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DEALING WITH DEALING WITH DISASTERDISASTER

JAPAN AFTERMATH, JAPAN AFTERMATH, JOPLIN FIRSTHAND JOPLIN FIRSTHAND

MARKET SNAPSHOTS:MARKET SNAPSHOTS:

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AUSTRALIAAUSTRALIA

GRASSROOTS EFFORT GRASSROOTS EFFORT DRIVES CHANGE DRIVES CHANGE

IN MINN. IN MINN.

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ARN • JULY / AUGUST 20112

table of contentsJULY / AUGUST 2011 • Volume 24, No. 5

AUTO RENTAL NEWS (ISSN 1075-9409) (USPS 011-305) (CDN IPM# 40013413) is published bimonthly with additional issues in February and December, by Bobit

Business Media, 3520 Challenger Street, Torrance, California 90503-1640. PERIODICALS POSTAGE PAID at Torrance, California 90503-9998 and additional mailing offi ces.

POSTMASTER: Send address changes to Auto Rental News, P.O. Box 1068, Skokie, IL 60076-8068. Please allow 6 to 8 weeks for address changes to take effect. Subscription

Prices - United States $25 per year; Canada $30 per year; Foreign $75 per year. Single copy price - $10; Fact Book - $30. Please allow 6 to 8 weeks to receive your fi rst issue. Bobit

Business Media reserves the right to refuse non-qualifi ed subscriptions. Please address Editorial and Advertising correspondence to the Executive Offi ces at 3520 Challenger Street,

Torrance, California 90503-1640. The contents of this publication may not be reproduced either in whole or in part without consent of Bobit Business Media. All statements made,

although based on information believed to be reliable and accurate, cannot be guaranteed and no fault or liability can be accepted for error or omission. Printed in USA

12 Rental Car Supply: Silver Lining, or Dark Cloud? With historic used car prices, you’re “sitting on gold.”

But can you take advantage? And how long will it last?

16 Market Snapshots: Japan, Australia ARN travels abroad to profi le Mazda Rent-A-Car, offer

Japanese car rental market statistics and update the Japan

crisis aftermath; plus a snapshot of Bayswater Car Rental,

one of Australia’s largest independents.

20 Local Operator Drives Change A grassroots effort results in anti-steering legislation in

Minnesota.

22 Crisis Care, Car Rental Style After escaping destruction by the Joplin tornado, an Avis

licensee and his team aid the relief effort.

24 A New Approach to the Hiring Process Behavioral and situational interviewing techniques reveal how

potential employees would handle future work situations.

Interpreting the answers will help you gauge a candidate’s

true worth.

FEATURES

4 Editor’s Corner How the GAO auto recall report could affect auto rental.

6 Industry News Safeco Field Tax Voted Down Calif. Assembly Approves Recall Bill

26 Car Rental Q&A What are some non-traditional signs or indicators that business is beginning to pick up? 28 Product and Vendor News

30 Used Car Prices

31 Ad Index

32 RentAlert Sell now?

DEPARTMENTS

1220

22

On the Cover: ©istockphoto.com/RTimages©istockphoto.com/Henrik5000

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The issue of recalls seems to have snowballed beyond

the bounds of car rental and fl eets. Th e Govern-

ment Accountability Offi ce (GAO) is on the recall

case, having just issued a report that takes the National

Highway Traffi c Safety Administration (NHTSA) to task

for the overall low repair rate of recalled vehicles.

Th e GAO report recommends that:

● the word “urgent” should be added to recall letters

in large type to get readers’ attention, and the VIN of the

recalled vehicle should be included so it is clear that the

letter pertains to the owner’s current vehicle.

● NHTSA creates a VIN search function on www.

safercar.gov and publicizes the website to vehicle own-

ers and the public.

● NHTSA develops a plan to use the data it collects on

recall campaigns to analyze particular patterns or trends

that may characterize successful recalls and determine

whether these represent best practices that could be used

in other recall campaigns.

● NHTSA seeks legislative authority to ensure that po-

tential buyers of used cars are notifi ed of any outstand-

ing recalls prior to sale.

