While vacationing in the land of neverending chotchkies and kitsch, I came across Jack Baruth’s recent article on Captivas.
This second-tier Chevrolet is getting a stiff price premium at the auctions these days for two simple reasons.
1) GM is willing to throw more financing at this vehicle than it’s actually worth… at least the first 50 coming through their auctions.
2) There will likely be at least 50 people willing to pay that premium, and then some. Just to have any late model vehicle.
The first reason is nothing more than an old trick used by manufacturers for decades on end at the auctions. Limit supply. Finance aggressively. Hope that the ever larger loads of off-lease and rental vehicles that follow can hit a similar price premium.
Other than a few early victories, the manufacturer has to bow down to the limits of their dealer network and financing arm. Then the independent dealers enter the fray and the price finds an equilibrum that may yield profits for everyone. From the bean counters, to the shareholders, to the consumers. Everyone wins!
Except, in GM’s unique case, the Captiva has been a fleet-only vehicle. Which brings on the question. Do fleet-only models make sense?
On the “Pro” side you have three big dollar signs.
$: Fleet only vehicles allow you to amortize the costs of an old model so that it still pays for you to produce it.
This can be a blessing for loyalists (Town Cars, old style F150’s, ), federalists (Crown Vic Police Interceptors and government issued Impalas), frugalists (overproduced Metros and Escorts from the Y2K era), and mediocrit-ists (Chevy Malibu Classic circa 2004 & 2005)
$$: The ‘new’ model can receive a healthier retail price and resale value. Since the old model is focused on those who value price and ownership costs.
The retail vehicle is given more features and a higher MSRP. While the fleet model is decontented to meet the transport needs of rental car companies, government agencies, transport and courier firms, and limo operators.
Cannibalization between the two models is virtually eliminated if this is done right. The retail model gets profits from the higher end of the market while the fleet vehicle fulfills the more pedestrian needs of the lower end.
$$$: Social equity of the brand improves to the point where each model is now seen as a market leader.
Equinox/Terrain + Capitva = Market leader!
Ford Taurus + Crown Vic/Grand Marquis = Not Great… But Okay…
New Malibu/Aura/G6 + Oprah Giveaway + Chevy Malibu ‘Classic’ = New Ownership! Clean Balance Sheet! $$$$$$$$!!!
This brings us to the Achilles Heel of this theory. Reputation.
Can any automaker build and sustain a two-tiered retail and fleet strategy, using two different models, without it eventually harming their overall reputation in the long run?
This is not an easy question to answer. But hopefully the Best & Brightest can shed some light into the darkest of possibilities.
Great article Steve, offers alot to think about.
There’s still a big market for fleet vehicles, so an automaker could
-ignore it altogether, like Honda
-fill it with its regular brands
-fill it with fleet-only brands
Considering how little the average consumer knows about cars and how flagrant badge engineering used to be, I suspect that it would be very easy to slap a different model name (and maybe some plastic trim) on your fleet-only model and really minimize the rep hit. What if the decontented fleet Chevy Malibu was a “Geo Ventura”? Would anyone who doesn’t read TTAC know it was the same car?
Probably the best idea to control the reputation hit. Let all GM fleet vehicles be under the Geo brand. Already has a bad rep, and no one really will care.
Fleets do expect some residual value though so how far you take this is an interesting question.
Does Honda ignore fleets? There sure are an AWFUL lot of rental Accords out there, and have been forever. My local Enterprise outlet (down the street from my house) must have 20 of them. I have no idea, I just rent a ton of cars every year, and keep my eyes open as to what is on the lot. Or do the rental fleets just buy them retail(ish)? Hertz and Avis have plenty of them too.
Personally, the only “rental spec” anything Hertz has tried to stick me with in ages was a Captiva last week at PHL, I got a Fiat 500 instead. Hertz Choice for the win!
It always seemed to me that Enterprise got their cars on the secondary market rather than new fleet sales. I’m not saying their cars were dirty, used, shitboxes… no, wait, that is what I am saying. Anyway, Enterprise may have had a substantial number of off-lease Accords because Accords are durable, but I don’t think Enterprise bought them new from Honda.
