The Car and Truck Fleet and Leasing Management Magazine

The ABCs of CAPs in the Mid-Size Market.

August 2002, by Ed Bobit - Also by this author

Action springs not from thought, but from a readiness for responsibility.-Dietrich Bonhoeffer

Thunder is good, thunder is impressive: but it is the lightning that does the work.-Mark Twain

Things don't turn up in this world until somebody turns them up.--James A Garfield.

The mid-sized or intermediate car segment remains the largest seller as it has for years. More than two-and-a-half million new registrations each year, which beats the second largest by about a half million units.

In the May issue of Motor Trend, author Larry Edsall reported key comments and quotes from domestic and import marketers as well as from analysts. Many feel this segment has been ignored or the factories have turned their backs on the traditional family sedan.

"That's a fair criticism of the domestic industry," says Kurt Ritter, marketing general manager at Chevrolet.

George Peterson, president of Auto Pacific, put in another way: "The way we see it is basically that Detroit just abdicated its position. They walked away from the segment by not being as aggressive as the Japanese."

Whatever the perception, the 2001 calendar year registration figures confirm that U.S. fleet purchases are totally dominated by the domestic makers.

To illustrate, and including every make in the mid-size group, 26.6 percent went into fleet. Maybe a bit misleading.

If we take some of the really non-fleet badges with less than 2.5 percent fleet sales (i.e., a couple of Acura models, Honda's Accord, the Infiniti G20, Toyota's Avalon and VW's Passat), the percent of fleet to total overall registrations jumps dramatically to 35 percent.

To give it another slant, Alan Greenspan, our nation's No. 1 economic guru, recently gave credit to the automotive industry for a resurgence in our U.S. economy. One might say that "fleet" buying in the mid-size segment was a significant part of this reasoning. Combining the numbers for 2001 for GM, Ford, DCX and Mercury totaled 549,381 units registered or whopping 44 percent of this sector of the new car market.

Yet another thought wave for our fleet manager readers comes from a news release form Automotive Lease Guide (ALG) who has now come out with a "fleet residual table" for predicting future used-car values. It's a shocker!

If you study the chart they provided as an example for one of the more popular mid-size base sedan models, reading from the top you see that they project a value of less than half of MSRP after four months and a little over a quarter after two years running at 21,000 miles/yr.

It's not all scary. No one in our business pays MSRP so once you work off invoice and include the incentives, it's totally different picture. If you have volume enough to qualify for a CAP (Competitive Assistance Program), you can then understand why you need it because of the depreciation.

Whether you use Black Book, IntelliChoice or some other residual service, it's much the same. That's precisely why you need to be very familiar with incentives, residuals, the condition of the turned in vehicle, and audit your outsourcer who is remarketing the units.

There it is in stark, black and white. To be a valuable corporate buyer you need to negotiate with knowledge on all the influences that directly affect the earned residuals.

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