PREMiERdrum Posted October 3, 2012 Share Posted October 3, 2012 CLEVELAND, Ohio -- General Motors' Lordstown-built Chevrolet Cruze remained the No.1 compact car in the country last month, thanks entirely to profit-free sales to rental car fleets. Last month, 39 percent of Cruze models headed to airport lots and other rental locations, up from 30 percent in August. And at the same time that it was boosting Cruze sales to rental fleets, GM surprised analysts by doing the opposite on pickups - cutting fleet sales to protect brand values. Selling large numbers of cars to fleet at wholesale prices can cause huge problems for automakers. Profits are minimal at best, and rental companies tend to keep cars for about a year before dumping them onto the used-car market. http://www.cleveland.com/business/index.ssf/2012/10/chevy_cruze_stays_no_1_in_sept.html Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted October 3, 2012 Share Posted October 3, 2012 Well, put one in the plus column for Focus retail for October. My roommate picked up a new '13 SE 5-door yesterday. Nothing too fancy, but giving it a good once over yesterday, I will say the fit and finish appear to be superb. Nice looking little car! Take that, Cruze! :P Quote Link to comment Share on other sites More sharing options...
PREMiERdrum Posted October 3, 2012 Author Share Posted October 3, 2012 39% fleet... good grief. Over produce, over discount, win the sales race! Quote Link to comment Share on other sites More sharing options...
akirby Posted October 3, 2012 Share Posted October 3, 2012 Don't forget pushing subprime financing. Another radio ad was bragging about how they got someone Cruze or Sonic financing with a 489 score. What's going to happen when all those rental units start hitting the used car market and they start repossessing cars that buyers can't pay for? Quote Link to comment Share on other sites More sharing options...
FordBuyer Posted October 3, 2012 Share Posted October 3, 2012 39% fleet... good grief. Over produce, over discount, win the sales race! Also see that Toyota offered 0% financing to over 30% of its customers in September, the highest in the industry. Corolla certainly needs that kind of help. Quote Link to comment Share on other sites More sharing options...
akirby Posted October 3, 2012 Share Posted October 3, 2012 Also see that Toyota offered 0% financing to over 30% of its customers in September, the highest in the industry. Corolla certainly needs that kind of help. That is roughly equivalent to and in lieu of a $1K rebate (or less) and it's usually only offered to buyers with good credit. In that context it's not terrible. Quote Link to comment Share on other sites More sharing options...
aneekr Posted October 3, 2012 Share Posted October 3, 2012 (edited) http://www.cleveland..._1_in_sept.html Here goes Mr. Schoenberger again, with his vague, unsubstantiated generalizations about OEM sales and marketing strategies for light vehicle fleet customers generally and the rental vehicle segment specifically. Edit: Schoenberger partially redeemed himself by appending some correspondence from GM spokesman Jim Cain to the bottom of the article. Nonetheless, if he wants to use the Cleveland Plain Dealer as a venue for his commentary about the automotive fleet and remarketing fields, Schoenberger ought to become better informed about them. Edited October 3, 2012 by aneekr Quote Link to comment Share on other sites More sharing options...
aneekr Posted October 3, 2012 Share Posted October 3, 2012 What's going to happen when all those rental units start hitting the used car market and they start repossessing cars that buyers can't pay for? The simple answer is 'nothing unexpected.' Re: rental unit remarketing: Most OEMs, including GM, offer repurchase agreements for rental car firms that define depreciation rates, delivery schedules, in-service periods, ancillary charges (e.g., vehicle damage, excess mileage, etc.), and turn-back arrangements. These agreements are designed to optimize forecasting, capital allocation, and other operations management related elements for the OEM, the rental firm, relevant financial institutions, and any third parties involved in remarketing like ADESA or Manheim. Re: repossession: This is done on a case by case basis, depending on the specifics of what constitutes default as specified in vehicle purchase/lease contracts and state and local regulations. Nonetheless, subprime credit scores alone may not result in higher rates of auto loan defaults, as the trend recently has been toward lower loan-to-value ratios (LINK). Quote Link to comment Share on other sites More sharing options...