I’m not sure where you are but I rent probably 50-75 cars each year all from major airports in the US & Canada and never, and I mean never, have got a Honda let alone seen one on the lot. This includes Enterprise, although National, Hertz and Avis are my go-to companies. Lots of Camrys, Altimas, Corollas, Malibus, Sonatas and Fusions. Recently been seeing a lot of Cruzes too. No Focuii yet. Few years ago the lots were overflowing with Sebrings and PT Cruisers. I’ll be in SLC next week, should I report back? Oh, and in Texas they always have some full size pickups on the lot. Yee haw!
Honda does not have a fleet department and they represent a very small percentage of vehicles in the rental industry. Enterprise Holdings also includes Alamo and National, they are HUGE and would not bother purchasing used cars.
Maybe this works better if you can tap different markets. Look at Mercedes taxis all over the rest of the world.
“tchotchkes”…Gentiles; oy vey!
Flashback to high school, 1989…
Hot high school girl is surprised to find my Bar Mitzvah photos at my home.
“Steve, you’re Jewish? But you don’t look Jewish?”
“Well, I’ll be happy to show you the proof.”
A few moments later she took my heart, took my virginity, and then the following year, she had the baby.
Thank God it wasn’t mine. But then again, there would have been a 16 month gap between conception and birth. We broke up amicably before I left for college.
She called me up out of the blue a few months ago. Now has 5 kids. Nice girl. Same guy surprisingly. Glad they all lived happily ever after.
Trackday Diaries: North Jersey Edition
LOL! A story that could only be told by a true mensch.
Echhh…rental cars are fakaktah.
We had a Chevy Classic as a rental when in Florida in 2005. Although adequate in every way, I never would have bought one.
I know nothing about the Captiva, but from what I read on here, doesn’t it deserve a better fate?
This is where I think the argument breaks down. The general public has no idea the car they rented is a fleet-only model. They just know that Chevy they rented was “adequate”. The next time they’re in the market for a car, they won’t shop Chevy if they want something more than just adequate.
Exactly.
I think the Captiva makes sense as there is no consumer-grade Captiva. Malibu Classic, on the other hand, can’t be doing much for the Malibu moniker, they should give it a unique name…Chevelle maybe?
Aside from branding issues, seems like a good way to utilize capacity and shield your new models from the fleet-queen stigma. Although there’s something to be said for getting people behind the wheel of your product, I very nearly bought a Mazda 5 after renting one.
Tough call.
The GM L-Body Chevy ‘Classic’ has been gone for 7 years now. 2005 was its last year, so it’s a moot point.
Well… there was a Z body (epsilon platform) Classic for 2008 when the Malibu was redesigned. Enabled GM to get another year out of the horrible boxy Malibu and create yet another model year of parts confusion…
Those were dropped sooner than expected, weren’t out for a whole year.
“create yet another model year of parts confusion”
Cars, the final frontier. These are the stories of General Motors. Its its endless mission: to explore strange new markets, to seek out new ways of building cars no one wants, and confuse consumers, mechanics, and parts counters everywhere. To boldly go into fleet sales and eventually back into bankruptcy!
The best policy is to always sell cars that the end user will appreciate even if there are several layers of middlemen in the ordering process. Don’t sell crap. Undesirable cars sold to fleets eventually get to a potential retail customer and cheapen the brand.
During the carpocalypse, Hertz started buying Toyota Camrys and keeping them for a couple years. Once I got used to the idea of rental cars with 40k miles, dents, and carpet stains, I started to appreciate renting a retail sedan with comfortable seats instead of killing my back driving a Cobalt. Fleet sales to rental car companies used to be a problem because those rentals used to compete for consumer dollars in the retail market in less than a year.
Brings to mind the days when fleet-only luxury cars made sense, like the Lincoln Towncars at Hertz and Budget. They had no problem selling those to the general public after they left the rental fleets. In Tucson it was first come, first served.
One guy I know has bought several rental cars, among them a Towncar and a Taurus. Each had every gadget and option that would appeal to an owner except that the interior materials were clearly entry-level grade, and no leather.
But I don’t think that fleet-only models by any auto maker make sense these days. I once rented a 4dr F-150 from Enterprise and it was more luxo-barge than anything else. Ditto with a Camry and a Sonata I rented from different companies.
When it comes to resale time, highly optioned models and better trim-levels sell much faster than the strippo models. Where else can you get a one-year old model with all the toys for a discounted price and prearranged financing, Zero down and easy monthly payments?
