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.