Fleet Managers Do More With Less In First Half of 2010

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By Tom Webb
Chief Economist for Manheim Consulting 
Author of "Manheim's 2010 Used Car Market Report."

Our team of analysts at Manheim Consulting has recently completed the midyear edition of our annual Used Car Market Report, a comprehensive summary of trends in the used car business that includes a look at what’s happening in the fleet business so far in 2010.

Here’s a sneak peak at some of the trends we study in the fleet section of the report:

• In the first half of 2010, commercial fleets bought 227,200 vehicles, up 34 percent from the same period in 2009. Remember, though, that many fleet managers purchased few or no vehicles during the spring purchasing cycle last year. First-half 2010 purchases were still a third less than the 2008 level.
• The level of fleet purchases so far in 2010 reflects continued business caution concerning the recovery. With so many vehicles nearing their maximum service life, fleet replacement, rather than fleet expansion, was responsible for the increase in purchases in the first half. As more units continue to reach their maximum life, second-cycle buying is expected to lift commercial fleet purchases to close to 475,000 units, which would represent a 37 percent increase from 2009. Click here to view graphic. 
• Government fleets bought 9 percent fewer vehicles in the first half of 2010 as municipal and state governments cut back on services and employment and delayed vehicle replacements. At the federal level, the 25,000 units bought under the stimulus program in 2009 were absent in 2010. Click here to view graphic.
• At the wholesale level, fleet managers are taking advantage of strong demand and high prices in the auction lanes. Dealers favor commercial fleet units because they know they have been maintained in accordance with the manufacturer’s recommendations. Adjusted for mileage and seasonality, the average auction price for end-of-service midsize fleet car rose above 2008 values in August 2009, and those gains continued through the first half of 2010. Click here to view graphic. 

The recession has forced fleet managers to do more with less, and most have lengthened vehicle replacement cycles. For some fleets, this was a logical decision because the recession reduced fleet utilization, meaning additional months of service did not necessarily translate into more mileage. For many other fleets, there was a conscious decision to keep vehicles in service longer even if higher mileage meant higher maintenance costs and a lower value when remarketed.

For the complete Mid-Year edition of the Used Car Market Report, visit www.manheim.com/consulting, and as always, please contact me any time if Manheim Consulting can be of service to your business.

Tom Webb is chief economist for Manheim Consulting. Contact him at Thomas.webb@manheim.com, follow him via Twitter at www.twitter.com/TomWebb_Manheim and read his blog at www.manheimconsulting.typepad.com.