Do Rental Sales Hurt Consumer Sales?
I ran across an article today that i thought i'd share. I dont the article itself has much new or interesting information, however it did touch on one point, albeit briefly, about fleet sales to rental companies. The author points out that GM often dumps large quantities of unsold cars onto rental fleets where styles isn't important. This is true, clearly, but the author should have gone deeper. Could these rental fleet sales actually be urting consumer sales?
Consider the situation when you rent a car, you want cheap, temporary transportation. Due to the huge volumes of GM and Ford cars sold to fleets, you will mots likely get a GM or Ford. So what then is your impression of the car? Sure you might be pleasantly surprised with the power, handling etc, but you went in there looking for cheap transportation and thats what you got. If you then go to a dealership and see the same car, will it have the stigma of cheap transportation? Also consider the sheer volume of the rental cars out there. If 99% of the time you see a rental car it's a Ford or GM would anyone really want to buy one? People will think youre driving a cheap car thats only good enough for a rental fleet.
When i was stateside last week i had a new Impala. It was not a bad car, it rode a bit to soft for my tastes, but it had decent power, the seats were comfortable, electronics were laid out well. But would i recomend it to someone? Would i buy it myself? Doubtful. No matter how much leather was thrown at it, how many gadgets installed or how much flashy paint or wheels were on it, it would still be a dressed up rental car to me.
It's an interesting thought, because what is "helping" GM and Ford in the short run could actually be giving their product a bad rap and hurting sales long term. Due to the gross overcapacity at GM and Ford and the dire need to maintain cashflow, they literally dump new cars on rental fleets. Sure this helps with cashflow short term and keeps the plants running, but in the end GM and Ford basically build cars for rental fleets. Why would anyone spend their hard earned dollars for a car that for the general population, is nothing more than cheap temporary transportation?
http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_levin&sid=aFXVDT_noz08
Consider the situation when you rent a car, you want cheap, temporary transportation. Due to the huge volumes of GM and Ford cars sold to fleets, you will mots likely get a GM or Ford. So what then is your impression of the car? Sure you might be pleasantly surprised with the power, handling etc, but you went in there looking for cheap transportation and thats what you got. If you then go to a dealership and see the same car, will it have the stigma of cheap transportation? Also consider the sheer volume of the rental cars out there. If 99% of the time you see a rental car it's a Ford or GM would anyone really want to buy one? People will think youre driving a cheap car thats only good enough for a rental fleet.
When i was stateside last week i had a new Impala. It was not a bad car, it rode a bit to soft for my tastes, but it had decent power, the seats were comfortable, electronics were laid out well. But would i recomend it to someone? Would i buy it myself? Doubtful. No matter how much leather was thrown at it, how many gadgets installed or how much flashy paint or wheels were on it, it would still be a dressed up rental car to me.
It's an interesting thought, because what is "helping" GM and Ford in the short run could actually be giving their product a bad rap and hurting sales long term. Due to the gross overcapacity at GM and Ford and the dire need to maintain cashflow, they literally dump new cars on rental fleets. Sure this helps with cashflow short term and keeps the plants running, but in the end GM and Ford basically build cars for rental fleets. Why would anyone spend their hard earned dollars for a car that for the general population, is nothing more than cheap temporary transportation?
http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_levin&sid=aFXVDT_noz08
posted by Corrigan at 3:07 AM
4 Comments:
The answer: Yes.
Also, selling massive amounts to rental companies drastically hurts the resale value of cars. With some rental companies, their contract requires GM to buy the vehicles back after 6 months or a year. Then GM is forced to put them on the auction block for GM dealers.
The other situation is Enterprise. They actually buy their cars and then sell them directly to auctions after about three years.
This large amount of used cars on the market is one of the key reasons that domestic manufacturers have poor resale value. Nobody will give you a good price when the market is flooded.
So I needed a break from work and thought I would check out what you had posted.
OK, I don't work in the car world so you may view this as a bunch of garbage, but it has been in my experience of car talk that most people find Fords very "economical" rather than "cheap". They do get what they pay for, but some people are simply looking for economical in this day an age. The average person isn't thinking about rentals when they go and purchase a car, they think economics and what the necessity of the cars gadgets are to its overall cost.
I eat, breath and drink (of course) in a city and if I look around 100% of the government employees around me are only driving Fords. I would think this goes back to economics and the fact that they are reliable cars, no? I may have to eat my words on that last comment due to the Auction Factor. That is, when and where are government cars are being purchased (new or used at an auction)?
If you want better resale of any car, then there should be stricter rules around emission's testing. It would get the old cars off the road a lot faster and force people to purchase new or newer used cars, but this issue is a whole new can of worms.
newer rules for emissions wouldn't get old cars off the road. almost all laws have grandfather clauses allowing the current cars.
cheap, economical... semantics. as for rental cars, i truly do believe they have a strong impact on the market. think about anything you've boughten. if you were shopping and had an experience with one of the products you were shopping for, that experience would have a very strong effect on your decision making process.
Old cars off the road..that's all i own!
I still maintain that if global warming is happening, it's most likely non human related. Sunflares, difference in the output of the sun, volcanoes, natural variance...it's a bit egotistical to think that we are affecting the climate with CO2, a vital ingredient to life on the earth. hmmm..might be a good blog!
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