By on March 3, 2010

Chrysler once again topped Edmunds’ True Cost Of Incentive index last month, despite failing to significantly improve its sales over February 2009’s miserable showing. The only upside is that Chrysler basically held even with reduced incentives, as the entire industry is spending about 14 percent less on incentives than it did a year ago. Another interesting point of analysis from Edmunds:

Comparing all brands, in February smart spent the least, $341 followed by Scion at $426 per vehicle sold. At the other end of the spectrum, Lincoln spent the most, $5,568, followed by HUMMER at $5,195 per vehicle sold. Relative to their vehicle prices, Saturn and HUMMER spent the most, 14.9 percent and 13.6 percent of sticker price, respectively; while Porsche spent 1.4 and smart spent 2.3 percent.

But Toyota and GM will help carry those numbers up next month, with huge incentive spends planned. Meanwhile, after many automakers found religion about retail sales last year, fleet sales are back in a big way. And they’re no longer seen as something to be ashamed of.

Automotive News [sub] reports that only 35,832 of Chrysler’s 84,449 sales last month were to retail customers, with the remaining 58 percent going to fleets. Despite the fact that this combined with Chrysler’s chart-topping incentives doesn’t exactly speak to the company’s viability, Chrysler spokesfolks were unapologetic, saying:

Fleet sales were very strong this month, and our company sales reflect that. We still expect our total fleet sales for the year to be around 25 percent. It’s a good viable business for us. It shows that large companies have faith in our company to order. We make money on fleet sales

And none of the automakers are being snobbish about fleet sales. Ford’s fleet sales rose 74 percent compared to last February, and GM’s fleet sales rose 114 percent, making up nearly a third of all GM sales according to Automotive News [sub]. GM’s leasing (another former sin) also rose last month, to make up ten percent of all deliveries.

This time last year, fleet sales, incentives and leasing were considered part of the huge collection of problems that brough American automakers to their knees. Now that they’ve received their bailouts, the old habits are coming right back. And there are always excuses: sure they make some profit and yes, they will always be part of the business. But with incentives going up and Toyota looking vulnerable, a discount war is looming on the horizon. If Detroit once again gets caught up in a negative spiral of volume-pushing through incentives, fleets and leasing, any chance of a sustainable turnaround could be hamstrung. Those who fail to learn the lessons of the last several years have no business being in business.

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20 Comments on “Incentives, Fleets Fattened February Sales...”

  • avatar

    Ouch – 58% total fleet sales for Chrysler! According to some of our “best and brightest” here – “a sale is a sale” and how it is done and how much it helps the company in the long run is completely immaterial. It’s a wonder how the D3 got into this mess in the first place with thinking like that.

    But I knew most of the sales were from fleets which have aging vehicles due to putting off new purchases (was anyone surprised as to why MFGRs owned several rental companies in the past? – it was to get rid of metal that would not move).

    Can we get a breakout of overall fleet sales per major MFGR (GM, Ford, Chrysler, Toyota, Honda, Nissan, Hyundai, Kia)? I know Hyundia sells a lot of cars to fleets and part of their sales success stems from that fact. Subaru and Honda seem to be the companies who have very little reliance on fleet sales (sans special models such as NG and fuel cells).

  • avatar
    crash sled

    “Those who fail to learn the lessons of the last several years have no business being in business.”


    Oh but they have learned the lesson, that Government Motors will bail them out of their foolishness, no matter what. So they sell vehicles at a loss and hope to make it up on volume. It’s the American way.

    I’m interested in Hyundai’s progression down the incentives scale. The February numbers may be a blip, but if not, they could be a force to be reckoned with. We better get Government Motors to start investigating them immediately.

  • avatar
    Cammy Corrigan

    I’m stunned at Ford. GM and Chrysler, we didn’t expect any better with regards to fleet sales (did we?). But I thought Ford learnt their lesson over fleet sales? Without the fleet sales it would have been a decline?

    This puts Ford’s recovery in a different light.

    • 0 avatar

      It depends on the type of fleet sales. Selling Impalas to police departments or Transit Connects to companies is different from dumping Cobalts on Avis or Fusions on Alamo.

      I’d like to see a breakdown of fleet sales to corporations and goverments versus fleet sales to rental car companies. The former tend to produce higher profits and the vehicles aren’t dumped on the used-car market within 18 or so months.

    • 0 avatar

      That link in the article clears nothing and is used in the wrong context. Before January’s sales were released Ford admitted to higher fleet sales for that month, and its old news…we want information for February.

    • 0 avatar

      Humble apologies for misreading the Ford story… otherwise, the only number we’ve been able to hunt down for Ford fleet sales is a 74 percent increase over last February.

  • avatar

    I thought Scion did no-haggle pricing. Giving money away seems to alter that business model.

  • avatar
    Rod Panhard

    Stupid question time. Do fleet sales go through dealers? I know cop car sales go through dealers, but when Hertz or Avis buys a shedload of cars, do the cars go straight to Hertz or Avis?

    Or does the dealer get to PDI and all that for a fee?

