Fewer retired rental vehicles are coming to auction, pushing their prices up.
In the first quarter, automakers sold 392,000 cars and trucks to rental fleets, down 6 percent from a year earlier, says Chris Brown, executive editor of Auto Rental News.
At the same time, the number of vehicles in rental fleets grew and the number of retired rental vehicles at auctions dropped, Manheim data show.
The Detroit 3 relied heavily on fleet sales in the first nine months of 2010 and have cut back this year. Now other automakers also are curtailing low-margin fleet sales in the wake of the Japan earthquake, prompting fleets to hold on to the vehicles they have.
Mark Eckhaus owns Eckhaus Fleet, a company that he says buys "tens of thousands" of vehicles a year for resale to over 200 independent and franchised rental car operators. He has been told by manufacturers and dealers that sales to rental fleets have been curtailed or halted amid concerns over new-vehicle shortages stemming from the earthquake.
He usually buys Hondas from large dealership groups. But they have been told by the factory that their allocation will be slashed, and as a result have stopped fleet sales "until further notice," he says. Hyundai also notified him that it is having a hard time filling retail orders and is reducing its fleet sales, he adds.
"Since the earthquake, everybody has been afraid to sell cars," says Eckhaus. "I mean, you can sell a car and make a lot of money on it, but will you be able to replace it? We talk to every single manufacturer, and it's scary out there right now."
Richard Kent, American Honda Motor Co. senior manager of marketing, says he knows of no official statement that dealer sales to fleets have been cut, but adds that it would seem logical if Honda production is off 50 percent that sales to fleets would be off, too.
Bob Barton, president of Franchise Services of North America Inc. of Jackson, Miss., which operates U-Save Car & Truck rental system worldwide and other rental companies, cites another reason the rental companies are holding vehicles longer.
Back when most of the vehicles in rental fleets were program cars -- vehicles repurchased and remarketed by the factory -- rental companies typically got rid of them right after the New Year's holiday and then restocked for spring break and the Easter season, says Barton, who also is president of the American Car Rental Association.
That's no longer the case. In 2010, fewer than 30 percent of rentals were program vehicles, according to Manheim. That means the rental companies have to remarket most of the vehicles themselves -- an expensive process, even with sky-high used-vehicle prices, he says.
"When you own the vehicles, by the time you get done taking the vehicle to the auction, cleaning it and getting it ready to sell, it doesn't make economic sense to do so," he says. "With new-car prices being higher, you'd have to pay more to replace it."
Mark Rechtin contributed to this report