I think folks tend to forget that times have REALLY changed in the rental industry. I have been renting cars 20-30 weeks a year for scarily near 20 years now – I travel for a living. Back in the day when the big rental outfits were OWNED by the big three, you were going to get utter DRECK, every time. This is where the image of the “stripper rental car” came from. Countless base model Oldsmobile Achievas and Grand Ams. Ugh.
That was then, this is now. The Altima, Camry, or Accord I get when I rent a “full-size” (and those are 80% of what I get) is the exact same car you would buy off a dealer’s lot. Usually, but not always a mid-trim spec. If not, more likely to be a loaded V6 than a stripper. The Captiva is a new exception, and Hertz does have some. More than anything, the sheer variety of what I see at Hertz is amazing. I swear they have at least a few of 80% of what is sold in the US! They are definitely keeping cars a LOT longer than 15 years ago – not unusual to get a 35K rental car these days, and 2-3 years old, especially at the smaller locations. What you usually won’t see is anything new and hot, though there are exceptions – I got an orange Camaro when they first came out. I assume car companies intentionally place some cars to drive interest. Hyundai did this with the Sonota when the current one came out, I suspect. There is also a BIG difference between what you get at a “company store” and a franchise location. The franchises cars are usually older and higher mileage, and whatever is sold locally – often with the dealer name still on the trunk. As these are normally much smaller locations, they tend to be overwhelmingly domestic cars too – if you are going to get stuck with an HHR, it will probably be at some small airport somewhere, not at PHL or SFO. But for sure, Hertz cornered the market on Altimas the past couple years. Before that it was Camrys, before that Mazda6s. I actually miss those!
I’ll be picking up a car in Savannah GA on Monday – time to play “Rental Car Roulet? one more time! Will it be a minivan or a Corvette??
hehe “time to play “Rental Car Roulet? one more time! Will it be a minivan or a Corvette??”
No whammy, no whammy, no whammy, STOP!
krhodes1, speaking of which, my first experience with the Hyundai Turbo-4banger was in San Diego, CA. Picked the car up at Lindbergh Field and headed East on I-8 and then North on I-15.
Found myself doing 85 on I-8 and over 100 on I-15. Didn’t seem like I was going that fast without looking at the speedo.
Got pulled over by a CHiP officer who also happened to be a Sonata owner. He was more interested in the Turbo Sonata than he was in me speeding.
Got off with a verbal warning. He did tell me that his wife, who drives his normally-aspirated Sonata most of the time, gets flashed by his colleagues often for speeding because she loses track of how fast she is going.
So, the question, “Will it be a minivan or a Corvette??” is more than speculative since you can get bagged over the speed-limit in a lowly Sonata as well these days.
I bet they won’t have any problem selling those Turbo Sonatas when they get rotated out of the rental line-up. They’re not rental-fleet unique, but they’re hot.
I got Sonatas a couple times as rentals, and since that was my first real experience with Hyundai, they did much to fashion my opinion of the company. Now, I have absolutely zero interest in ever owning one.
redav, I don’t sell Hyundai. I don’t sell anything. Huyndai sell themselves. If Hyundai could make more, they’d sell more.
Can you believe that in MY area Sonata and Elantra sell OVER MSRP? And that is nothing compared to California and the West Coast where they sell at a hefty premium, mostly bundled with dealer-installed options that nobody wants or needs.
In spite of your dislike for Hyundai, they must be doing something right that attracts so many buyers and robs sales from Camry, Accord and Altima.
“attracts so many buyers and robs sales from Camry, Accord and Altima”
I know you’ve lauded Hyundai for some time, but other than engine displacements and other subtleties what is the real difference between they and *any* of those offerings? I see those and Hyundai as one big bland Asian mirage. What makes Hyundai stand out more and be the better buy in your opinion?
it is a game of numbers and overall the amount of vehicles sold fleet only have no real impact on manufacturer’s reputation since they are fleet only they are not subject to the same sales card process and follow up by either the builder nor the many satisfaction tracking orginations. They are built, used and sold under the radar of JD powers, Edmunds etc. They do provide the used market with a opportunity to buy cheap and sell for what the market will bear and in most cases a car with a Bowtie and nice looking will sell for something more than an off brand with the same amenities and drivetrain.
