Automotive Market Conditions May Be In Favor Of Fleet Managers, Claims Edmunds.Com

In a presentation to NAFA's Pacific Southwest chapter, Edmunds.com Chief Economist Dr. Lacey Plache and Senior Analyst Jessica Caldwell said that automotive market conditions may play out in favor of fleet managers in the second half of 2011. The August 23 presentation, held at the Southland/Cerritos Center for Transportation Technologies, Cerritos College, was on the topic of "Future Trends in the Automotive Industry."

"Declining consumer confidence, a struggling housing market, and a stagnant unemployment recovery are the top economic factors that will restrict the retail automotive market in the second half of the year," said Dr. Plache. "If those factors push enough retail demand into next year, automakers and dealers could turn to fleet sales to meet sales goals. In addition, fleet managers negotiating next year’s purchases may find themselves in a stronger negotiating position if automakers and dealers are concerned about the level of retail demand for next year."

Companies can also expect to have more success selling their used fleets in a pre-owned vehicle market that has seen prices soar in the last year. According to Edmunds.com data, the average transaction price for a three-year-old retail vehicle in July 2011 was $1,600 more than the average price for a three-year-old retail vehicle in July 2010.

Edmunds.com’s analysts warned, however, that before fleet managers get too optimistic, they will have to see if retail consumers are willing to defer their demand further than they already have.

"Even in the middle of bad economic conditions, the buying conditions for new cars have actually been getting stronger," said Caldwell. "Now that Japanese automakers are well on their way to recovery following the March earthquake, overall supply has increased and pricing is getting more competitive. Gas prices have also decreased over the last three months and interest rates are still very low for anyone who needs help with financing. The question now is whether these stronger buying conditions can motivate consumers in the face of rising economic headwinds, at least through the end of the year."

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