How Avis Budget Group is Changing Car Rental Remarketing

by Jon LeSage, remar­ket­ing edi­tor at Auto­mo­tive Digest

Car rental used to be con­sid­ered a “dump­ing ground” for automak­ers to sell new vehi­cle mod­els that weren’t doing well in retail. When those cars were tak­en out of ser­vice and sent to auc­tion, whole­sale prices were hit. That seems to be chang­ing now…..

Avis Bud­get Group is show­ing sig­nif­i­cant signs of how car rental com­pa­nies have been rethink­ing their role in the world of used vehi­cle remar­ket­ing.

Remar­ket­ing has been chang­ing for the car rental indus­try in recent years – with less vol­ume going through auc­tions and more empha­sis on upstream­ing. Automak­ers are keep­ing fleet sales lim­it­ed, too.

Dur­ing a third quar­ter earn­ings call, Avis Bud­get Group exec­u­tives explained their remar­ket­ing approach – how it “cas­cades,” or moves its rental cars from one brand to the next to make sure they’re being max­i­mized pri­or to being tak­en out of ser­vice and sold.

In Q3, 2,000 vehi­cles went from the Avis and Bud­get fleets over to trav­el­ers look­ing for a deep dis­count through Avis Bud­get Group’s recent­ly acquired Pay­less Car Rental sub­sidiary. The com­pa­ny thinks there will be very few new cars to buy for Pay­less in the near future.

Cars that are sit­ting around unused are being sent over from Avis and Bud­get to the group’s Zip­car car­shar­ing sub­sidiary that was acquired ear­li­er this year. Demand is high for these cars over the week­end, and they’re sent back to Avis and Bud­get dur­ing the week.

As for the remar­ket­ing process, about half of its used cars go to auc­tions; the oth­er half are sold direct­ly to deal­ers and con­sumers, which is a more prof­itable route than whole­sale for Avis Bud­get Group.

Dur­ing the con­fer­ence call, David Wysh­n­er, CFO for the car rental com­pa­ny, talked about the remar­ket­ing strat­e­gy. The aver­age age of these used vehi­cles is sev­en months, and 85% of the vehi­cles have few­er than 25,000 miles.

Prices for about 40,000 vehi­cles sold in Q2 were in line with the company’s expec­ta­tion, Wysh­n­er said. Keep­ing aver­age mileage in right range allows the car rental com­pa­ny to main­tain high resid­ual val­ues, he said.

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