Q: I saw on one of your manufacturer’s Repurchase Programs a reference to a “Non-Return Allowance.” What is that?
A: Some manufacturers, as part of their repurchase program, offer a cash allowance should the rental account choose to keep any of the vehicles they have purchased under the guidelines of the program. These programs vary from manufacturer to manufacturer and can vary for a manufacturer from year to year.
The 2011 Kia Forte. KIA, which had about 35,000 2010-MY rental car fleet registrations, now has a non-return allowance on most of its 2011 vehicle repurchase vehicles.
For example, as part of its repurchase agreement, Hyundai has offered a $1,000 non-return allowance for a number of years. This helps the rental account offset cost to a repurchase car that has been damaged or gone over the maximum mileage limitation. Sometimes you have a long-term renter who wants to buy the car — the non-return adds to your profit margin.
Sometimes a manufacturer may offer a non-return allowance that was not initially part of the program depending on market conditions and the needs of its dealers. For example, Kia, which had not offered a non-return allowance for a number of years, is now offering allowances on most of its 2011 repurchase vehicles. Other manufacturers do not announce the amount of the non-return allowance until after the minimum term of the repurchase program has passed.
The rental account must apply for the non-return money on a manufacturer-approved form prior to the vehicle’s maximum in-service period and after the minimum in-service date. This form is available from your fleet supplier.
The rental account may only apply for non-return on vehicles that have not been turned back into auction or designated turn-back center and will not be paid for rejected vehicles. An example of this can be seen with Hyundai, which has a standardized Excel spreadsheet that your fleet supplier can email you upon request. The form requires your company name and address, full VIN and reason for the non-return request. It is worth noting that most manufacturers will only accept this form via email.
Non-return funds usually take anywhere from 30 to 90 days. For example, the 2012 Hyundai Agreement states that the check goes out after 60 days. However, programs offering non-return allowances that are not part of the published repurchase program may take longer to pay the allowance.
This year a lot of rental companies are taking the non-return allowances. There are fewer new fleet cars and prices have increased, so it is harder to get replacements. It is not unusual to have 40,000-mile cars in a rental fleet, so keeping cars longer is not a problem. The market for used cars has remained strong, especially for Kia and Hyundai, so the cars are worth more.
Each rental account needs to carefully manage its fleet; it is your largest and most important asset.
Email your fleet-related questions to Auto Rental News care of [email protected] or directly to Eckhaus Fleet at [email protected]. Eckhaus Fleet is one of the largest independent fleet suppliers to the car rental industry.
Looking for other articles from our January/February 2012 issue? Go to our magazine page here.