Who Ruled The Rental Fleets In 2010?
One of the questions that came up in yesterday’s post, The Truth About The Ten Best-Selling Sedans Of 2010, was how to interpret a high percentage of fleet sales. After all, “fleet sales” could describe a huge variety of sales to diverse buyers at widely varying price (and profit) points. Rental fleet sales are widely seen as being far worse than other types of sales, which is why the resale value trackers at Automotive Lease Guide keep such a close eye on what they call “Rental Fleet Penetration.” In its latest newsletter, ALG notes
ALG tracks several key metrics that impact residual values and brand health. Of these metrics, rental fleet penetration (RFP), which ALG measures as the total number of vehicles sold into rental fleet channels divided by total sales, has been found to have an impact on both residual performance and perception of quality… As a general rule, ALG recommends RFP levels below 10% for Mainstream brands and
The Chrysler brand, which has had a history of high rental fleet levels in the past several years, showed the highest increase in RFP to ~49% in 2010YTD compared to ~19% in 2009YTD. Dodge and Jeep, also operating under the Chrysler umbrella, showed high YOY increases in RFP with levels at 32% and 18% for 2010YTD, respectively. Though industry retail sales showed improvement in 2010YTD, the Chrysler, Dodge and Jeep brands all suffered declines in retail sales compared to 2009YTD. While the decline in sales has a positive impact on residual values due to the drop in used supply, the increase in rental fleet penetration will negate much of the used supply impact on residual values due to the decline in perceived quality and residual performance relative to the competitors.
Chevrolet also displayed high increases in RFP levels to ~26% for 2010YTD compared to ~13% in 2009YTD. Retail sales for the Chevrolet brand also increased, resulting in increased used supply for the brand which would negatively impact residual performance, holding all else constant. Mercury rounded out the mainstream brands that experienced the largest increases in RFP levels.
But that’s hardly the whole story…
ALG has found that rental fleet sales have an even more detrimental effect on residual values and perceived quality for luxury brands compared to mainstream brands. Cadillac showed the highest YOY increase in RFP from ~9% in 2009YTD to ~17% for 2010YTD. Though rental fleet sales showed a significant increase compared to the Luxury brand average, Cadillac has shown improvements in other metrics. Retail sales grew by 34% in 2010 compared to 2009 (July YTD), while incentives decreased. While this is a positive story for Cadillac, the increase in rental fleet penetration will place the brand at a disadvantage compared to other luxury brands that have kept rental fleet below the 5% mark.
The other brands in the luxury list all had fairly small changes to RFP levels and averaged
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I rent from Hertz (I retired from Ford a few years back, and still have my #1 Gold number), and at least at PVD (that's Providence - T.F. Green Airport for those of you who don't fly much), they seem to be loaded with Japanese cars (Camrys/Corollas) and GM cars (Malibus/Impalas), although I did get a Chrysler minivan on a one-day trip in early December as my President's Club upgrade (if it had been for more than a day I would have explained to them why I didn't consider a minivan an upgrade from the sedan I reserved). I agree Chrysler seems to dominate the cheaper end of the rental market. About a year ago I got an Enterprise rental for a few weeks when my Mazda was in the shop after an 80-year-old collided with it, and pretty much everything on the lot was Chrysler (except for one Chevy that was off my list because it didn't have a passenger-side assist bar - a must because my partner is in a wheelchair). Reminds me of the days in the 70's when the entire State of New Jersey fleet from pool cars to state troopers was Plymouths - I figured Chrysler must have given a rock-bottom bid to get all that business. I worked summers for the state in those years, and got to drive one of the pool cars once a week; the best part of it was when I came cruising up behind slower drivers they always pulled over. Because I was driving a stripped Fury they probably figured I was an unmarked state trooper.
Good thing about the GM rentals though is when it leaves you stranded, at least you have Onstar to come rescue you.