Interestingly, the report does not make recommen-

dations to NHTSA whether it should take action specifi c

to car rental companies, nor does it tell car rental com-

panies how to handle its recalled vehicles.

Th e report does relay the GAO’s discussion with car

rental companies, who “… stated that a better indica-

tion of the severity of the recall would help them deter-

mine how to treat recalled vehicles in their fl eets and re-

duce confusion.”

However, getting NHTSA onboard has been, and will

be, an uphill battle. NHTSA “… believes that adding con-

tent to the notifi cation letters could be distracting and that

the fundamental information … is covered by the cur-

rent requirements,” the report states. Further, “NHTSA

offi cials told us that the agency has recommended to the

rental car companies that they should not rent recalled

vehicles until the defect has been repaired.”

But here’s where it gets interesting: Th e GAO orga-

nized 10 focus groups of vehicle owners in diff erent cit-

ies to determine their awareness of auto safety recalls,

their willingness to comply with the recalls and ways to

improve safety recall notifi cation letters.

Among other things, focus group participants report-

ed that “they … may be more likely to comply if the let-

ters included the VIN number and clarifi ed the severi-

ty of the defect.”

Exactly! Clarify the severity of the defect. Th is mirrors

what the American Car Rental Association has been ad-

vocating for months.

On top of that, the report points out that “… NHT-

SA has the ability to add requirements to the defect no-

tifi cation letters.” While NHTSA feels its letter system

is adequate, the GAO report suggests otherwise. Th is

could open the door for wording that characterizes the

nature of the recall.

While NHTSA has stated its resistance, the fact that

another government agency has issued a report with rec-

ommendations for change could help the car rental indus-

try’s case with legislators. Now, it’s not just the car rent-

al industry calling for clarifi cation, it’s the “real people”

who made up the focus group. It’s constituents.

Th e report shows that the public has real issues with the

way recalls are carried out. And it shows that NHTSA is

not the be-all, end-all authority — its practices have been

and should be vetted by other government agencies.

The report falls short of recommending a two-

tiered system or addressing recalls by severity, as the

focus groups recommend. But, at the very least, the

GAO report should show legislators looking to push

through recall bills that the issue is much more com-

plicated than banning all unfixed recalled vehicles

from the road.

The report recently released by the Government Account-ability Offi ce (GAO) shows that the auto recall process is in need of repair, and is diffi cult for vehicle owners to comply. This could help the fi ght for sensible recall legislation.

How the GAO Auto Recall Report Could Affect Auto Rental

BY CHRIS BROWN

editor’s corner

ARN • JULY / AUGUST 20114

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industry newsDTAG Recommends Shareholders Take No Action Regarding Hertz Exchange Offer

Dollar Thrifty Automotive Group’s board of directors unanimous-

ly recommends that Dollar Thrifty shareholders not tender their shares

pursuant to Hertz Global Holdings’ offer to acquire all the outstanding

shares of common stock of Dollar Thrifty for a price of $72 per Dollar

Thrifty share, according to a June 6 press release. Each share consists of

$57.60 in cash and 0.8546 shares of Hertz common stock.

In the statement, Dollar Thrifty reiterated that it has agreed to coop-

erate with Hertz in its efforts to pursue antitrust regulatory clearance of

Hertz’s proposed acquisition of Dollar Thrifty. The company also said it

is cooperating with Avis Budget Group in connection with Avis Budget’s

efforts to pursue antitrust regulatory clearance of an acquisition of Dol-

lar Thrifty.

As of press time, Avis Budget Group had not made a counteroffer

for Dollar Thrifty. The company expected an FTC ruling in June, accord-

ing to a CNBC report.

Meet Horatio, Mascot of Hertz’s New Branding Campaign

The Hertz Corporation unveiled a global, multifaceted branding

initiative in May designed to cultivate a dialogue with customers by

focusing on customers’ driving experiences.

The campaign is built around the question “Are You The Gas or

The Brake,” and focuses on how people operate as either the gas

(more aggressive, exciting, adventurous) or the brake (conservative,

reserved, more of a planner). The campaign acknowledges the wide

range of “travel personalities” and serves as a platform to address

the different wants, needs and aspirations of customers. Hertz will

use the platform to illustrate the fl exibility provided by its products

and services and its ability to fulfi ll a variety of

travel preferences.

