by Jon LeSage, remarketing editor at Automotive Digest
Car rental used to be considered a “dumping ground” for automakers to sell new vehicle models that weren’t doing well in retail. When those cars were taken out of service and sent to auction, wholesale prices were hit. That seems to be changing now…..
Avis Budget Group is showing significant signs of how car rental companies have been rethinking their role in the world of used vehicle remarketing.
Remarketing has been changing for the car rental industry in recent years – with less volume going through auctions and more emphasis on upstreaming. Automakers are keeping fleet sales limited, too.
During a third quarter earnings call, Avis Budget Group executives explained their remarketing approach – how it “cascades,” or moves its rental cars from one brand to the next to make sure they’re being maximized prior to being taken out of service and sold.
In Q3, 2,000 vehicles went from the Avis and Budget fleets over to travelers looking for a deep discount through Avis Budget Group’s recently acquired Payless Car Rental subsidiary. The company thinks there will be very few new cars to buy for Payless in the near future.
Cars that are sitting around unused are being sent over from Avis and Budget to the group’s Zipcar carsharing subsidiary that was acquired earlier this year. Demand is high for these cars over the weekend, and they’re sent back to Avis and Budget during the week.
As for the remarketing process, about half of its used cars go to auctions; the other half are sold directly to dealers and consumers, which is a more profitable route than wholesale for Avis Budget Group.
During the conference call, David Wyshner, CFO for the car rental company, talked about the remarketing strategy. The average age of these used vehicles is seven months, and 85% of the vehicles have fewer than 25,000 miles.
Prices for about 40,000 vehicles sold in Q2 were in line with the company’s expectation, Wyshner said. Keeping average mileage in right range allows the car rental company to maintain high residual values, he said.