    • 0 avatar

      Well I know that one of the B&B will soon increase our knowledge, I wouldn’t be shocked if the corporate office arranges the big sales to rental agencies and then the local dealer takes care of prep and delivery, getting a certain cut from the mothership. I know fleet sales into the like two dozens have been arranged at the local level around here. The local school district will call up the Ford, Chevrolet, Pontiac, and Chrysler dealers (yes they’re all independent entities around here) and give them a set of paramaters. “We need vehicles that have x features for x uses we’re going to buy 24 of them, what’s the best price you can give us?” That’s why their fleet has trucks from Ford, Chevy, Chrysler, and GMC… Their group of vehicles for those central office personel that need to run all over the county consist of everything ever built on the W-platform, Escapes, old S-10/S15 Blazers and Jimmys, and a few Suburbans, Expeditions, 12-15 passenger vans for when they need to transport larger numbers. Thank god they’ve finally cracked down on people taking the vehicles home.

    • 0 avatar

      That is an unknown. Many dealers are now providing fleet sales for various customers and negotiating the deal in bulk for lower invoices. It is not know if these dealer sold fleet vehicles are counted as a retail sale or fleet (I think it’s the former and we are being mislead by the sheer volume of fleet sales). If their #s drop it is b/c of reduction in fleet sales, if their #s rise it is b/c of retail sales. Something’s fishy here and it’s not the first time we are intentionally mislead with misinformation from these companies.

      The 4 local Ford & GM dealers have built separate buildings for fleet sales (must be large enough for them to invest in an entirely different structure).

    • 0 avatar

      Generally any buy of over 5 vehicles is considered fleet and the bigger ones are negotiated with corporate not the dealer but yes they end up through dealers as all sales have to.

  • avatar
    Kyle Schellenberg

    I find it interesting to see that Hyundai has dropped incentives by half and yet their sales keep increasing. With that extra padding on every sale, they’re going to leapfrog even Toyota within a few years.

    • 0 avatar

      Partly true, notice we have no fleet numbers for them and others. Without that we don’t know a thing.
      However, I agree fleet sales are not all bad, If the vehicle gets used up no problem. Even if it goes to a rental company for a couple years, those sales pay a lot of bills and debt in bad times. Half the cars I have rented in the last few years have been non “domestic”. I remember a year ago or so Subaru’s published growth strategy incorporated expanding fleet sales.

    • 0 avatar

      To me as an economist – a sale is not just sale. If it sells at cost or sometimes just enough to cover fixed costs – it will be something bad in the long run. Short term thinking of move the metal has lead to their demise and staying the course using the same strategy will only lead them again to ruin. They need flexibility in production to increase/decrease volume based on demand. Fleet sales should be only there to cover for reaching economies of scale from time to time – not complete reliance on keeping a factory running.

  • avatar

    It would be nice to have someone dissect these numbers in more detail. Are the renaissance products over at Ford/GM the vehicles with high incentives, or are we talking models that no one really wants. Ditto that on the fleet side. Due to the sheer amount of pickup trucks sold by both GM and Ford you have to wonder how that effects fleet sale percentages.

  • avatar

    The chart above shows that GM, rather than Chrysler, had the highest True Cost of Incentives last month.

  • avatar

    I’ve always been curious about Edmund’s calculation of these numbers and their link is as expected, pretty vague.

    Take the Fusion for example – 0% for 36 months, if you take this vs. trying to get 5.9% on the street, you save $2339 in interest, does this count towards the Edmund’s total, and if it does, who chosed the comparison street rate?

    Next – how does it account for the military/College Grad/Police/Quarter Horse Association money that Ford and GM generally kick in vs. their Import counterparts – is this driving up their number vs Nissan who just gives a straight $1500 on an Altima?

    For me it’s always looked as if the Domestic’s gave more opportunity for people to pick up an incentive (right now, 7 different cash offers on Fusion vs 2 for Altima) but have never felt confident that Edmund’s cash numbers are really walking out the door.

  • avatar

    “Chrysler once again topped Edmunds’ True Cost Of Incentive index last month” – but only by $87 more than Ford, the current dandy of TTAC, at least until Toyota fixes it’s (perception) problem of UA.

    Another interesting thing; going from the bottom of the chart to the top, comparing this Feb. with a year ago we see:

    Toyota increased its incentives
    Nissan increased its incentives
    Hyundai decreased its incentives
    Honda increased its incentives
    GM decreased its incentives
    Ford decreased its incentives
    Chrysler decreased its incentives – significantly.

    Finally, if Chrysler sales in Feb to fleets were 58%, but the company says they expect fleet sales for the year to be about 25%, does that mean this is simply the peak fleet sales month? Like Christmas for fleet sales? It makes sense because Feb is slow selling time for retail (better chance of good fleet deals) and rental companies would want to stock up for the summer travel season. I don’t know. I’m just trying to make some sense of this. Anyone here work in the industy in sales & marketing or in the rental or fleet business that could shed some light on this?

    • 0 avatar
      Buffs Fan

      Last year, February had to be especially bad for businesses due to the uncertainty in the economy. So while fleet sales are strong this year, the percentages may be big because of how bad last February was for fleets.

      The real brand killing sales by the Big 3 were to the rental companies, especially when they gave incentives to turn them in a few months, thereby going to auction and competing against current model year vehicles. Commercial businesses or governments that buy the vehicles and drive them like a normal person (i.e. 100K plus) look like good sales. Does anyone know how to find out how many of these fleet sales are going to rental companies?

  • avatar

    I know I recently got a mail from a toyota dealership of 0% for 5 years on 8 different models….I think that might have been March 1. I can’t wait to see the numbers once march is over.

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