As part of the new brand cam-

paign, Hertz is offering incentives, such

as free weekend rentals and

the opportunity to win a new

Chevy Camaro SS. The central

element of the new branding ini-

tiative is a marketing campaign creat-

ed by Omnicom Group’s DDB and WPP’s G2.

As part of the creative, Hertz introduced an an-

imated mascot named “Horatio,” voiced by ac-

tor Owen Wilson.

Avis Budget Group to Buy Avis Europe

Avis Budget Group, Inc. and Avis Europe plc

announced on June 14 that they have reached

agreement on the terms of the acquisition by

Avis Budget of all outstanding shares of Avis Eu-

rope in exchange for £3.15 in cash per Avis Eu-

rope share, which is roughly $5.00. The acqui-

sition is scheduled to close in October 2011,

subject to Avis Europe shareholder approv-

al, court approval and regulatory clearances, ac-

cording to a press statement.

Avis Europe is an independent, publicly trad-

ed company that operates the Avis brand via

a network of more than 3,100 locations in 112

countries, through wholly-owned subsidiaries in

13 countries and through a license arrangement

in an additional 99 countries. Avis Europe also

operates the Budget brand through 950 loca-

tions in 59 countries.

The terms of the transaction value Avis Eu-

rope’s ordinary equity at approximately $1 bil-

lion. According to the press statement, sever-

al of Avis Europe’s shareholders have already

committed to support the transaction. Avis

Budget has received “hard” irrevocable commit-

ments from Avis Europe’s majority sharehold-

er, D’Ieteren, whose holdings represent approx-

imately 60 percent of the share capital of Avis

Europe as well as from the directors on Avis

Europe’s board.

Upon the acquisition becoming effective, the

combined Avis Budget and Avis Europe busi-

nesses will have annual revenues of approxi-

mately $7 billion and owned or licensed oper-

ations in more than 150 countries. Avis Budget

expects to fund the acquisition using a combi-

nation of its own cash resources, equity fund-

ing through the potential issuance of up to $250

million of Avis Budget common stock, and debt

fi nancing that has been arranged by a syndicate

of banks and/or proceeds from the issuance of

debt securities.

While Avis Budget will continue to monitor

the Dollar Thrifty situation, “the company’s fo-

cus squarely will be on completing and integrat-

ing the signifi cant acquisition of Avis Europe,”

according to the press statement.

ARN • JULY / AUGUST 20116

ARN0711news.indd 6ARN0711news.indd 6 6/27/11 1:41:07 PM6/27/11 1:41:07 PM

Schumer Announces National Safety Recall Legislation

Arguing that car rental customers would be en-

dangered if rental agencies were allowed the deci-

sion to take a safety-recalled vehicle out of service or

not, U.S. Sen. Charles Schumer, D-New York, once

again called for legislation that would prohibit renting

cars that have been recalled for safety reasons.

At the 2011 Car Rental Show, the American Car

Rental Association (ACRA) proposed a two-tiered

system categorizing each recall by the nature of the

defect and the potential for harm. Schumer rejected the ACRA pro-

posal. Schumer introduced legislation in March requiring car rent-

al companies to operate under the same restrictions as automobile

dealerships, which are banned from selling any recalled vehicle until

the safety issue is addressed.

Schumer said ACRA’s proposal would allow each rental car company

to set its own policy, which would lead to the rental of unsafe cars.

The ACRA proposal, however, would require the owner or lessee

of any vehicle (commercial or private) to immediately cease opera-

tion of the vehicle when the manufacturer and/or National Highway

Traffi c Safety Administration (NHTSA) believe continued operation

of the vehicle — pending completion of the recall remedy — would

pose a signifi cant risk to public safety.

A proposal to extend some taxes on car rentals, hotels

and restaurants that would pay off Safeco Field in Seattle

failed in the Washington State Senate on May 19.

Senate Bill 5958 failed by a single vote.

Supporters argued that the taxes on car rentals, ho-

tels and restaurants would create thousands of new jobs by

funding a convention center expansion and other amenities.

