September 6, 2022

Fleets Worry About Depreciation Risk When Resale Values Normalize

The 111th State of the Fleet Industry video produced by Automotive Fleet offers insights into the state of the fleet market as presented by AF Editor Mike Antich.

 

🎙Today's topics include:

  • Multi-prong forces exerting upward pressure on fleet acquisition costs.
  • Concern that future resale prices will be insufficient to offset today’s higher depreciation rates.
  • The overwhelming majority of commercial fleet vehicles are sold to independent dealers who primarily sell these vehicles to customers who typically have subprime credit.
  • Higher interest rates are creating an affordability issue for subprime buyers of fleet vehicles.

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Timestamps ⌚

0:00 Intro
1:28 Gap Between New and Used Prices Decreased in 2021
2:08 Multi-Pronged Pressures Increase Acquisition Costs
3:42 Fear that Future Resale Insufficient to Offset Higher Depreciation Costs
4:40 KMPG Forecast of 20-30% Decline in Resale Values
4:56 Overvalued Assets will Create Negative Equity
6:00 Top 3 Buyers of Used Fleet Vehicles
6:36 Fleet Vehicles Primarily Purchased by Subprime Buyers
7:13 Interest Rates for Subprime Buyers are 17-21%
7:22 Affordability Issue for Subprime Buyers
8:22 Three Scenarios for Next 12 Months
8:26 Scenario 1: Used Prices Decline at Manageable Rate
8:43 Scenario 2: Inflationary Price Pressures Persist}
8:58 Scenario 3: Strong Fed Rate Hikes Induce a Recession

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