Saturday, June 23, 2007

Beware of the Fleet Queens

Yesterday, I came across some interesting data on fleet sales as a percentage of total sales for each car and truck sold in the US for the first half of the 2007 model year. There were some surprises and some non-surprises in reviewing the list.

Before pointing out some of the more notable items, let's talk about fleet sales. What is a "fleet sale" anyway? Well, auto sales are broken into two main categories: retail sales and fleet sales. Every manufacturer wants high retail sales, because they're not giving volume discounts on the vehicles, retail units are generally better equipped than the ones sold to fleets, and retail sales don't end up at auctions or used car lots for half of their original MSRP with 10,000 miles after only a year. Heavy fleet sales (and thus a large volume of fleet vehicles on the used car market) depress residual values of every one of that model, including ones sold to retail customers , making unhappy retail customers and likely further reducing retail sales.

Fleet sales can also be broken down into a few subcategories: commercial, government, and rental. The daily rental fleet sales are the worst kind, because the cars are driven by hundreds of different people during their time owned by Hertz or Avis, and not necessarily babied by their drivers. They are also quickly sold back to the manufacturer, as opposed to a car sold to a company for use by a sales representative, where he or she would keep the car for three years before turning it in. Also, having a substandard car in your lineup that is a "rental car favorite" is not a good way to turn renters into future buyers, because you're not putting your best foot forward as a manufacturer. For example, imagine if the general public thought that all GM sedans were on par with the Grand Prix, when the reality is that many are better.

The source of my data is http://www.fleet-central.com. Fleet Central is a website for automotive fleet managers and appears to be pretty comprehensive. Fleet percentages given are as a percent of the model's total sales midway through 2007 unless otherwise noted, and include commercial, government, and daily rental sales.

The Non-Surprises

Ford Taurus

Think about the cars you have rented over the past few years. Most likely, they were models such as Chevy Malibu (58.8%) or Impala (53.9%), Ford Taurus (96.5%), Pontiac Grand Prix (77.6%), etc. For this reason, these models are all leaders on this list. Some others on the list are not surprises; the Ford Crown Victoria, a government favorite (thanks to police departments) sold 91.3% of its overall sales to fleets, mostly governmental agencies. The Ford Econoline, a favorite of plumbers and contractors, was 69.2% fleet sales because not many retail buyers need or want the capability and size of a full-size van.

The Surprises
Dodge Avenger

This part is more fun, but it's not necessarily good news. There are some 2008 model vehicles, just introduced in the past few months that are already selling more than half of their production to fleets (and mostly daily rental fleets). Offenders include the Chrysler Sebring (63.5%) and Dodge Avenger (79.4%!!). No wonder Chrysler management is so concerned about those two vehicles and has implemented an immediate improvement program to make them more attractive to people who want to buy the cars, not just catering to people who rent them and don't get to choose.

Other relatively new models with somewhat high fleet percentages include the Kia Optima (52.8%), Dodge Caliber (45.1%), Ford Edge (32.0%), and Chrysler Aspen (31.2%).

The Fleet "Hall of Shame"
Pontiac Grand Prix

The following vehicles sold more than half of their overall sales to fleets; if you would like to buy one of these cars for yourself, you can probably get a great deal on a slightly used one, but you're likely to take a huge depreciation hit if you decide to be in the minority and buy one of these new from the dealer.
  • Chevrolet Express (58.4%)
  • Chevrolet Impala (53.9%)
  • Chevrolet Malibu (58.8%)
  • Chevrolet Uplander (70.9%)
  • Chrysler Sebring (63.5%)
  • Dodge Avenger (79.4%)
  • Dodge Caravan (54.8%)
  • Dodge Charger (56.2%)
  • Chrysler Crossfire (70.6%)
  • Chrysler PT Cruiser (61.8%)
  • Dodge Magnum (60.9%)
  • Ford Econoline (69.2%)
  • Ford Taurus (old version) (96.5%)
  • GMC Savana (50.9%)
  • Kia Optima (52.8%)
  • Mercury Grand Marquis (50.0%)
Study the list above carefully; odds are, next time you visit the rental car counter, they'll hand you the keys to one of the models above.

The full lists are available here:

Cars: http://www.fleet-central.com/af/stats2007/cars_web.pdf
Trucks: http://www.fleet-central.com/af/stats2007/trucks_web.pdf

No comments: