Historic Times for Fleet Sales
Usually characterized by discount pricing, fleet sales consist of sales of vehicles to corporations, rental car firms, utility companies, and government agencies. In recent years, the auto industry has extended fleet sales to companies in the small business sector. Fleet sales have traditionally given automakers ways to sell large volumes and find homes for surplus inventory. Before the auto industry started its recovery, however, manufacturers tended to lose money on fleet sales. If they didn’t lose money, fleet auto sales were still considered low-profit line items, a way for automakers to pad their budgets and keep factories open.
However, over time, fleet sales have been turning much more profitable with the recovery of the auto industry since the financial crisis of 2007-2008. U.S. auto manufacturers are doing a better job of producing the kinds of vehicles people want; companies are able to charge better prices for cars and trucks in both the retail and fleet markets.
Recently, fleet car sales have skyrocketed: in fact, commercial fleet sales reportedly increased by 8.8% in 2018, primarily bolstered by sales of trucks, SUVs, and vans. Sales of vehicles for government fleets also increased by 2.4%.
History of Fleet Car Sales
Frequently, the vehicles were discounted too steeply when sold to rental car agencies. Pushed by labor contracts and inflexible manufacturing facilities into continuing the production of unpopular models, the big three automakers, General Motors, Ford, and Chrysler, were faced with an overstock of cars and trucks in showrooms. Needing to move the vehicles off the lots, they used rental car agencies as temporary repositories.
The automakers often lost money a second time, too. After buying back the fleet vehicles from the rental car agencies at excessively high prices, they were then forced to resell the used vehicles at wholesale auctions due to oversupply. However, with the auto industry’s recovery, manufacturers have developed new fuel-efficient models such as the Ford Explorer sports utility vehicle and Chevrolet Impala, which are very popular with consumers. Meanwhile, automakers are exercising greater caution over offering vast discounts in fleet sales and have been making fewer agreements to buy back used vehicles.
Fleet Sales Deals
Automakers have also been forging successful deals such as fleet sales of sedans and sport utility vehicles to police departments. For example, in fleet sales to law enforcement agencies in 2014, Ford sold 10,000 police-issue Taurus full-size sedans and 20,000 units of the Interceptor Utility, a modified version of the Explorer. From 2011 through 2014, the California Highway Patrol paid just under $30,000 for each of the Interceptors it purchased. In early 2013, the Los Angeles Police Department bought 188 new vehicles to replace older cars and trucks in its huge fleet. The new vehicles included 50 Interceptors, 38 Ford Sedans and 100 Dodge Charger Pursuit sedans. Currently, the Los Angeles Police Department website states that annual fleet purchases can cost anywhere between $25 to $32 million, “including the cost to equip or modify vehicles to meet the needs of the Department.” While each state or city department retires their fleets at different mileages or in different years, the generated sales are definitely increasingly benefitting automakers.
In some cases, automakers are making moves to hold off on fleet sales, at least temporarily, and sell a vehicle at retail only. As of March 2015, Ford made such a decision about the F-150 pickup truck, launched in 2014. Under conditions of tight supply and high consumer demand, Ford opted to make sales of the truck to retail customers a priority.