By on January 20, 2011

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 <5% for Luxury brands to avoid any negative impact from rental fleet sales on residual performance.

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 <5% for both 2009 and 2010YTD. Both the mainstream and luxury domestic brands have shown higher rental fleet trends versus their import counterparts.

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30 Comments on “Who Ruled The Rental Fleets In 2010?...”


  • avatar
    TEXN3

    Avis has tons of CTS sedans, pretty loaded out too… which is perfectly fine with me. If I don’t rent 4WD then I usually get my free upgrade to one. First GM I’ve really enjoyed driving and have no gripes about…shoot, first rental I could say that about save the XTerra for 4WD needs.

    • 0 avatar
      SVX pearlie

      *yawn*

      No surprises there:
      1. Chrysler sells a ton of fleet
      2. Impala & Malibu replacing Crown Vics = more Chevy rental sales
      3. CTS, etc. replacing Town Car = more Caddy rental sales

      This is news?

    • 0 avatar
      TEXN3

      It was a surprise to me and I am at the rental counter 4-5 times a month…as I usually rent with Hertz and up until the past few years, they’ve gone away from Fords and towards Nissans (mostly) and Hyundais. Like I said, I normally rent 4WDs unless in somewhere like southern Cal or where I won’t be on some BLM or USFS trail.

      Regardless, the CTS is a well-rounded package, and I was extremely impressed with a GM product.

  • avatar

    If a person buys a jeep for “residual value”, he needs his head examined. The first thing a proper jeep owner ought to do is to drill a few holes. That line of the worksheet may be disregarded safely.

  • avatar
    krhodes1

    I rent about 30 weeks a year, almost exclusively from Hertz. A few observations:

    1. I hardly ever even see Chrysler products at Hertz.
    2. I get far more Japanese and Korean nameplates than anything else.
    3. They are keeping the cars a LOT longer. Used to be you would rarely if ever see a rental with over 15K on it, now 30-50K is very common, and I am seeing these as a VERY frequent renter who usually gets the nicer cars as a perk.
    4. I get Camrys more than anything else. Hertz has a zillion of them. I reserve a Sentra, and my frequent renter upgrade gets often me a Camry.

    I am sure that #2 is a direct result of #3. Rental companies aren’t stupid, I am sure they have figured out that they are better off buying more expensive cars and keeping them longer. If they kept the usual old-school rental fodder crap for 50K they would have to pay to fix them, whereas a 3yo Camry will probably not need repairs and keep a much better percentage of thier value. I doubt they are having much effect on the resale at this point.

    • 0 avatar
      Scoutdude

      Actually keeping the Japanese stuff that long is stupid because if they keep them to 50K they will have had to replace the tires and brakes while the OE equipment from GM or Ford will outlast that 50K.
      But yes in general they have been keeping them longer and longer in many cases being forced to by the MFG and buy back agreements. Ford at one point went so far as to dictate % of certain colors and trim level mixes to qualify for the best purchase price, % of cars bought back, and minimum number of miles to qualify for repurchase. They simply didn’t like having too low of mile vehicles on the used lot as that didn’t help new vehicle sales.

    • 0 avatar
      SVX pearlie

      Hertz is historically Ford, so you wouldn’t expect to see a lot of Chrysler there.

      Similarly, Avis is GM, so less Chrysler there as well.

      Chrysler is Dollar / Thrifty / Budget – interestingly, even their rental partners connote cheapness.

    • 0 avatar

      “Actually keeping the Japanese stuff that long is stupid because if they keep them to 50K they will have had to replace the tires and brakes while the OE equipment from GM or Ford will outlast that 50K.”
       
      Uh, don’t think so. I’ve seen a fair few Chevys and Fords that have needed brake pads and/or tires before 50k. And GM OEM tires tend to be junk in terms of traction too.

    • 0 avatar
      CJinSD

      I had a high mileage Hertz Toyota too. It was a bit of a surprise to get a car from Hertz with dents and scrapes on every panel, a cigarette smoke stinking interior, and 39,000 miles on the odometer, but it drove better than a 37 mile Cadillac they once gave me, and didn’t have any glaring defects like an 18 mile Buick I had to complete assembly of for Avis. It drove better than an 80 mile Chrysler from Enterprise, and did a better job of representing its manufacturer than a 300 mile Ford. The Cadillac was years ago, but the almost new new Chrysler(s – there were 3 of them) were 2010 models in 2009 and the almost new rattle trap Ford with the non-functioning passenger window was a 2009 model.

      It looks like the rental companies are taking different strategies. Some of them are buying good cars and taking advantage of the economies of long service lives, and some are still buying GM and Chrysler for the low capitalization. I wonder who has better accountants. Oddly, the best rental car I’ve ever had was a low mileage 2011 Camry from Enterprise, a company that usually serves up the worst sort of subsidized garbage in my experience.

