of ROIC spread, okay? On top of that, we will continue to see, right, the depreciation dynamics evolving here. That's why we estimate that we need a high single-digit price pass-through to keep the levels of profitability that we're experiencing right now.
Very clear. Thank you.
Yeah, and one quick comment here. I think it is really important to mention that I think we are very well positioned for this tough environment, right? We have a very strong balance sheet. We have the fleet cycle in the Rent a Car at the right place, renewing the fleet, and we have 75% of our debt hedged, right? We believe we can maneuver here and take advantage of opportunities that market might present. We see some of our competitors reducing growth or even shrinking the fleet, and Localiza is well-positioned to a tougher macro scenario.
Fair enough. Thanks, Nora.
The next question is from Filipe Nielsen. We will open the audio so you can ask your question. Please, Filipe, go ahead.
Hey, thanks for taking my question. I have two on my side. The first one is regarding severe use vehicles. You mentioned in the release that you've been shifting the Fleet Rental segment from the severe use into the car subscription, which in my perception looks positive for ROIC spread. I just wanted to understand if there's any more adjustments there, if we still need to. We're still ongoing with the reduction, or if it's just like you're done with the reduction and now it's only like carry on from the previous optimization. The second point, just to follow up on the ROIC spread, I understood the strategy focusing on that. Just wanted to understand, as you reach the desired level in 2027 or even earlier.
Should we expect higher growth, as you mentioned, in the Fleet Rental, or maybe higher return of capital to shareholders in any sense? How do you see capital allocation in this different environment? Thank you.
Okay. Thank you, Filipe. In terms of the severe use in Fleet Rental, I think we have done like 90%, 95% of the work here is done. The amount of cars that is left actually have a return that is only slightly below our average, but this process will continue, but it will be a more gradual process. This actually help us in terms of growth going forward, because when you look at 2026, 2025, we were shrinking aggressively that fleet. Going forward, we are not going to have an effect so strong. So that help us to see an acceleration maybe of growth in Fleet Rental with the opportunities that we described. Okay? In terms of the ROIC spread, of course, once we reach the target that we want, our priority is always to allocate more capital in that level of return.
When you are delivering like the mid-20s in ROE or ROIC spread of six to eight here, every time that you have an opportunity to allocate more capital, it generates a lot of value. If we do not have more opportunity to allocate capital with a very high return, then we can think about our capital structure in a different way, if we are going to return more cash to shareholders, if we are going to reduce our leverage. But once again, as we have priorities to allocate capital, have competitive returns, we will do so.
Great. This is clear. Thank you.
The next question is from Rogério Araújo. We will open the audio so you can ask your question. Please, Rogério, go ahead.
Hello, Rodrigo, Nora. Thanks a lot for the opportunity. I have just one question. I am actually struggling to understand why the purchase to sale spread has deteriorated much more in car rental versus the Fleet Rental business comparing to pre-COVID levels. Could you please help me understand what are the factors here, if that is mix, or maybe new electrified models are already affecting the one-year-old used car market, but has not reached the two, three years old market yet? I know one should affect the other, right? But I am just trying to understand, and I really cannot. Thank you very much.
Okay, Rogério. Thank you very much. There are a few reasons here, right? There is a mix reason in Fleet Rental that is helping Fleet Rental, is that the increased participation of car subscription. The car subscription car depreciates much less than the average car because it is a very, very light use vehicle. So the participation of retail of that car subscription car is much higher than the Fleet Rental and the Rent a Car itself. So in terms of mix, there is a very positive trend in Fleet Rental in that regards, right? Another thing in terms of mix is that we are reducing the severe use vehicle, right? We had 50,000-60,000 severe use vehicle. These vehicles were depreciating close to BRL 12,000-BRL 15,000 per year. As you reduce the participation of those cars, you also have a mix effect.
On top of that, the 36-month cycle compared to the 15-18-month cycle helps you to attenuate the fluctuations when you have a short-term reduction of the residual value. Okay? So, the combination of these three factors explain why the depreciation of Rent a Car has been affected in a more steep way than Fleet Rental. There is maybe a fourth that it is not yet consolidated, is that you can say that the depreciation of the first year changed a little bit more than the depreciation of the second and third year. But that is still not 100% proven here. There is maybe an effect, of course, that if new car prices go down, it is expected that it will affect more a one-year-old car than a three or four or five-year-old car.
