Fleet Sales No Longer ‘Dirty Words’ for Automakers

by Jon LeSage, edi­tor, Fleet Man­age­ment Week­ly

Automak­ers have had to change their stan­dard oper­at­ing pro­ce­dures since being hit hard finan­cial­ly in 2008–2009. Fleet sales has been one of the changeovers tied into attempt­ing to sta­bi­lize fund­ing, remar­ket­ing, and increas­ing retail new vehi­cles sales at high­er trans­ac­tion prices. While the def­i­n­i­tion of fleet/commercial sales varies by who you’re talk­ing to, it is con­sid­ered to be around 15% to 20% of new vehi­cles sales and $65 bil­lion in annu­al US auto pur­chas­es……

Fleet sales, espe­cial­ly to car rental com­pa­nies, for years have been con­sid­ered a “dump­ing ground” of prod­uct that hasn’t been sell­ing to well on retail lots and that were sub­ject to excess capac­i­ty. Dis­count­ed deliv­er­ies have been made to car rental, util­i­ty, and gov­ern­ment fleets – pri­mar­i­ly through the Detroit Three automak­ers. That’s hurt them finan­cial­ly – sell­ing them for less than need­ed and when they repur­chased them and sold them on whole­sale mar­kets.

More fis­cal­ly con­ser­v­a­tive automak­ers have been chang­ing their fleet sales prac­tices through their fleet sales depart­ment, cap­tive finance, and remar­ket­ing teams. The vehi­cle options are get­ting bet­ter for fleets such as the Chevro­let Impala and Ford Fusion. They’re being more dis­ci­plined with fleets in pric­ing and fund­ing arrange­ments, as well.

“Fleet and even rental fleet are no longer dirty words deserv­ing of blan­ket crit­i­cism,” said Maryann Keller, an auto indus­try con­sul­tant and for­mer direc­tor at Dol­lar Thrifty Auto­mo­tive Group Inc. “These are not unprof­itable trans­ac­tions, or at least for the man­u­fac­tur­er, they don’t have to be.”

Fleet pur­chas­es made up 19% of new vehi­cle sales this year through July for the sev­en largest automak­ers, accord­ing to Auto­mo­tive News Data Cen­ter esti­mate. That’s down slight­ly from 20% for that same time peri­od in 2012, and is line with the lev­el reached for all of 2012.

Fleet remar­keters have been part of the chang­ing used vehi­cle land­scape in recent years — pro­tect­ing resale val­ues and access­ing new and emerg­ing remar­ket­ing tech­nolo­gies. Automak­ers will be care­ful­ly watch­ing resale val­ues to deter­mine the best ratio of fleet-to-retail sales and real­is­tic pro­duc­tion capac­i­ty. With new car man­u­fac­tur­ing drop­ping to a 27-year low in 2009, demand has been strong and used vehi­cle val­ues have seen a great deal of strength – some of it to his­toric highs. Used vehi­cle prices have been soft­en­ing late­ly, but all things con­sid­ered, are still doing very well. Automak­ers do say they’ll be tight­en­ing the sup­ply as need­ed to pro­tect their fund­ing trans­ac­tions. There are a lot of off-lease vehi­cles return­ing to mar­ket, and fleet cat­e­gories are being care­ful­ly tracked – that includes auc­tion activ­i­ty in auto man­u­fac­tur­er off-rental pro­gram vehi­cles, off-rental/at risk vehi­cles, and through fleet/lease con­signors. Automak­ers would like to keep sup­ply and demand with­in a healthy bal­ance.

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