fordmantpw Posted October 3, 2012 Share Posted October 3, 2012 The simple answer is 'nothing unexpected.' Re: rental unit remarketing: Most OEMs, including GM, offer repurchase agreements for rental car firms that define depreciation rates, delivery schedules, in-service periods, ancillary charges (e.g., vehicle damage, excess mileage, etc.), and turn-back arrangements. These agreements are designed to optimize forecasting, capital allocation, and other operations management related elements for the OEM, the rental firm, relevant financial institutions, and any third parties involved in remarketing like ADESA or Manheim. Re: repossession: This is done on a case by case basis, depending on the specifics of what constitutes default as specified in vehicle purchase/lease contracts and state and local regulations. Nonetheless, subprime credit scores alone may not result in higher rates of auto loan defaults, as the trend recently has been toward lower loan-to-value ratios (LINK). But as these rentals show up on the used market and the resale value plummets, buyers today will be so terribly upside down in their car, that when they can't make the payments, it's easier to let it be repo'd than to sell it and get less than you owe on the loan. Quote Link to comment Share on other sites More sharing options...
akirby Posted October 3, 2012 Share Posted October 3, 2012 But as these rentals show up on the used market and the resale value plummets, buyers today will be so terribly upside down in their car, that when they can't make the payments, it's easier to let it be repo'd than to sell it and get less than you owe on the loan. This. ^^^^^^ I was referring to the impact on residual values and long term financial impact of failed loans. Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted October 3, 2012 Share Posted October 3, 2012 (edited) Re: rental unit remarketing: Most OEMs, including GM, offer repurchase agreements for rental car firms that define depreciation rates But: If the mfr allows the agency to purchase a product mix that diverges significantly from retail sales (typically, lots of base/poorly equipped models) the arrival of a significant number of minimally equipped vehicles on the used car lots a year or less after launch tarnishes the brand and reduces the ATP for new ('why should I buy a new Belchfire 8, when I can get a year old model for half the price?'). How do we know that GM's repo agreements are preventing a flood of bargain basement Cruzes from hitting the market next summer? Edited October 3, 2012 by RichardJensen Quote Link to comment Share on other sites More sharing options...
fordmantpw Posted October 3, 2012 Share Posted October 3, 2012 But: If the mfr allows the agency to purchase a product mix that diverges significantly from retail sales (typically, lots of base/poorly equipped models) the arrival of a significant number of minimally equipped vehicles on the used car lots a year or less after launch tarnishes the brand and reduces the ATP for new ('why should I buy a new Belchfire 8, when I can get a year old model for half the price?'). How do we know that GM's repo agreements are preventing a flood of bargain basement Cruzes from hitting the market next summer? Not to mention, when you rent a vehicle and it's a bargain basement model, what is your opinion of that vehicle (and the brand) vs. that rental being a more upscale version? See: Ford Taurus Quote Link to comment Share on other sites More sharing options...
aneekr Posted October 4, 2012 Share Posted October 4, 2012 (edited) How do we know that GM's repo agreements are preventing a flood of bargain basement Cruzes from hitting the market next summer? That's a good question. I no longer work in the automotive fleet field, so I don't have insight into exact repurchase agreement stipulations for Chevy Cruze. My guess is that allocation of this model to larger rental firm customers is weighted toward midgrade and highline trims. The fleet specific Cruze, code 1FL, is based on the midlevel LT grade (link to Cruze fleet order sheet). My own experience renting cars on business trips - anecdotal and limited as it may be - is that most Cruze models present in the major rental firms' fleets (Enterprise, Hertz, Avis Budget Group, and Dollar Thrifty) are LT and LTZ trims, with relatively few of the low end LS trim. I've noticed similar weighting for Ford products as well. Many smaller rental firms - and even the larger ones regarding specialty cars - prefer to handle remarketing their fleet vehicles on their own. In fleet management parlance, such assets are termed "risk vehicles". This would be the default option for rental car deliveries that do not conform to OEM repurchase agreements. Edited October 4, 2012 by aneekr Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted October 4, 2012 Share Posted October 4, 2012 Ford's repo requirements are available online--although, I'm sure all of them are up for negotiation Would not be surprised if GM is willing to skew the fleet mix down market, if the agencies press them on it. Their fixed costs are significantly higher than Ford's. Quote Link to comment Share on other sites More sharing options...
Noah Harbinger Posted October 4, 2012 Share Posted October 4, 2012 39% fleet... good grief. Over produce, over discount, win the sales race! NOT 39% fleet: 39% daily rental fleet. Quote Link to comment Share on other sites More sharing options...
jpd80 Posted October 4, 2012 Share Posted October 4, 2012 (edited) Ford's repo requirements are available online--although, I'm sure all of them are up for negotiation Would not be surprised if GM is willing to skew the fleet mix down market, if the agencies press them on it. Their fixed costs are significantly higher than Ford's. Good old GM, they are as predictable as a clock, pump and dump all the way so long as factory order books are full, makes it look like everyone is doing a great job, large bonus checks for production and sales managers ensues.... Edited October 4, 2012 by jpd80 Quote Link to comment Share on other sites More sharing options...
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