I have always considered Chevrolet an “off” brand. If I want quality, I buy Chrysler or Japanese.
Did i miss something and Chrysler quality is in the running with the Japanese? Like Toyota ‘Japanese’ or Mitsubishi ‘Japanese’?
did i just see chrysler and quality in the same sentence?
We must’ve just dropped into an alternate universe. When I think of Chrysler I think more Chinese than Japanese. As in, “This pentastar POS belongs in a Chinese razor blade factory. . .”
Actually, Fiatsler has won me over as well. I was never a Chrysler fan. In the past they made crap cars. I owned several Jeeps and they required a lot of TLC and repair.
But I have carefully compared the 2012 Jeep Grand Cherokee Overland Summit I bought for my wife against the 2008 Japan-built Highlander Limited I bought her in 2008, and I concluded that the Grand Cherokee is an even better CUV than the Highlander was. The Highlander has been a perfect CUV without any warranty issues. Hopefully the JGC will be just as good.
Fit and finish on the Grand Cherokee are excellent. Power, NVH and ride are outstanding. Handling is good for something this size.
I would recommend the Jeep Grand Cherokee in any trim to anyone considering a CUV. For those needing a V8, Grand Cherokee offers a 5.7 and the SRT-8 with the monster motor. No one else has anything like it. Variety is the spice of life and Grand Cherokee has it in spades.
People who own the 300 and 200 have told me the same thing. And sales show it. More people are buying Fiatsler products because they really are better today than the crap Chrysler used to peddle and inflict on us.
I must have misspelled, I meant ‘Chrysler kwality’.
April fools! Since when is a Chrysler product quality and Chevy an off brand. Time to lay off the crack pipe and educate yourself. Chrysler is and has been at or near the bottom of the barrel for years. The most recent 2011/2012’s have improved but still have a way to go before proving themselves compared to Chevy/Ford or the Asian products such as Honda. There is a lot full of Chrysler junk right before my eyes at work and 85% of them have been in the shop numerous times, are rusting prematurely, have had tranny failures, bad engines, interiors that are falling apart etc. The Chevy’s meanwhile have been very reliable and are holding up very well, my Impala included which now has 92k and still runs/drives the same as the day I bought it. Ditto most of the other Impalas, 05 on up Malibus, Cruze, S-10’s, Monte Carlos, Trail Blazers etc that litter the parking lot. I know because I actually take the time to listen to what people tell me in real life scenarios and not what some kid writes on the internet.
If cars are poor quality, they end up junked sooner, and hurts company in long run. In the past ‘early beaters’ such as Corsicas or Acheivas turned turned off new car buyers.
As someone mentioned above, if a good designed car is fleeted, then renter will want to buy. But if a ‘good enough’ outdated car is dumped in bulk, and renters ‘hate driving them’, it cuts image.
Agreed. I have a very positive experience with the new Malibu via rental in 2010, actually got me interested in the product. This is versus the last run in I had with a Malibu via rental in 2003, which turned me off to them.
I guess there is some expectancy with a fleet car that it will not be as nice as a retail car but… A bad product will result in a bad reputation regardless of it’s designation. Even at the fleet level real people still have to drive the wretched things, business have to maintain them and at some point you run out of excuses and patience and move to a brand that is trying harder.
Pulling some numbers out of my butt here…
8 out of 10 people who rent cars are NOT enthusiasts.
6 of them just rent based on price: “Oh lookee! A small SUV for $169 a week! And all my stuff fits!”
1 of them says “Oh, what a steaming pile of poo! What is this, a Chevy? Well, I’ll never buy a Chevy, if this is the crap they sell!”
and 1 of them says “What a lovely ride! I think I’ll buy one when I get home! What is it, a Chevy?” Then the go to the local Chevy dealer where they find out they can’t buy one. And go shopping someplace else.
I would say a higher percentage rent based on price, maybe eight out of ten, as opposed to six.
As long as each model, both fleet and retail, is able to maintain a good reputation for quality and reliability, then splitting the market does no real damage to the parent brand and can only help the consumer model. The Malibu Classic is an example of how not to do it, since that car was just plain awful anyway you cut it. The Crown Victoria/Taurus was a better effort, as although the Panther cars were outdated, no one ever really considered them a terrible car at what they did.
