The availability of repurchase vehicles is diminishing, and this situation will not change any time soon. Many of you have already accepted this realization and have decided to purchase risk vehicles.
Obviously, price plays a significant role in the selection process in terms of available capital as well as the affect on monthly interest costs. We can all recognize a “cheap” deal when we see one, but at the same time we have to be cognizant of other factors beyond price.
So how do you go about evaluating vehicles and determining the best ones to buy?
Understand the Incentives Game
Following acquisition price, residual value is the next critical factor. Besides just forecasting residual value you need to consider brand value, brand and model durability, local dealer stability and local vehicle supply.
From the rental operator’s standpoint, brand value consideration goes beyond the public perception to include how the manufacturer reacts when it misses sales targets.
Many times, deliveries to rental fleet accounts are the first course of action to correct for an oversupply of cars. The benefit to the manufacturer is that the incentives can be earmarked exclusively for those units. However, if that action does not resolve the oversupply then the manufacturer may increase the retail incentives to correct the imbalance. This puts you in the unenviable position of having vehicles in operation that are actually more expensive than new units on the local dealer lot.
Kick the Tires at the Auctions
While the Internet has become a marvelous tool to review average prices and values, it can’t show you the durability of a vehicle coming out of rental service. Visit your local auction on pre-sale day and inspect the vehicles in the class you are considering.
Look for durability indicators: worn tires at low mileage, excessive denting to deck lids, hoods and doors, abnormal interior wear patterns on the cushions, carpeting and seatbelts, and excessive bumper cover damage. Your top maintenance processes will be all for naught if the new cars you are buying show excessive wear-and-tear at the other end. There are still many program cars running through the lanes, so take advantage of this opportunity while you can.
How Stable Is Your Local Dealer?
Should the need arise, consider the local dealer of that brand to provide service and parts—not just batteries and radio knobs but crash parts as well. Additionally, just how stable is the local dealer of that brand? Will they be in business when the cars come out of service? Has the franchise been bounced around between several dealer groups over the last couple of years? If so, the retail (new or used) market for that brand may not be there to support you when your vehicles come out of service.