The car rental and restaurant taxes would end in 2015.

Critics argued that lawmakers should not erode pub-

lic trust by extending the life of what was voted in as a tem-

porary tax scheduled to expire once Safeco Field bonds are

paid off. The bonds will be paid off this year ahead of sched-

ule due to better-than-projected revenue.

Shane Skinner, controller for Enterprise Holdings in

Washington and Alaska, worked to oppose the bill. “We

have really focused on the promise that was made back in

1995 that these taxes would expire, as promised to our cus-

tomers and the people of Washington,” Skinner told Auto

Rental News.

Doris Cassan of CMC Investments Inc., a Seattle-based

Dollar Rent A Car licensee, was also instrumental in contact-

ing legislators to oppose the bill.

According to a recent Elway Poll of 405 Seattle voters,

57 percent said they favored repealing the taxes rather than

extending them for other purposes, while 37 percent pre-

ferred keeping the taxes.

Calif. Assembly Approves Recall Bill

Introduced by Assemblymember

Bill Monning, AB 753 would require

car rental companies to ground and fi x

all vehicles under a safety recall before

renting them. The bill passed 42-26,

one vote more than the simple major-

ity needed.

The American Car Rental Associ-

ation has drafted a series of proposed

amendments to the bill. The amend-

ments seek to: move the proposed

safety recall provisions from the Civil Code

section into the Vehicle Code; allow for man-

ufacturer-specifi ed interim repairs; recognize

“staged” recalls — when the recall is staggered

by date, for instance — as well as regional re-

calls; and extend the recall rules requirement

to “any owner of more than 10 vehicles who

permits its employees, customers or other per-

sons to operate a vehicle.”

The measure will now go to the California

State Senate. A hearing was expected in June,

after press time.

JULY / AUGUST 2011 • ARN 7

industry news

California As-

semblymember

Bill Monning

Safeco Field Auto Rental Tax Bill Voted Down

Proposed legislation to extend taxes on rental cars to pay off

Safeco Field, home of the Seattle Mariners, was voted down

on May 19.

U.S. Sen. Charles

Schumer, D-New

York

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industry newsSea-Tac Conrac on Track

The consolidated rental car facility at Sea-Tac Airport

serving Seattle is on schedule to open in the spring.

The $419.3 million rental complex will be fi nished

in November but won’t open immediately to give car

rental companies time to ramp up operations.

The fi ve-level, 2.1 million-square-foot facility will have

a 50,000-square-foot customer service area, 5,400 park-

ing stalls on four fl oors plus a fi fth-fl oor bus plaza. Mov-

ing the rental cars into the facility will free up about

3,200 parking spaces in the Sea-Tac airport garage.

The conrac is being funded with a $5 daily charge on

rental cars. The daily fee will increase to $6 when the

conrac opens. The charge will pay for virtually the entire

facility, according to a Sea-Tac media fact sheet.

Getaround Unveils Peer-to-Peer Car Sharing Technology

Peer-to-peer car sharing service Getaround unveiled

in May the Getaround Carkit, the fi rst device designed

exclusively for peer-to-peer car sharing, according to the

company.

The Getaround Carkit combines GPS, Wi-Fi and keyless

remote technology. Along with a new iPhone app, users can

conduct entire transactions, including reserving, paying for

and unlocking cars on their iPhone. The Getaround service

allows car owners to set pricing and availability, and to op-

tionally approve each rental request individually.

Getaround also announced it is working with Berkshire

Hathaway, one of the nation’s largest insurance groups, to

provide insurance coverage for Getaround rentals. This pol-

icy includes liability, collision and comprehensive coverage.

The coverage supersedes the policies of both owners and

renters throughout the rental period.

Hawaii Passes Car Rental Surcharge

Hawaii state lawmakers passed House Bill 1039 on

April 29. The bill includes an increased sur-

charge on car rental taxes from $3 to

$7.50. The surcharge will be used to help

close the state’s defi cit.

ARN • JULY / AUGUST 20118

HAWAII

Apr

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$

II

close

Texas CDW Legislation Defeated

Texas legislation that would have imposed some un-

necessarily strict requirements on vehicle rental compa-

nies that sell collision damage waivers (CDWs) as part of

vehicle rental contracts has been defeated by the Truck

Renting and Leasing Association (TRALA), according to

a statement from the association.

