Automakers have used fleet sales to prime the pump of this recovery. October was the first month that retail customers rather than fleet buyers drove sales higher.
But now the chickens are coming home to roost in the form of pockets of soft used-vehicle prices.
Used-car and -truck inventories remain tight and prices high. But disproportionately high fleet sales rates for some new models are causing price drops when those vehicles return to the used-car market, say analysts at NADA Used Car Guide.
"Rental penetration rates above 30 percent can have a corrosive effect on used-vehicle values because those units return to the market in large quantities over a compressed period," says Larry Dixon, an auto analyst at NADA Guide. The company analyzed rental fleet registration data from R.L. Polk & Co.
Consider the Dodge Grand Caravan. Through October, Chrysler Group had sold about a third of its 2010 Grand Caravans to rental fleets, NADA Guide's analysis found.
Last summer, the average wholesale price for both 2009 and 2010 used Dodge Grand Caravan SXT minivans hovered around $17,000. In May and July, prices of the 2009 models slightly exceeded those of the used 2010s.
Dixon says the used 2009 and 2010 models never should have been so close in price. What happened next restored -- suddenly -- the usual price difference between the two model years.
The number of retired rental 2010 Grand Caravans returning to market jumped from 148 units in July to 421 in August, 826 in September and 664 in October. In contrast, the volume of retired rental 2009 Grand Caravans entering the used-car market from July through October peaked at 143 a month in October.
The influx of 2010s pushed prices down. By October, the average price of a used 2010 Grand Caravan dropped almost 4 percent to $16,566. And that of the competing 2009 Grand Caravan plunged 20 percent to $13,723.
Other models may face similar price swings. According to NADA Guide data, many brands, including Dodge cars, Chevrolet and Hyundai, will see large increases in retired rental volume re-entering the market through the first quarter of 2011.
For models with high retail demand, such as the Dodge Charger and the Chevy Traverse, that won't be a problem. Their prices might soften but will not plummet, Dixon predicts. "They're going to be protected more or less from significant declines," he says. But "there are some manufacturers and models we're keeping a closer eye on."
Jonathan Banks, director of editorial and data services at NADA Guide, says: "When you get to these high rental penetration levels like we've seen on some Chrysler models -- in the 60 to 70 percent of total sales to rental fleet -- you can't put those in the market and expect consumers to purchase them because there was never consumer demand for those vehicles in the first place."
