Automotive Fleet, August 2018

Midsize cars have performed better in the resale market than crossovers and SUVs This has not been the case for the last three years Resale of vehicles for fleets is always a major issue One must intelligently forecast which types of vehicles are going to resell the best down the road monitor oil gas prices and not run the vehicles into the ground in the meantime Due to historically low oil prices the past few years the popularity of larger vehicles has gone up such as SUVs and crossovers Lower oil prices means lower recurring costs for your fleet making the marginal utility of the larger vehicle worth the slight increase in fuel costs Now that fuel costs are going up again it costs that much extra to run those larger fleet vehicles and as a result smaller vehicles are becoming cheaper to run and more valuable as a result On top of these large macroeconomic trends manufacturers have cut way back on mid size car sales to more closely match demand This means they arent flooding the rental market with excess inventory anymore Thus right as demand might be increasing for mid size cars due to oil gas prices supply is decreasing due to manufacturers more careful moderation of their inventory and demand forecasting Fleet must think three years into the future when they are buying vehicles Which vehicles are going to depreciate the least Which are going to see a spike in demand Which are going to hold their value the most These are all questions that are pertinent to answer Right now mid size vehicles are seeing a decrease in demand making them hot commodities right now and likely in the future AUTOMOTIVE FLEET I AUGUST 2018 56 EDITORIAL BY SHERB BROWN Surprising Fleet Resale Trends The fundamental macroeconomic data also supports the thesis that mid size cars will be more valuable in the future so its not just speculation either As noted in this chart from ADESA analytical services from June 2018 year over year car resale prices have increased more than 4 reversing a trend that has persisted for multiple years now correlating with an increase in gas and oil commodity prices The perfect storm of increasing gas prices and increasing prices for mid size cars versus SUVs and crossovers means its even more imperative for fleet managers to make the correct decision now to reap the gains in cost savings and gain on sale increases The bottom line is that the market is shifting and you dont want to be caught off guard Pay attention to gas prices and retail buying trends as well as the resale market so you dont get caught with the wrong vehicle at the wrong time Not only could it hurt you down the road but also every time you go to the pump as gas prices increase AF sherb brown@ bobit com 0 10 20 30 40 50 60 70 80 00 05 10 15 20 25 30 35 FLEET LEASE SALES OF THREE MY OLD UNITS WITH 36K 45K MILE Model Class Average Prices Y Y Variance June 2018 June 2017 Dollar Percent Midsize Car 11921 11444 478 42 Midsize SUV CUV 20564 19907 657 33 WTI CRUDE OIL SPOT PRICE FOR 2015 2018 US RETAIL GAS PRICE FOR 2015 2018 Now that fuel costs rising it costs that much extra to run those larger fleet vehicles and as a result smaller vehicles are becoming cheaper to run and more valuable as a result The perfect storm of increasing gas prices and increasing prices for mid size cars versus SUVs and crossovers means its even more imperative for fleet managers to make the correct decision now to reap the gains in cost savings and gain on sale increases SOURCE Y CHARTS SOURCE ADESA DATA VIA TOM KONTOS WEST TEXAS INTERMEDIATE CRUDE OIL USED AS A BENCHMARK IN OIL PRICE