Texas HB 3059 would have regulated the form used

and the price that vehicle rental companies could charge

when selling CDWs. It would have also required CDWs

to be underwritten, which would have essentially treat-

ed CDWs as an insurance product and required higher

licensing standards for vehicle rental company employ-

ees that sell CDWs.

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industry news

Thrifty, Enterprise Win Website Awards

Keynote Competitive Research has announced the re-

sults of the Keynote Competitive Research Industry Study

examining U.S. rental car websites. In the 2011 U.S. Rent-

al Car Sites study, Enterprise.com took fi rst place for Best

Overall Customer Experience and Thrifty.com came in fi rst

for Best Overall Technical Quality.

For the “Customer Experience” portion of the study,

Keynote observed and conducted online interviews with

2,000 prospective rental car customers as they interacted

with the websites of 10 car rental companies and travel por-

tals: Alamo, Avis, Budget, Dollar, Enterprise, Expedia, Hertz,

Orbitz, Thrifty and Travelocity.

The study revealed that when tested by actual users, En-

terprise.com offers the strongest Overall Customer Expe-

rience, placing fi rst in both “Conversion Impact” and “Cus-

tomer Satisfaction.”

For the “Technical Quality” portion of the study — using

measurement computers located in 12 cities across the U.S.

— Keynote measured a typical transaction when search-

John Holt to Run AdvantageThe Hertz Corporation and Advantage

Rent A Car announced that John Holt has

been appointed vice president of Advan-

tage Rent A Car. Holt has assumed the

position and reports directly to Mark Fris-

sora, Hertz’s chairman and chief executive

offi cer. Holt succeeds Lois Boyd, who was

appointed to lead Hertz’s equipment rent-

al business on April 25.

Holt joined Hertz in 1995 as a manager of its airport lo-

cation in San Diego. Other key roles include territory man-

ager in Los Angeles, director of U.S. car rental fi eld oper-

ations in the company’s Park Ridge, N.J. headquarters and,

most recently, general manager of off-airport operations in

Southeast Florida.

Prior to joining Hertz, Holt held sales and operations

leadership roles for other companies, including a leading na-

tional leisure rent a car company. He is a graduate of San

Diego State University with a B.A. degree in business admin-

istration and an M.B.A. from California State University.

ARN • JULY / AUGUST 201110

ARN0510purco_01.indd 1 4/28/10 9:49:10 AM

ing for and reserving a rental car online. Based on the thou-

sands of transactions monitored over the course of the

study, Thrifty.com set the standards for both Responsive-

ness (speed) and Reliability and was named the winner for

Overall Technical Quality.

Hertz Introduces EVs to D.C. Fleet and Electric Bikes in London

The Hertz Corporation announced the expansion

of its Global EV initiative to Washington, D.C., add-

ing all electric (EVs) and plug-in hybrid electric vehicles

(PHEVs), including the Chevy Volt and Nissan LEAF to

its Union Station fl eet. Hertz is making the next gener-

ation of electric vehicles available to members of Con-

gress, employees on the Hill and the general public.

Hertz has also introduced Ultra Motor Fast4ward

Edge and A2B Hybrid 24 electric bicycle models to Lon-

don. Both models can reach speeds up to 15.5 mph.

With every electric bike rental, customers will receive

full training, a lock,

optional helmet

and a copy of the

AA Leisure Guide

to London with

suggested bike

rides around the

capital.

HOLT

ARN0711news.indd 10ARN0711news.indd 10 6/27/11 1:41:18 PM6/27/11 1:41:18 PM

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ARN • JULY / AUGUST 201112

The used car market is enjoying historic pricing — but can you take advantage, and how long will it last?

BY CHRIS BROWN

RENTAL CAR SUPPLY:SILVER LINING, OR DARK C

The summer season is in full swing and

you’re ready to rent cars — but have

you seen that used car market? Auction

prices are higher than ever and dealers are

scrambling for low-mileage used units — the

cars you’re renting right now.

