Wholesale Fleet Volumes, Prices Increase In First Half Of 2011

• Vehicle supply challenges, tighter budgets, and delivery delays were a concern for all fleet managers in the first half of 2011. Automakers devoted more output to their dealer networks as retail demand picked up.

• As a result, fleets were disproportionately impacted by the electronic and mechanical parts shortages that caused automakers to miss production targets on selected vehicles. Parts shortages worsened following the earthquake in Japan and placed additional limits on fleet orders in the second quarter. That forced fleet managers to shift to other makes or delay replacing some units in service.

• Still, commercial and government fleets combined bought 388,508 vehicles, up 11.1 percent in the first half of 2011 compared to last year. Demand was especially strong for commercial vehicles above Class 3. These vehicles stay in service longer than cars, and many fleets took advantage of the extension of the bonus depreciation under the tax law of 2010 to refresh their fleets.

• Auction demand for end-of-service fleet vehicles was strong during the first half, especially for fuel-efficient models. Commercial fleets would have purchased even more passenger vehicles if not for the inability of the automakers to fill special orders and meet delivery schedules. Some commercial and government fleet managers shifted orders to the 2012 model year buying-cycle as it became apparent that orders would not be filled prior to the early build-out dates for 2011 models.

• The number of commercial and government vehicles sold at auction continued to increase. Strong demand and prices in the lanes made auctions the most effective and profitable remarketing channel, even though many of the vehicles offered for sale had high mileage. In the first half of 2011, record wholesale values enticed some fleets to cycle out of vehicles earlier than planned. Instead of running vehicles thirty-six months or longer, some fleet managers opted to sell vehicles after twenty-four months of service. High residual values on younger models with fewer miles and lower maintenance costs more than offset the lower monthly depreciation that is generally associated with a longer service life.

• In the first half of 2011, the average auction value of a mid-size commercial fleet vehicle was more than $9,700, up eighteen percent from 2010. At the same time, the average mileage declined seven percent to just less than 65,000 miles. Fleet vehicles are increasingly sold in Manheim online auctions, where they attract buyers who appreciate that these vehicles were maintained to factory specifications.