    • 0 avatar
      TEXN3

      Maybe historically, but not so much anymore. Hertz has been purchasing Nissan (try driving a blinged out QX56 to public meetings in eastern South Dakota-didn’t help my client much), Hyundai, Toyota, and Chevy (SUVs, CUVs, trucks). Ford has no share in Hertz anymore, and doesn’t dump into their fleet much at all. The last Ford I had with them was a Mustang in 2009, prior to that an Explorer in 2007. I’ve had a few Explorers with Avis however. I won’t touch the other rental agencies, but I do notice what’s on the lots whenever I walk out to get my vehicle.

      I’ve even had a few Subarus, an Outback in 2006 which did so well along the US border in Montana that I decided the Outback would be my next vehicle…perfect Idaho vehicle.

  • avatar
    Steven02

    Can you post a document that has this information but without sorting by increase, but instead by RFP?

  • avatar
    Scoutdude

    While there are some negative affects of pushing your cars into rental fleets there are some upsides. Take Hyundia/Kia in the past many people wouldn’t have even considered one but when the got 1 for a rental and found out that they aren’t the POS joke they used to be and are quite reasonable cars and a good value. On the other hand you have the case of Chrysler products where people who might have considered one ruled it out after having lived with it for a couple of days.

    • 0 avatar
      SVX pearlie

      IMO, it depends a lot on which car one gets.

      For example, we rented an older-gen Kia compact last year, and I was not favorably impressed at all. With 3 passengers, it had no power, and mileage was not very good. Based on that experience, it’s amazing that anybody would consider Kia / Hyundai for a new car.

      OTOH, if your experience is a new 2010+ Sonata, then that makes a much better impression.

    • 0 avatar
      strafer

      Had a Dodge Nitro rental last summer, and that was about the crappiest rental ever.
      Definitely knocked Chrysler down a few notches on my list.

    • 0 avatar
      aspade

      Even a good car leaves a poor impression when you get an abused 40,000 mile example with a worn out suspension, mismatched tires and bad alignment.
       
      Government and business fleet sales are great advertising but I’m convinced rental sales are poison.

  • avatar
    Dimwit

    One thing that’s missing from this screed is the C4C fiasco. That removed so much iron from the used market that having *any* recent stock, whether rental or not is a plus. Even our esteemed Mr. Lang has remarked on how difficult it is to get anything some days. That must affect the market and not the manufacturers.

    • 0 avatar
      charly

      C4C again? It is the 690,114 car “victims” that create the high prices in the second hand market. Not the unsold 20 million cars due to carmagedon and the low level of new car sales.

  • avatar
    Forty2

    Both Avis and Hertz lately have exclusively given me Nissan Altimas, or at least a choice between that and a Camry (ugh). I’ve driven so many Altimas lately I think of them as my third car.
     
    Now that I think about it, I don’t think either company has given me a domestic car in at least a year. Far cry from the days when I had to explicitly wrote “NO MALIBU” in my reservation records lest I end up with the early-decade doughy 4-cyl wheezers.

    • 0 avatar
      DweezilSFV

      By 2000 the Malibu was only available with the 6. The 4 didn’t arrive again until mid decade with the Malibu Classic. “Doughy 6 cylinder wheezer is more apt…

  • avatar
    Forty2

    Oh wait, I did get a domestic rental last year: a white 2010 V6 Mustang. Was quite impressed with that engine, and got my first speeding ticket in over 20 years in it from a KY state cop in a black Mustang. I’m sure he had the V8.

    • 0 avatar
      Quentin

      The 2010 Mustang was still the old 4.0L.  The 2011 has the new 3.5L.  Edmunds calls the 4.0L “crude and unpleasant” and “weak and outdated”. 

    • 0 avatar
      TEXN3

      All hail the Godly Edmunds.com! I’m a fan of Edmunds.com, I’ve sworn by it since 1997.

      The engine is pretty old, but was rather torquey…and fit the Mustang well. It is similiar to the V6 found in Nissan and Toyota SUVs. Big displacement, OHC, made for low and mid range power. Moved the Mustang pretty good, I had a few rentals with the engine. The new V6 is quite a sweet engine, and a very sophisticated design. In comparison, it does make the 4.0 feel rather crude, but the 4.0 is still a good engine and much superior to the old 3.8/4.2l OHV V6.

  • avatar

    No real surprises here. Fiasler rules the rental lots, and Chevy remains quite solidly in the top five. I’ve still yet to see a non-rental Cruze.
     
    And to see Cadillac resorting to dumping so many vehicles (and not all of them are DTS sedans, kids) to rental fleets is sad — wait, I mean hilarious.

  • avatar
    donkensler

    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.

  • avatar
    GarbageMotorsCo.

    Good thing about the GM rentals though is when it leaves you stranded, at least you have Onstar to come rescue you.


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