It’s the perfect car rental Catch-22: You’re

sitting on gold, yet you can’t cash in because

replacing your current fl eet with new inven-

tory is a questionable proposition at best. So

what are car rental companies doing? And

how long will this last?

“We have some [rental operators] that were

selling their cars for $500 to $1,000 more than

the price they bought from us a year ago,”

says Mark Eckhaus of Eckhaus Fleet, a sup-

plier to auto rental companies. “We have guys

that have gone to the auction and from week

to week the car is $800 more.”

Matt Rawlings of City Auto Rental in Cleve-

land, Ohio, reports similar pricing. Rawlings

bought a 2009 Kia Rio at auction in Decem-

ber for $7,400 that was fetching $10,000 in

May. Similarly, a 2010 Chevy Aveo bought

for $9,200 was going for $11,000 fi ve months

later. Th at’s right, a used Chevy Aveo.

Th e numbers are not anecdotal. In May,

a straight average of auction prices for rent-

al risk units remained above $14,500 for the

third consecutive month, according to Man-

heim auction data. Th e Manheim Used Ve-

hicle Value Index stood at 127.8 — the high-

est it’s ever been.

But if you sell, you have to replace those

cars. And there isn’t much out there. Af-

ter bankruptcy, the auto manufacturers

had found religion with their new business

model of building to demand and regulat-

ing sales to the rental market. Th en the Ja-

pan crisis forced both Japanese and domes-

tic manufacturers to cancel orders to rental

and commercial fl eets.

“We’ve been advising people that if you

have cars on order, and you think you’re go-

ing to get them, don’t sell what you’re rent-

ing yet,” Eckhaus says.

David Wilson, a Th rift y licensee in Nash-

ville, Tenn., says that while he would like to

sell into this market, he is staying put for

now. “We decided because of the uncertainty

about orders, we’ll turn off our sales and hold

our fl eet through the summer, hoping that

the market will hold and we’ll sell for a prof-

it later this year,” he says, adding, “Th ough

it’s tempting to keep selling right now, we’re

in the business of renting cars.”

Jack Vercollone of VERC Rentals in Mas-

sachusetts was able to replace canceled or-

ders through purchases from other manu-

facturers and fl eet dealers. “We’re paying

more money for them,” Vercollone says.

“But there’s an opportunity on the fl ip side

to sell some of our small stuff . We’re willing

to go with tighter utilization now if we can

sell those cars at a good profi t.”

“We had a bunch of orders canceled but

I think we’ll be all right, and yes, we’re go-

ing to have to run some cars longer because

of that,” says Charlie Mullen of ACE Rent A

Car, regarding the company’s 12 non-affi liate

locations. Mullen — and other operators —

report that early summer demand has been

soft , mitigating some of the supply issues.

“All things in balance, we’re going forward

with a smaller summer rental fl eet and we’ll

have higher rates,” Mullen says.

Tough on the Little Guy

While holding inventory is viable for some,

the depleted used car market is not helping

the independent RACs, such as Rawlings,

who rely on the auctions to stock their fl eet.

“It’s costing me $2,300 more just to buy the

exact same car I bought fi ve months ago,”

he laments.

Th is hurts his fl oor plan as well as the

business model. “I’ve got to go out and

borrow more money just to maintain the

same fl eet size, or come up with more cap-

ital somewhere,” Rawlings says. “I have in-

expensive cars and an inexpensive rate. It’s

hard to maintain that rate when your costs

go up by $2,000.”

Moreover, the cars Rawlings traditionally

bought with 15,000-20,000 miles now have

30,000-40,000 miles and require more recon,

including tires. “It’s costing me more to put

those cars on the road,” he says.

On the back end, Rawlings has adjusted

ARN0711shortage.indd 12ARN0711shortage.indd 12 6/20/11 12:12:02 PM6/20/11 12:12:02 PM

his remarketing strategy. He moves most of

his metal from his own lot. He has a website

to advertise his inventory and has arranged

for fl exible fi nancing for buyers with less-

than-stellar credit.

“I’ve picked up my retail selling eff orts in-

stead of taking them to the auction,” he says.

