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I also read a lot of library books, but I prefer to leave titles in my 'Library'. That gives me another way to know what I have read so that I am less likely to inadvertently select previously read books. My public library uses OverDrive, and patrons have the option to access OverDrive with the Libby app, but I prefer to use a browser to go to the OverDrive web site to select and check out books. While OverDrive does have a 'history' function, its not immediately obvious when using OverDrive when a selected book is included in the history list - the only indication is that there is a 'remove from history' option, but there have been several instances when I failed to notice that flag. I don't particularly care for the Libby app, and one reason is that it has no way to check if a book has been previously checked out.
So my practice is that when I finish reading a book, I immediately invoke the option on my Paperwhite to return the book to the public library. eBooks are in pretty heavy demand, and doing that means that if someone is waiting for a book that I have checked out, they may be able to get it a few days sooner. However, as you say, there is no option in the on-board software in a Kindle to direct that a book be deleted from the Kindle library.
But it is possible to go to Content and Devices on the Amazon web site, and select the books that you want to delete from the Kindle library. There is also a 'select all' function, but that could be dangerous because you could delete books from other sources, including purchased books.
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