In 2016, an estimated 42 percent of retired rentals will go to auctions, down from 55 percent in 1999, Tom Webb, Cox Automotive's chief economist, told the annual convention of the Association of Consumer Vehicle Lessors here.
There's a short list of sources that supply used vehicles to dealers via wholesale auctions, each with its own near-term outlook:
- Dealerships: These generally are vehicles taken in trade that dealerships don't want and send to auction. With new-vehicle sales flattening, this source isn't growing, but some dealers say they're getting more older, higher-mileage cars in trade that they're willing to consign to auctions.
- Lessors: The steady rise of leasing in recent years promises a corresponding climb in the number of off-lease vehicles. The total will come to 3.1 million vehicles this year, Webb predicted, calling it "not that big." But he added, "2017's 3.6 million is more of a problem," and the flow will be "definitely a problem" when it tops 4 million in 2018.
- Repos: Repossession rates have remained level, but the rise in sales is leading to a steady rise in this low-volume supply.
- Rental fleets: The rental business has been soft lately. "I don't believe they have any need to grow their fleet size," said Webb.
Eric Lyman, vice president of industry insights at ALG, a unit of TrueCar Inc., agreed.
"We think rental fleet penetration," meaning its share of U.S. new light-vehicle sales, "will level off around 13 percent."
For more than a decade, rental fleets' share of new-vehicle sales has been between 11 and 14 percent, ALG's data show. Cox Automotive's data put the range between 10 and 12 percent since 1995.
The numbers may vary slightly, but the conclusion is the same. Rental fleets' share of total sales has been fairly steady on an annual basis, even if a flurry of retired rentals' sales at auction can depress used-car prices in any given month.
Of more import, Lyman said, was the impact on a specific brand's residual values and image. On that score, the market has shifted of late.
Webb said the Detroit 3's combined share of the rental market is "lower than it's ever been." That's a result of General Motors' 19 percent reduction in sales to fleets -- including rental, commercial and government fleets -- through September, continuing a policy it began in early 2015.
In contrast, Ford Motor Co.'s total fleet sales rose 10 percent through September.
But the big increases were elsewhere.
Nissan North America's fleet sales jumped 40 percent so far this year. Combined fleet sales by the Hyundai and Kia brands climbed 15 percent.
Ford has traditionally dominated the commercial fleet segment, including building cab-chassis units for coachbuilders that make specialized bodies from concrete mixers to fire trucks. After a year of boosting fleet, Ford's fleet mix is 31 percent through September compared with 28 percent in 2015.
Car-heavy Hyundai-Kia competes a bit with sedans and hybrids in the commercial and governmental segments but sells heavily to daily rental agencies.
Fleet is running at 21 percent of its total sales, up from 19 percent in calendar 2015.
Hyundai-Kia's share of the rental market "has been this high in the past," Webb said. But he added that back then, those brands weren't doing much leasing. Today, they are.
Jesse Snyder contributed to this report.