Last summer we published an account of rental fleet penetration trends in our monthly market update Guidelines.

In the July 2010 edition, we discussed the impact that excessive off-rental fleet supply can have on used vehicle values, and we pointed out makes and models that were at the biggest risk of seeing significant used value erosion because of high rental fleet penetration, or “pen”, rates.

Back then, the five brands with the highest rental fleet pen rates were (in order) Saturn, Chrysler, Mercury, Dodge, and Isuzu, with each having a rate at or significantly above 30%.

Fast forward eighteen months and only two brands – Chrysler and Dodge – are still doing business here in the U.S. 
Chrysler group’s dramatic annual improvement in new sales over the past few months piqued my curiosity around how much change there has been in the proportion of rental fleet sales relative to last year.

According to new vehicle registration data from R.L. Polk, Chrysler’s brands have significantly reduced the number of units sold to rental fleets and as a result, the group’s rental pen rate has dropped by -11% relative to last year.
 
This said, Chrysler and Dodge still derive a sizable percentage of overall sales from deliveries to daily rental fleets, and both brands still lead all others in this category by a wide margin.  In fact, Chrysler’s combined rental penetration rate for September and October was 18 percentage points higher than Chevrolet’s and 25 points higher than the market average (see penetration rate table).



Looking across models, both the Dodge Charger and the Chrysler 200 had a rental pen rate of 41%, while the Dodge Avenger led all other models over this period – Chrysler’s or otherwise – with a used retention-depressing rate of 69%.

Like we’ve stated before, new sales to daily rental firms benefit rental companies and manufacturers alike when volume and build configurations are approached responsibly, but when four out of ten – or in the Avenger’s case, seven out of ten – new sales are based on rental deliveries and not consumer demand, used value retention is sure to suffer. 

Make no mistake – Chrysler has made major strides relative to where they were just a year ago, both in terms of fleet penetration and new product.  The new Dodge Durango and its cousin the Jeep Grand Cherokee are both leaps and bounds above prior generations, and the interior of the Chrysler 300 matches those of cars with considerably higher price tags.

Chrysler still has some work to do before its accomplishments can be viewed in the same light as those of Chevy and Ford however.   A lot is riding on the new 2013 replacement for the compact Dodge Caliber, and all-new versions of the Avenger and 200 (due for 2014) simply can’t come fast enough.

Fleet heavy models do have one thing working in their used value favor.  Vehicles sold to rental fleets over the past couple of months will find their way into the used market next year at a time when overall supply will still be tight.  This will help lessen – but not prevent – value erosion to some extent. 

In addition, we know from our routine conversations with rental companies that there is a growing reliance on using data and analytics to maximize sale proceeds, and that this fact-based process was born out of the trend of rental companies assuming more of the risk associated with remarketing off-rental units.  

This intelligent approach regarding when and where to remarket will also help limit the price deterioration associated with a concentrated mass of returning rental supply.