Vehicles built by the Detroit 3 dominated sales to rental car companies in the first half of the year, according to the Manheim 2010 Used Car Market Report Mid-Year Edition.
But the rental companies are buying the vehicles because they need them and are paying more than they did when auto companies routinely used the rental industry as a relief valve for excess plant capacity, says Tom Webb, Manheim's chief economist.
"They're not selling them at a loss; the rental car companies are not buying them simply because they're bargains," Webb says.
Through June, cars and trucks built by General Motors Co., Ford Motor Co. and Chrysler Group accounted for 70 percent of the 829,060 vehicles sold to rental fleets, says the Manheim report. Manheim cited data from Bobit Business Media, a publications company that covers the fleet business.
In comparison, almost half of the 530,234 vehicles sold to rental fleets in the first six months of 2009 and 67 percent of the 869,297 sold in the first half of 2008 were Detroit 3 vehicles.
Annual sales of 1.5 million to 1.6 million units are needed to maintain the size of the nation's rental fleet, Webb says. Sales to rental companies totaled 1.1 million in 2009, down from 1.5 million in 2008 and nearly 2 million in 2007.
In the first half of the year, 65 percent of the rental cars in service and an even higher percentage of vehicles purchased by rental companies were sold under agreements that shift depreciation risk and remarketing expenses to the rental companies, Webb adds. That's up from 51 percent in the 2007 model year.
Before the recession, most of the vehicles sold into rental fleets by Detroit automakers were program vehicles, meaning the automakers assumed the depreciation risk and remarketing expenses of those vehicles.
Those vehicles stayed in fleets a short time and re-entered the market in large volumes, depressing used-vehicle prices and residual values and resulting in heavy losses for automakers.
Other highlights in the report:
-- Used-vehicle sales are projected to rise to close to 37 million in 2010 from 35.5 million in 2009.
-- More than 75 percent of franchise dealers buy some or their entire used-vehicle inventory online. Manheim.com now receives 900,000 visits per week, and more than 21 percent of all Manheim transactions occur through the auction company's Web site.
-- Late model used vehicles will remain in short supply at least through 2012 as the availability of off-lease units remains low.