Beware of the Fleet Queens, 2008 Edition

By Chris Haak

08.19.2008

Just over a year ago, I wrote a piece covering which vehicles were being sold primarily to fleet customers. Fresh data in hand, I thought it would be a great time to revisit this analysis for mid-2008.

First, a little background information about fleet sales. You’ll hear many manufacturers attributing falling sales numbers to a strategic decision to reduce their fleet sales. Fleet sales are categoriezed in three groups: sales to government agencies (police cars, repair trucks, etc.), sales to commercial buyers (work vans, pickup trucks, taxis, limousines, company cars), and sales to daily rental companies (Avis, Hertz). Fleet sales to commercial and government buyers aren’t necessarily a bad thing; generally these fleet buyers hold the cars for a longer period of time (usually about three years), have a limited number of different drivers for each vehicle, and maintain them fairly well. Commercial and government fleet buyers also tend to pay a discounted, although fair, price for the new vehicles. The advantage to automobile manufacturers in selling to commercial and government fleets rather than daily rental fleets is that because these buyers hold the vehicles longer, the used car market is not flooded with low-mileage used cars that are less than a year old, thus depressing resale values for retail customers.

Sales to daily rental companies, on the other hand, which make up about 65% of all fleet sales so far in 2008, are not ideal for manufacturers. The cars are generally sold at a steep discount (usually a loss), are driven by people who don’t care about the car (try Googling ‘rental car abuse’ to see what you find), and as mentioned earlier, hit the used car market relatively quickly, driving down values of new cars. Customers logically ask themselves why they should buy a $20,000 new car when they can get the same car (albeit with a rental car past) for $13,000 with only 10,000 miles on the odometer.

From a brand standpoint, the largest sellers to fleets as a percent of overall sales were:

Chrysler (46.50%)
Dodge (39.38%)
Pontiac (39.29%)
Kia (34.26%)
Ford (34.09%)

The smallest sellers to fleets as a percent of overall sales were:

Scion (1.15%)
Acura (1.36%)
Mini (1.40%)
Smart (1.40%)
Honda (1.78%)

The above statistics included all fleet sales, including government, commercial, and rental. In large part (with the obvious exception of Honda), all are more or less niche brands. Combined, the five brands above sold fewer units to fleets (12,993) than some individual models such as the Pontiac Grand Prix (13,525).

When isolating the rental piece, the largest sellers (as a percent of overall sales) were:

Chrysler (39.87%)
Pontiac (33.89%)
Kia (33.36%)
Dodge (27.81%)
Mercury (25.86%)

When digging into individual models, the highest fleet percentages (overall fleet sales, not just rentals) were:

Ford Crown Victoria (94.23%)
Chevrolet Uplander (89.34%)
Dodge Magnum (75.43%)
Ford Econoline (71.95%)
Chrysler Sebring Convertible (69.95%)

Most of the above numbers can be individually explained. The Crown Victoria is now sold only to fleet buyers such as police departments and taxi companies (it’s not even listed on Ford’s website). The unloved Chevy Uplander minivan is being phased out in favor of the Chevrolet Traverse large crossover. The Dodge Magnum has been discontinued and the last of its production run was probably sent to fleet rather than retail buyers. Almost half of the Econoline’s fleet sales are to commercial buyers, such as plumbers and electricians; the days of the large custom van as a family vehicle were decades ago. Finally, the Chrysler Sebring Convertible is a favorite of car rental customers, particularly in warm climates, because it’s cheap, spacious, and the roof opens.

The individual models with more than 50% of all sales going to rental car companies are listed below:

Chrysler Sebring Convertible (69.34%)
Dodge Magnum (62.64%)
Pontiac Grand Prix (62.07%)
Chrysler PT Cruiser (61.90%)
Mazda Mazda6 (58.59%)
Chrysler Sebring Sedan (54.53%)
Dodge Avenger (54.23%)
Mercury Grand Marquis (53.20%)
Dodge Caliber (52.94%)
Suzuki XL7 (52.38%)

This means that the ten vehicles listed above can probably be bought used for a great deal, if they’re models that strike your fancy. It also means that if you buy a used Chrysler Sebring Convertible, there’s almost a 70% chance that it will be a former rental car, and if you have the misfortune of buying a new one as a retail buyer, it will depreciate pretty rapidly. That’s a little scary, particularly for a model that is only finishing its second year on the market. Perhaps the rumored Nissan-sourced midsize car to be sold as a Chrysler or Dodge will help solve the Sebring’s problem. Of course, the Sebring’s problem is also Chrysler’s problem; the fact that the Chrysler brand sells almost half of its sales to fleets has to be worrisome for Chrysler LLC, and dashes any hopes of Chrysler being a near-luxury competitor to Lincoln, Buick, or Cadillac in the near future. (All three of those brands sell less than 15% of their vehicles to fleets).

For all the data you’d ever want on fleet versus retail sales for the first half of 2008, visit Automotive Fleet’s website here. The direct link to my source data can be found here. And, of course, beware of the fleet queens during your car shopping excursions!

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