February 20, 2007
Ford to decrease rental fleet sales to boost resale values
Dearborn, Michigan – Ford has announced that while its fleet sales in the government and commercial sectors increased in 2006, it will continue to de-emphasize rental fleet sales to improve the residual value of its vehicles.
By significantly limiting its presence in the rental market, Ford says it is minimizing the price-cutting impact that ex-rental units have on new car sales. Rental units are more damaging to residual value than other types of fleet vehicles because they typically return to market within a year of being built, enticing buyers away from new vehicles with their low prices and low mileage. Comparatively, commercial and government fleet vehicles stay in service for three to five years and do not compete head-to-head with new cars, with a resulting minimal impact on residual values.
“Reducing our rental volume to improve our vehicles’ residual value is part of our Way Forward strategy,” says John Felice, director of North American Fleet, Leasing and Remarketing Organization. “We anticipate and plan an overall decline in fleet volume this year, but it’s almost exclusively attributable to a decrease in rental volume.”
The company’s fleet share increase of 0.4 per cent led the industry in 2006; it delivered nearly 900,000 vehicles, up 6 per cent from 2005, outpacing the industry sales increase by 5 per cent. The company says its increase was fueled by the popularity of its F-Series trucks, E-Series vans and Crown Victoria taxicab and police interceptor sedans in commercial and government fleets. Rental fleet sales will decline further with discontinuation of the Freestar minivan and the last-generation Taurus sedan; the 2006 Taurus production was 100 per cent fleet last year and represented a third of Ford’s total rental volume. The company is replacing it in fleet sales with a limited number of 2007 Five Hundred and Fusion sedans.
The company says that in recent years, the Taurus held only 30 per cent residual value after 36 months due to its high-volume rental presence, while the Fusion, Five Hundred and Lincoln Zephyr/MKZ, with a limited volume in the rental market, held between 45 and 50 per cent after 36 months.