Along the lines of Ford’s old system, Nissan and Toyota seem to be the ones really pulling it off now. Nissan has the Cedric Y31 for fleets and the Teana for consumers, Toyota’s got the Crown Comfort for the fleets and the Camry for consumers. Neither brand really seems hurt by it. Finally, with the Captiva, GM actually has a quality product to dump on fleet buyers and they can start doing this right.
Actually those rental 2004-2005 Malibu Classics were better cars in many ways than the 97-03 units they replaced. The 3100 was dropped in 04 replaced by the 2.2 Ecotec which has proven to be a very reliable engine compared with the intake failure prone 3100. The brakes were upgraded and war-page on the rotors was considerably reduced. This series of Malibu also never had the intermediate steering shaft failures or the faulty power steering problems that the 04-07 versions suffered. We occasionally get 04-05 Classics in at our used dealership and rarely every see them again after the owners drives off other than routine service. Fuel economy as reported by several owners is also superior to the previous V6/Quad 4 cars.
…Equinox/Terrain + Capitva = Market leader!…
Actually if you do the math, the Equinox and Terrain combined is the top selling CUV in the United States.
“Do fleet-only models make sense?” Apparently not to Ford; witness the demise of the Town Car, Crown Victoria and Econoline.
Ford’s been trying to kill those for years. I do scratch my head at the logic since those were all nice profit centers, but maybe Dearborn knows something I don’t.
Part of the problem is that they all needed to be updated to meet new safety and fuel economy standards, and that would cost big $$$$
Not to mention, their existence isn’t good for Ford’s image which it is trying to drastically change. I work at Enterprise, and we still see a few Crown Vics come in. Compared to newer Fords, if you didn’t know better, you would think they were built by two completely different companies.
If the car can be built with a lot of parts commonality (thus getting the benefit of larger volumes) and minimal cost of development, I think it’s a great idea. Maximizes volume while keeping resale value of the mainstream product available to the public high (or at least not sabotage it.)
Sometimes renting a car does lead to a positive buying decision. Years ago, I rented (an admittedly fully-optioned) Ford Fusion for use at home when I had a ton of company arriving for a family event. I was impressed enough by the car to buy my own, which I enjoyed for several years. I always appreciate when I can actually rent a car that I have a chance (and interest) in owning. I always ask for what my options are, and try to chose the most interesting. Ok, I am an enthusiast and probably within the minority of folks who rent and could care less what mode of appliance toaster they get…but if I can score something more interesting, then I’ll take it. I’d hate to see rentals go back to simply being bland stripped down variants of basic transportation.
I had a similar experience with a Malibu Maxx LTZ that I rented. I liked the car so much after renting (and taking it on a 300 mile trip) that when the lease ran out on my then-current Pontiac, I got one. Truth be told, I like the form factor of a mid size car with a hatchback. My experience with the Maxx was very good, and I was greatly disappointed when GM canned the model for the US.
I think the only way GM or any other seller in the US market could do this is to use models not currently sold here. I guess I see the logic of using the Captiva in this manner, but only if it provides the end user with a great experience. The same issue would be had with any car(s) chosen for the same duty.
But points brought up by other posters are valid, and probably override what few benefits GM would get from this experiment. The fact that if they like the car, they can’t get one new, or that it could potentially cast a shadow over the rest of the product line. Addtionally, the duplicate assembly and engineering issues I would imagine would negate some of the benefits too, although since the Captiva is already here, I can see why they went ahead with it.
To put it plainly, no, a separate rental brand is a bad idea.
I had a great idea several years ago when the old Taurus was going out of production and the plant going to be torn down. I told my buddy that we should lease the Atlanta plant from Ford, lease the work force, and lease the equipment. Call our enterprise, RENTACARCO LLC. Make rental Tauruses and only sell to fleets. At the end of the rental term, buy them back cheap and crush them. Scrap metal is used to build new rental Tauruses. Ford is happy because they don’t have to buy out workers, the rental car guys are happy because they have a constant source of cheap cars. Wait, there’s more. We get rich by paying ourselves a “special dividend” like the one Hertz paid to its vulture capital partners, then the go public with an IPO and really cash out. When the whole thing goes KABOOM two years later, we don’t care.
And no, I’ve never worked for Ford.