But in the case of particularly in Localiza, these three factors that I described in terms of the increase of participation of car subscription, the reduction of participation of severe use, and the fact that you have a longer cycle to attenuate short-term fluctuations explains probably 90%-95% of the reason why Rent a Car has been affected more than Fleet Rental.
That makes a lot of sense, Rodrigo. Thanks very much.
My pleasure, Rogério.
The next question is from Jens Spiess. We will open the audio so you can ask your question. Please, Jens, go ahead.
Yes, hello. Congrats on the results. I have two questions. The first one is a follow-up on the comment on the Chinese OEM purchases. I just want to understand the purchasing terms, how different they are from the traditional OEMs. I know you probably cannot give many details, but just get a sense of how much divergence there is between both, and if Chinese OEMs purchasing terms are gradually converging towards those of the traditional OEMs. Secondly, on depreciation, you mentioned 7%-9% of annual depreciation. Does that mean that if on a monthly basis we start observing monthly depreciation of, I don't know, around 0.6 to 0.75 going forward, that it shouldn't be a worry considering that you are already reacting to it from a pricing perspective? Is this the correct way of seeing it?
Jens, let me talk about OEMs in general. First of all, one thing that probably we didn't talk during this call is that we're much focused on the downward pressures of prices, but there are some inflationary pressures that may happen in the beginning of next year. That's not the scenario that we're preparing ourselves to, but that can be a silver lining here. As the dollar exchange rate increased, that will make more expensive for foreigners players to bring cars here. On top of that, you have a sharp increase in costs in freight, and the import taxes will also rise. I also see a mild reduction in terms of supply here of the local players. If you put all together, you can see, it's not your question, I'm just talking in general here, you can also see some inflationary pressures.
Once again, they may attenuate what we see in terms of competitive dynamics. That's not the scenario that we're preparing ourselves to, but there can be inflationary pressures that can change a little bit these trends. In terms of OEMs here, the fact that most of the Chinese players still do not produce in Brazil, do not still face the fixed cost of Brazil, they tend to have conditions to purchase that is not as good as the local players, okay? Once they move to Brazil, they start to assemble here in Brazil, they're faced with the Brazilian conditions to produce, we think that the condition difference will narrow significantly. Today, there is a difference. We have competitive conditions both with foreign players and local players here, but there is still a difference between them, okay? In terms of your second question, let me just clarify.
What we said is that we don't see a 7%-9% depreciation. We see a 7%-9% spread between the car that we buy and the car that we sell, okay? To get to the actual depreciation, you would need, of course, the price of the car that you buy and the cost of Seminovos, the margin of Seminovos, and the period in that case was 15 months, okay? Just to clarify that. What I said is that depending how you do that math, you're going to see a depreciation between, as I said, BRL 8,500 and BRL 10,000, okay? So that's what I say. If you believe that the conditions will tend to the higher end of the spread here between 7% and 9%, most likely we're going to see the depreciation of rental cars surpassing the BRL 10,000 mark per year.
Okay, perfect. Thanks for clarifying that. That's clear now. Let's hope inflation comes back next year. That would be definitely a very unexpected and good surprise. Thank you.
Thank you, Jens.
The next question is from Pedro Bruno. We will open the audio so you can ask your question. Please, Pedro, go ahead.
Thank you very much for the time. Just a quick question on demand still, specifically in the quarter you mentioned in the release, the election potentially positively impacting, especially corporate demand in Rent a Car. If you could help us run us through what is the exact demand source, and if you can, I do not know if you have any direction of how to measure it, and if in the rationale of the source of this demand, the election period itself, so the beginning of the fourth quarter, also should have some impact from it. Thank you very much.
Thank you, Pedro, for the question. Let me take this one. I think RAC volumes were strong not only because of the election period, but the election contributes to monthly rentals and rentals for the parties for the campaigning period. We see activity on that front mostly in September, but we can get some residuals in October as well. I think the strong growth of 10% year-over-year, above 10% year-over-year in Rent a Car is also deriving from higher fleet availability. You remember that in the second quarter, we added plenty of cars to cover for the July vacation period. We were able to take advantage of the volume while we pass through prices. You see not only the 10% plus volume growth as well as an acceleration in the pass-through of prices of 5.5% on a year-over-year basis.
