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Empty Dealer Lots Disrupt Fleet Purchasing

October 12, 2009

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The bad economy has created a new landscape in the auto industry, one with fewer cars on dealer lots.  

The New Landscape

On the OEM side, layoffs, plant closures and renegotiated union contracts are all playing a part. Dealers, with the high cost of financing, are cutting back on inventory to save on floor plan costs and to accommodate slower retail sales. And then came Cash for Clunkers, which pulled new sales forward while generating no used vehicles.
That witch's brew of circumstances has created inventory levels of 30 days at some dealerships, substantially down from the normal range of 70-80 days.   

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Says one major multi-franchise dealer: "In my 30 plus years in the fleet industry, I've never seen anything quite like this-very limited dealer inventory of new vehicles and very limited availability of used vehicles. Of course over the past 12 months we've seen a lot of things we've never seen before so I guess I shouldn't be too surprised."
"Dealers used to have a thousand vehicles in stock, now we're lucky if we have 200," says another large fleet dealer.  

Dealers accustomed to feasting on Hungry Man are now picking at Lean Cuisine. And that means fleets are too.  

"Fleets looking to find vehicles out of stock are having a hard time right now," says the third dealer I spoke to. "Plus dealers are asking a premium since inventories are so low." 

Each dealer recounted recent stories of doing back flips for fleet customers to satisfy out-of-stock purchases. The problem, dealers say, is that some fleet operators still think they can walk into a dealership and choose from a lot full of white pickups with custom utility bodies.  

One dealer recounted a small business owner saying, "I just go from dealer to dealer until I find what I want."  

That's much harder now. And that impulse is costing fleets more money. Fleets can't expect such good deals anymore when buying out of stock. 

"It's pretty hard to let stuff go at a fleet-type margin when you don't have the volume of cars you want and you need to make a little gross," says one dealer.  

Dealer trades are a way of life. But in this age of low inventory, dealers say the practice has gotten more cutthroat-especially if a dealer is looking to pull something out of another dealer's retail inventory, which won't include holdback and finance money.  

Now more than ever, it behooves the small fleet customer to plan ahead. And that means learning to order from the factory.  

A Great Time to Factory Order

This is taught in the first class of Fleet School 101, but always worth mentioning: when you buy of out stock, you're often forced to choose from vehicles with accessory packages that are more attractive to the retail customer, such as those with leather, navigation, moonroof or an upgraded stereo. Not only will those options cost you, but you may risk the ire of another driver who won't be able to take advantage of those options.  

A fleet account will allow for ordering the vehicle with the exact specs needed, along with fleet-only rebates and incentives.  

While order-to-delivery times were battered in 2009 due to plant closures, problems at parts manufacturers, dealer constriction and shipping delays, OTD times are normalizing again. The manufacturers are ramping up and looking for orders. Expect delivery times of 60 to 90 days. The used vehicle market is holding up well, making it a good time to trade.  

"I don't believe this situation will last a long time, maybe 90 days," says one dealer. "If I was contemplating replacing company vehicles, now would be the perfect time to factory order." 

Fleets need a registered fleet account with the manufacturers to order. Some small businesses don't even realize that they qualify for a fleet number. General Motors, Ford and Chrysler require that a company currently operates a fleet of 15 or more vehicles of any make or model, or has registered or leased five or more new vehicles of any make or model during the past year. Toyota defines a fleet customer as having 10 or more units in operation (any make or model). Nissan requires only five.  

Manufacturers have announced their intent to ramp up production next year, by as much as 45 percent in GM's case. This is good news for model availability. However, OEMs believe the change toward lower inventory is permanent.

Why waste a good recession! Use it to change your business practices for the better.

 

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Author Bio

Chris Brown

Executive Editor

Chris Brown is the executive editor of Business Fleet Magazine and Auto Rental News. Through these publications, online newsletters, trade events and associations, Chris covers all aspects of the fleet world, including fleet management, manufacturer fleet activities, the fleet leasing industry, vehicle remarketing, rental industry news, car rental taxation and legislation.

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