Fleet Depreciation Rates Decrease in CY-2012
The ongoing tight supply of used vehicles has kept resale values strong and reduced fleet depreciation rates. This is expected to continue through CY-2013. A return to traditional resale values isn’t expected until CY-2014.
The ongoing strong used-vehicle market continued to benefit commercial fleets by exerting downward pressure on fleet vehicle depreciation rates during calendar-year (CY) 2012.
Three fleet management companies (FMCs) participated in this year’s annual fleet depreciation study providing data and commentary as to fleet depreciation trends in CY-2012 compared to CY-2011. The participating FMCs were ARI, LeasePlan USA, and PHH Arval.
“PHH analyzed several car and light-truck segments, including cars, crossovers, SUVs, pickups, and vans. Overall, average percentage depreciation (as a percentage of capitalized cost) declined from 2010 to 2012 (year-to-date as of October 2012), but results varied by vehicle segment,” said Bill Cieslak, vice president, North American remarketing for PHH Arval. “Cars, crossovers, and vans experienced a drop in percentage depreciation of roughly 5 to 6 percentage points from 2010 to 2011, but, then increased 2 to 6 points from 2011 to 2012, although none of these segments have returned to their 2010 percentage depreciation level.”
While monthly miles, on average, went up for compact cars in 2012, monthly depreciation in both cents per mile (CPM) and dollars per month dropped compared to 2011.
This was borne out by other participating FMCs. Regardless of whether data was examined from the standpoint of net resale gains or cents-per-mile expense, all pointed to decreases in depreciation for CY-2012, as observed by LeasePlan USA.
“Using the cents-per-mile measure to normalize the effects of varying monthly miles driven between years, depreciation expense has decreased substantially, between 5 and 15 percent in segments where terms/service life were similar and sufficient data existed in both years,” said Becky Langmandel, asset risk and analytics manager for LeasePlan USA.
For intermediate cars, miles also edged up and cents per mile dropped compared to 2011. Dollars per month decreased as well.
All participating fleet management companies reported decreases in vehicle depreciation in 2012; however, the percentage of depreciation varied by vehicle segment. The segments experiencing the greatest decrease in depreciation were intermediate and compact cars.
“The light-truck, full-size van, minivan, and sport/utility vehicle segments reported modest gains in the resale market, compared with the even more robust gains realized in the compact/intermediate car segments,” said Bob Graham, vice president, vehicle remarketing for ARI. “Year-to-date in 2012, vehicle depreciation continued to decrease slightly in comparison to 2011 and 2010. This is attributed to the strong used-vehicle market and lower acquisition costs for better-equipped vehicles.” The light-truck and SUV segments experienced the least depreciation reductions.
“Average percentage depreciation held steady for pickups from 2010 to 2011 and declined slightly from 2011 to 2012. The SUV segment experienced a 5-percentage point increase from 2010 to 2011, and a further 3-percentage point increase from 2011 to 2012. This was partly attributable to a more aged (i.e., higher months in service) portfolio of SUVs sold in 2011 and 2012,” PHH Arval’s Cieslak said.
Across the board, light trucks saw their depreciation expenses decrease in 2012 compared to 2011. In addition, the average months in service fell from 56 months to 49 months.