Q: Lately my local dealers have been coming to me with some good deals on new cars. What criteria should I use to know if these deals are right for me?
Jack Vercollone — vice president, Sixt Rent A Car, Boston
A: Those good local deals can and should be taken advantage of, but only if you have a flexible fleet plan and keep certain criteria in mind.
The first order of business is to understand your fleet plan, and to make it flexible enough to fleet up opportunistically.
This means completing your fleet planning in conjunction with your annual profit plan and forecast. However, because rental demand, fleet needs and the resale market are continuously changing, you should review your plan every 30 days to ensure adjustments are being made and appropriate actions are taken, such as spot buys and de-fleeting as the market dictates.
MMR (Manheim Market Report) and Black Book are important benchmarks for past market performance, and both assist in projecting the models that could be your best fleet buy. However, the data is still historical.
Always having a good fleet mix by model — and more importantly, by manufacturer — will ensure that you’re not too heavy in any one car type. This will lessen the chances of getting burned if the market gets unusually soft on a particular car type or manufacturer.
When you buy outside of your original plan, it helps to have a diversity of remarketing channels when it comes time to sell. Develop and strengthen relationships with local and regional auto dealers, wholesalers, auctions and credit unions. These channels provide a diverse pipeline for not only selling your fleet but also will open up new possibilities to acquire fleet.
Depending on your rental market and your percentage of business versus vacation customers, the selection of cars and the rate that will support your fleet mix may differ from other rental markets. Therefore, each rental operator must challenge the “standard” fleet model.
Do the vehicles you’re considering fit your existing business model? Will your customer base support the rental rate you can get for those models? Can you create a market niche with a certain car type that will be financially beneficial, both during its rental life but more importantly at time of disposal?
You also need to consider the time of year when you’ll be selling those cars. This becomes even more important for rental operations that have more pronounced peaks and valleys in demand, such as those in vacation destinations with short summer seasons, ski areas or hot weather climates.
Think twice if your optimal time to de-fleet puts you at a time of year when the market in your area is deflated.
If buying new, be mindful of dumping units when manufacturers will be offering aggressive retail pricing and rebates on new units specifically if within the current model year, which isn’t necessarily in autumn anymore. Those deals on new units might be good enough to pull away the potential buyers of your used units.
If you are unsure of the future resale market, ask the selling dealer of this spot buy to structure an option where the dealer will repurchase the cars at a certain point for a guaranteed price.
Dealers have been known to agree to this type of guaranteed buyback, and it’s a win/win for the seller and the buyer — the dealer hits a sales quota and feeds his pipeline of used vehicles later while the rental company can exercise the option to keep the vehicle or sell back at an agreed-to price, protecting you against severe swings in the wholesale market.
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Larry Soleta is director, commercial sales for FleetSources, a division of fleet sales provider Walser Automotive Group. Soleta can be reached at firstname.lastname@example.org
Email your car rental operation-related questions to Auto Rental News care of email@example.com.