Heading to Q4, we see, of course, less of the impact of the elections of October, as I mentioned, but we enter the peak season of December, again, with a good level of fleet. As Rodrigo mentioned a couple of times in the call, we will prioritize volume, so we will probably cover the excess demand to prices instead of volume in Q4. We should see a good level, not only of volumes, but especially in the price side.
Great. Thank you very much.
The next question is from Gabriel Rezende. We will open the audio so you can ask your question. Please, Gabriel, go ahead.
Hi. Thank you, Rodrigo. Thank you, Nora. I have two follow-ups on the Seminovos side, so apologies on coming back to this topic, but just trying to stress out some of the factors that you posted in the 3Q. We saw this healthy level on a consolidated level for the EBITDA margin in the Seminovos segment. However, when we break this down on a per segment basis, you posted a 0.7% EBITDA margin in the Rent a Car segment, which was way below what you have been posting in the previous quarters. Just trying to understand potentially one-off factors that might have impacted this performance into the 3Q. Perhaps SG&A, the mix of the cars sold, the channel that you used to sell these cars. Just trying to understand that. Also, how we can think about volumes, Seminovos volumes moving forward.
We saw 87,000 vehicles being sold this quarter. I believe this level remains healthy for the company's fleet size at this point. Just trying to understand how you are seeing this level moving forward in the coming quarters as well, and whether it will be necessary to accelerate this level that I have seen. Thank you.
No, thank you, Gabriel. Let me start with the volumes, right? I think it is, I cannot overstate what the performance of the team of Seminovos is delivering, right? Even in a scenario as we are facing right now, we are growing year-over-year 16% in volumes, and everybody else is shrinking. The market, the competitors, everybody. We are still being able to deliver a pace of sales between 15 months and 17 months here, which put us in a position really to optimize the life cycle of our cars. Going forward, of course, we only had one month in the fourth quarter. October started very healthy. It is probably the best month of the quarter, but we started very well in October. We do not expect this trend to change here in terms of volume.
In terms of the margin, it is almost the same dynamics of the depreciation itself, right? Fleet, you see a much more stable environment here, and in Rent a Car, as we all reported here, we had deterioration of prices in the third quarter, right? You could see that in Fipe, you could see that in the new car prices, in the new entrants. What happens is that, in Rent a Car, the Seminovos margin gets under pressure much more than the Fleet Rental. There is also another effect. We are now working closely to two months of inventory in Seminovos, right? We are reducing that already. We are already below that target. But when you work with this kind of inventory and the prices go down, the inventory does not depreciate.
Every single aspect, as you are describing this one-off, every single dollar that the price goes down goes directly to the Seminovos margin. The combination of a slightly higher inventory in Seminovos and a sharp decrease in prices in the third quarter here led to a lower Seminovos margin in Rent a Car. In Fleet Rental, we see a much more stable. Going forward, this is supposed to persist. We are going to see Seminovos margin in Rent a Car is still under pressure, and we are going to see Seminovos margin in Fleet Rental at healthy levels.
That is clear. Thank you, Rodrigo.
The next question is from Alberto Valerio. We will open the audio so you can ask your question. Please, Alberto, go ahead.
Thank you for the opportunity, Rodrigo and Nora. My question here goes for tax reform. How should we model the tax reform for next year? Would you guys get this fiscal finance credit in cash in the beginning of the year, or it will be in a discount of the CBS during the year? On Seminovos, should we model some sort of tax already next year, of CBS, or only 2028? If you could help us on this matter, would be very helpful. Thank you.
Okay, Alberto. Thank you. This is a very, let's say, complex subject, but let me try to give you a direction to help. First of all the cars that are bought in 2026, they will not be subject to the CBS when they are sold. Since we most likely are not going to sell any car that is purchased in 2027 in 2027, we are going to sell all the cars, you will not have a CBS next year, right? If the reform happens as it is supposed to. When you look at in terms of the tax credit, we are not working with the scenario of getting it in cash. The law says it specifically that we will restitute in 60 days if you have. But if the government disputes, they have up to a year to return that cash.
A more conservative approach, that would be actually not to consider that in your balance sheet. Of course, doing everything that we can to get that money back as soon as possible. That can have an effect on the capital invested, right? Because you would have a sharp increase on the tax credits next year. There is a doubt that if you can use these tax credits, for example, to compensate other federal taxes, but this is not clear, and the law is not clear about that. Our base case is that there will be no CBS in Seminovos next year, right? If it is, it is just residual, only if you add a lot of value in that.
