Slumping U.S. new car sales– and their effect on manufacturers– are getting a lot of ink (and unleashing torrents of the red variety). Meanwhile, the American used car market ain't a load of laughs, either. Dollar Rental has checked-in with their financial results for the first quarter of the financial year. Explaining their $297.9m Q1 loss, Dollar's CEO brings the noise. "As we had anticipated, weakness in demand and pricing in January, coupled with an increase in fleet costs, adversely affected our performance in the quarter." Now don't get to thinking that this is good news for The Big 2.8, reflecting their oft-stated commitment to cutting back residual-killing fleet sales. Dollar asserts that "vehicle depreciation costs per vehicle increased approximately 31 percent in the first quarter of 2008 over the first quarter of 2007, and were above the Company's expectations due primarily to softness in the used car market." In other words, unloading their old shit is proving problematical. Solution? "The Company expects that its new fleet optimization software, together with the anticipated extension of fleet holding periods, should moderate the increase in vehicle depreciation costs over the course of the year and should enable the Company to operate a more efficient fleet program." Bottom line: look for rental cars to get older and prices to go up.
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I don’t think this is a bad idea. I rent cars fairly frequently, and rarely see one with more than 10K miles. It’s gotta be expensive to turn their fleet as often as they do.
The devaluation of the Dollar continues…
Where did you find that photo? That’s one of the best finds you guys have come up with in a while. Perhaps the guy on the back left is the only realist of the bunch.
Rental car companies prefer fairly new vehicles in order to minimize maintenance costs and to maximize resale value. It is (or used to be) cheaper to flip cars after 6-12 months of use than to keep them for years and years (and risk–gasp!–having to spend money maintaining the cars). Even a Chevy Classic will drive trouble-free for, say, the first 6-12 months.
Wow! Dollar is being run by international MBA’s, too! Sell it short!
I would think it would be fine to keep a car for 20,000 miles with no maintenance other than oil changes and tire rotations. But I’m sure they have expensive modeling software to figure this out ahead of time.
Well the several rentals I’ve had recently, Malibu, Caravan, Cobalt, Caliber, Focus, Corolla had from 5k – 15k miles and were starting to show signs of quality problems (yep even the Toyota).
The Big 2.8 talked why they wanted rental fleet sales was to impress those who rented them into hopefully getting them to buy a new car of that model. That failed badly as it just reminded me of why I won’t buy any of them.
Oddly enough, at this very moment I am renting a Dodge Caliber from Enterprise with 33,000 miles on it. That does seem a bit weird.
rented from hertz three weeks ago. I was given an 07 Accord with 16K on it.
My buddy is a body man and he regularly gets to repair Enterprise rental cars with boo boos. He knows the Enterprise guys and last I knew, once the car hits 23,000 miles, it’s history/goes back into the system and is sold. I’m surprised if Enterprise are running a rental car with 33,000 miles on it; they must have re-run their math and decided to stick out the reliable cars.
But then since we’re talking a Dodge Caliber, I have to wonder instead whether they’re sticking it out simply because the resale value on a Chrysler product sucks big-time? Or, are these Caliber’s reliable?
If the engine is, it sure can’t be laid at the feet of Chrysler, since Hyundai lead the design team on this “global motor” (and it is built in a Dundee Michigan factory 1/3 owned by Chrysler, 1/3 owned by Mitsubishi and 1/3 owned by Hyundai).
I recall reading a paper on this engine and Hyundai designers intended for the engine to be able to reliably last 250,000 miles or more.
Ironically, only Chrysler is tapping the Dundee plant as a source for engines at this time.
I had to drive a crap midsize Pontiac from Philly to Lakehurst, NJ a few weeks ago which had a racing engine sound; an awful overall drive; and something like 30,000 miles. From Avis. I filled out their survey and told them how thrilled I was not to have a compact car like I asked for, and they rebated 40 bucks.
That guy in the back left of the photo better feed that thing on his head, or it’s gonna go for that cake.
The Toyota Matrix I picked up from Hurts this morning had 51,000 KMs on it.
The Detroit 3 have stopped giving the rental car agencies cars for basically free, so the rental car places have cut back on buying, keeping the cars longer. Duh.
Geotpf: The Detroit 3 have stopped giving the rental car agencies cars for basically free, so the rental car places have cut back on buying, keeping the cars longer. Duh. s this article states, Dollar is NOT tagging the rising cost of buying their cars as their main drag on profits. It’s a selling problem. They can't unload them at the right price afterwards. You could argue, same diff. But it's not.
My understanding was that back in the days of “program car” used-car bargains, the cars were sold (leased?) to fleet operators with guaranteed buy-back prices (or lease termination values?). Fleets sold such cars only when they’d bring more than the factory’s specified repurchase price. If those buyback deals have disappeared, then resale value would become much more important. Is there any reader who’s in the industry and can inform us about this point?
“expects that its new fleet optimization software, together with the anticipated extension of fleet holding periods”
This implies not only longer holding periods, but also closer attention to projected resale values when purchasing vehicles.