Since there's no penalties for no-showing they truly have to overbook.
Also smaller locations will a lot of times show cars available for immediate booking and pickup that they dont currently have onsite. The reason is that the location pulls cars a day before from a central location. Thus the car is available to be rented, it's just parked offsite at another location. This happens frequently when booking at non-airport locations.
As OP was prepaid there should've been a car ready for him. At a minimum company needs to pay difference between what he was to pay and what he paid. If they refuse file a small claims case. In most states these are quick and easy. You can include costs to file, taking time off work to goto court, etc.... Most companies will either just pay or simply not show up to court resulting in default win. Once you win can ask court to seize property to pay for claim. They'll pay real quickly when you come in and seize a Mustang for falling to pay a $250 court claim.