And we are not considering that we are going to get the full amount in cash in terms of the tax credits here, despite the fact that we will try our best to do so.
Perfect. But the credits that you get from new cars that you will buy in 2027, you can use it to compensate on the CBS of rental.
Absolutely. This is absolutely. What I am saying is that most likely we are going to have an excess credit, because if you compare the credit that you get on your purchases with the debit of the rental in 2027, you are going to see in your model that we are going to have much more credit than debit. As I said, if you can get this excess credit in cash, that would be very good in terms of cash generating, and we reduce our invested capital. If not, we are going to have a higher working capital, right? Technically speaking here, and only in the 2028 and 2029, that would be able to turn all this money into cash, all this credit into cash. Sorry.
Yeah. Alberto, the first couple of years of the tax reform, we won't have the CBS and IBS levying on the Seminovos. Just by 2029, probably we will see the debits increasing versus the credit. So we will pile up credits in the first couple of years of the reform.
Fantastic. Thank you so much, both.
The next question is from João Frizo. We will open the audio so you can ask your question. Please, João, go ahead.
Hey, good morning, Rodrigo. Good morning, Nora. Two from my side, and sorry to dig deeper on depreciation trends, but the first one is around the expectation for 7%-9% difference between new and the sold car prices, right? Which you mentioned implies on a depreciation that could range between BRL 8,500-BRL 10,000 per car. Just wanted to hear if this expectation already embeds a further deterioration in the market, or if this is the market as it is today with no further expectation of increasing competition, more restricted credit lines, more new entrants in the market, more new models, et cetera, right? If so, would this be a downside risk to depreciation going forwards? My second question is around transactional prices, right?
We have a lot of data on listing prices for new and used cars in Brazil, but on the transactional side, I just wanted to hear on your side what has been the latest at the margin for those markets. Thank you very much, guys.
No, thank you. Once again, we're not talking about guidance or anything like that. We're seeing that we're looking right now, when you see the marginal car, spread between seven and nine. This is the situation as it is, okay? If it is any change in the situation, even in inflationary scenario or deflationary scenario that it's more aggressive or less aggressive, what I'm describing today is what we are already looking at the cars that we buy right now and their expectations given the market conditions as we see, okay? That's why we're saying that if you do the math, you're going to see, as I said, the eight to a little bit higher than 10 in the very upper range here, okay?
But I also would like to remind us that despite the fact that there is this trend in depreciation, we have been successfully able to pass through prices to compensate that. So that's why we are experiencing record profits, record returns with higher depreciation, right? If you were a bank, we were increasing our bad debt provisions while increasing our ROEs. That shows you our capacity to live in a scenario like this. In terms of transactional prices, we see, of course, transactional prices under pressure here, but there are a lot of effects, right, that it's happening. Not only on the prices itself, but you see a movement of some OEMs that are launching cars with low spec to compete with the new entrants. So the competition has becoming much more complex to follow.
If you look at a transactional price of a specific model, maybe it did not go down as much, but there will be a new model, a lower spec, that the price went down more than it is supposed to compete with that. But the trend in terms of new car prices and used car prices that we saw in this quarter, both transactional and used cars were down.
João, just to add to that creates opportunities for Localiza, right? We are becoming even more relevant to some OEMs, and we are able to improve the conditions and terms. This is going to be key for next year's purchase negotiations.
Understood. Thank you very much, everyone.
Okay.
There is one last question from the chat, comes from Cristiano Souza from Zeno. Thank you, Cristiano, for the question. If we see an environment in Brazil where inflation rates accelerate significantly, how could that impact your depreciation rate and ROIC in general?
Thank you, Cristiano. If we see inflationary, and that inflation also translates to higher car prices, that would be, of course, something that would reduce the level of depreciation of the company. If we see a reversal of the trend that the cars starts to a deflationary pressure to an inflationary pressure, then most likely we would see depreciation going down, Seminovos margin going up, and our returns, of course, going up. That would require us to pass through less prices than we're planning in this deflationary scenario that we're experiencing right now. I would like to thank you all for joining us. Our investor relation team remains available for any further question. Thank you very much.