KBB: Rental Compacts a Smart Option for Dealers at Auction

Tight supply and high wholesale prices have caused many a headache for the used-car business this year, but one particular industry segment may give dealers a bit of financial relief while still helping them meet their used supply needs, according to Kelley Blue Book.

The company stressed in its Blue Book Market Report that in light of today’s supply-squeeze, there are still affordable options for dealers looking to fill their lots, specifically touting three-year-old highly fleeted rental compact cars.

Granted, highly fleeted models have shown the most price growth within compact and subcompact car segments this year.

For instance, the values of fleet-heavy units like the Kia Rio, Chevrolet Aveo and Chrysler PT Cruiser have jumped more than 10 percent, whereas the Honda Civic and Toyota Corolla (low fleet models) have simply stayed flat “due to their relatively high values,” said KBB’s manager of vehicle valuation Alec Gutierrez.

That said, these high-fleet compacts still represent smart buys for dealers in the auction lanes.

“Vehicles in rental fleets are up only because of the value proposition that they present to dealers and consumers in this economy, and also in this environment where all compacts had strengthened or maintained the least amount of depreciation through the year,” Gutierrez explained.

“When the market heated up, dealers were looking for budget vehicles that met consumer financial and fuel-efficiency needs. Dealers are just looking for cheap vehicles to offer their customers,” he continued.

“These rental-fleet vehicles provide great value when market prices are high. Overall, dealers can expect to save more than $2,000 when purchasing a three-year-old highly fleeted compact, while savings on a fleet-heavy crossover will only yield a modest $500,” Gutierrez further noted.

Some examples of high-fleet compacts that can be bought at auction for significantly lower than the $10,000 segment average price include the Suzuki Forenza Sedan 4D ($3,525 less than the average), the Chrysler PT Cruiser Sport Wagon 4D ($3,300 less) and the Chevrolet Cobalt LT Sedan 4D ($2,100 less).

In light of 8.6-percent unemployment and upside-down mortgages, Gutierrez stressed that a former rental unit would likely be an option for many families and urged dealers to keep that in mind while at the auction should a low-mileage model come across the lane.

As Gutierrez noted, high-fleet crossovers represented just a $500 discount, but some models like the Jeep Compass Sport SUV 4D ($1,675 lower) and the Suzuki Grand Vitara Sport Utility 4D ($1,950 lower) had prices that were much less than the segment's average auction price of $14,000.

Compacts, Crossovers "A Safe Bet"

Moving along to look at the months ahead for dealers, Gutierrez stressed that compacts and crossovers are likely to still be “a safe bet.” Not only are their values likely to be steady, the fuel efficiency and affordability that can be found in these segments are attractive to consumers amid a rocky economy.

He pointed out that compacts represent close to 15-percent of used-vehicle sales, as well as 15 percent of sales on the new-car side. Meanwhile, compact crossovers command about a 7-percent share on the used-vehicle side and 10 percent of the market for new vehicles.