Fleet News

Car makers and rental firms cooperate to avert residual values collapse in wake of US terror attacks

MANUFACTURERS and daily rental companies have pledged to work together to avoid distress marketing thousands of cars destined for rental service.

The precipitous drop in demand for rental cars from inbound US business travellers following the attacks on New York and Washington DC is predicted to have a dramatic impact on the UK rental fleet.

The UK daily rental sector accounts for about 300,000 new cars a year, with a standing fleet of about 150,000 cars at any one time, the majority now supplied on buy-back arrangements with manufacturers.

Finding alternative sales channels for a significant proportion of those cars would be a huge challenge for manufacturers, a challenge exacerbated by the prospect of a flood of early terminated buy-backs as daily rental companies defleet cars at standstill in airport pounds. The knock-on effects of distress remarketing could be calamitous for residual values.

However, some commentators are playing down the impact, explaining that most rental outlets are not wholly reliant on US inbound business and will be scaling down their fleets at this time of year in any case.

Rental companies and manufacturers have spoken of their determination to find a way out of the current crisis.

Carolyn Emberton, Avis UK fleet director, said: 'We have contracts in place with manufacturers and we are working with them. These relationships tend to be strong, and manufacturers understand our problems.'

Barry Cook, Vauxhall's rental and used vehicles sales manager, said: 'If our rental partners see a blip in their business through the present turmoil, we will work closely with them to ensure any downsizing in their fleets can be managed in both parties' best interests. If they say they would like to defer purchases and not make contract volumes, we will work with them without us having to impose the conditions in the contract.'

Peugeot fleet and leasing director John Taylor said: 'Although our rental volume equates to around 9% of our total sales, we will be impacted by the rental companies' decision. But I believe that because our rental volumes are not large the damage can be absorbed elsewhere.'

And at Ford, Russ Tilley, manager rental distribution and remarketing, confirmed the manufacturer had had a couple of discussions about deferring orders, but said it was too early to assess the full impact because demand in hire sectors such as local rental and replacement cars was holding up well.

'I am not seeing order cancellations, or requests for early defleets,' he said.

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