Automotive News (subscription required) reports this week that nearly half of Chrysler brand vehicles (48.5 percent) were bought by fleets in recent months. This is more than any other brand (Pontiac is next with 44 percent.) Critics of Detroit often mention the high percentage of fleet sales, and Detroit executives often talk about reducing their dependence on these sales.
What’s so wrong with selling vehicles to fleets?
A few things, especially when the fleet in question is a daily rental rather than a government or corporate fleet. Only about a quarter of GM’s and Ford’s fleet sales were to rental companies such as Hertz and Avis. For Chrysler, about half were.
The downsides to fleet sales begin with profiability: fleets get larger discounts than consumers do, because they buy in volume. And rental fleets get the largest discounts.
The second problem has a larger direct impact on consumers: fleets, and especially daily rental fleets, often only own the vehicles for a relatively short time, then dump them into the used vehicle market. This substantially depresses the used car values for models that sell heavily to fleets. Buy one of these models, and you’re almost certain to take a bath come trade-in time.
As Hawk pointed out in the thread on this topic over at Allpar, these nearly new fleet cars also compete with new cars, making it harder for dealers to sell the latter. Chrysler’s most recent attempt to deal with this problem: only dealers that take their quote of new cars can buy used fleet cars at Chrysler’s auctions for these.
A third problem I first saw mentioned over at The Truth About Cars: when manufacturers develop a model they know will be heavily sold to fleets, they are even more inclined to cost-cutting than they usually are. So the resulting product is more likely to look and feel cheap.
A final, related problem with fleet sales: fleet customers aren’t as picky as retail customers. They don’t care as much about appearance, performance, fuel economy, comfort, or many other things retail car buyers care about. They care about operating costs, and they especially care about price. Conversely, a higher proportion of fleet sales is a sign that the people who do actually care about appearance, performance, and so forth don’t think highly of the car. The more appealing a car is to the people who drive it, the lower the percentage of fleet sales can be expected to be.