“I’m doing a better job of letting my renters

know I have cars for sale.”

Working the Short Season

Rental companies that serve a short sum-

mer tourist season are also squeezed into a

short supply scenario. “Holding fl eet isn’t

really the answer for us in most cases,” says

Randy White, CFO of Corpat Inc., a Nation-

al and Alamo licensee serving the northern

Rocky Mountain states. Corpat needs a much

larger fl eet for the summer season, though

holding program cars longer can cause prob-

lems with the program mileage caps.

White says his group has been dealing

with cancellations, but worked the supplier

contact list hard for replacements. Th ey got

the cars, but in terms of price, they had to

grin and bear it. “Th ere’s not as much room

to negotiate these days,” White says. “We

needed the cars.”

Aft er ordering, it becomes an issue of tim-

ing. Th e goal is to get out of the cars when

the season ends, but minimum hold peri-

ods may force operators to hold cars longer

than they actually need them, White says.

And with cities spread out over hundreds

of miles it becomes a logistics problem to

move them to auction.

“We’re not standing too bad on numbers,

but they’ve been slow in getting here,” White

says. “If the cars come late, we may have all

JULY / AUGUST 2011 • ARN 13

K CLOUD?

5.6%

Total Compactcars

Midsizecars

Luxurycars

Pickups SUV/CUV Vans

20.1%25%

20%

15%

10%

5%

0%

-5%

-10%

14.4%

1.1%

-4.0%

1.3%

-5.8%

PRICE CHANGES FOR SELECTIVE MARKET CLASSESyear-over-year % change, May 2011

AVERAGE AUCTION PRICE – RENTAL RISK UNITS

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$15,000

$14,500

$13,500

$12,500

$11,500

$10,500

$9,500

$8,500

2008 2009 2010 2011

Rental risk units reached historic auction price highs in May. Are they ready to come down?

The value of compact cars spiked this spring on higher fuel prices.

ARN0711shortage.indd 13ARN0711shortage.indd 13 6/20/11 12:12:03 PM6/20/11 12:12:03 PM

ARN0711wtp.indd 1 6/17/11 9:00:23 AM

these relatively new cars we don’t need in

October and November.”

The Fuel Wild Card

As evidenced by the skewed pricing for

economy cars, high fuel prices are once again

throwing a monkey wrench into the market

— but to what extent?

“Th is market is not overreacting like we

saw in 2008,” says Ricky Beggs, managing

editor of Black Book. “Th is isn’t uncharted

territory — it’s not disrupting the whole in-

dustry as it did before.”

Tom Kontos, chief economist for Adesa,

says auction values of trucks and SUVs have

soft ened in the face of fi rming prices in oth-

er segments, especially versus compact cars.

However, “Th e supply of SUVs and pickup

trucks is not nearly as skewed as it was in

2008,” Kontos says. “Back then there was al-

most a boycott of buying SUVs.”

While the demand side is lift ing compacts

and economy cars more than trucks and SUVs,

“Th e rising tide of tight supply is lift ing the

values of all ships,” Kontos says.

With large car values still somewhat de-

pressed relative to other segments, some are

adopting a buying strategy that goes against

conventional wisdom: “I can buy bigger cars

for about the same price I can buy these

smaller cars for,” Rawlings says, “and rent

them for more.”

Fuel prices peaked in May, according to

the U.S. Energy Information Administra-

tion’s Short-Term Energy Outlook, and will

continue to fall — though not to the extent

they did aft er summer 2008, leading into

the recession.

Nonetheless, falling fuel prices may be start-

ing to impact the wholesale market. “We’ve

already seen the bubble burst on our Prius-

es,” says Vercollone, who saw gas prices drop

in his area for three weeks in a row. “Th ey

peaked three or four weeks ago (in May) and

now they’re starting to come down. Th ey’re

about $1,000 less now than we were getting

for them, maybe more.”

The Tipping Point

“When I talk to people about what the

used car market will be like in the next eight

months, I ask ‘how can it possibly be any

higher?’” says Dave Arney of VRCG, a con-

sulting fi rm and supplier to the rental mar-

ket. “Th e used car market, I believe strongly,

has topped out and is on its way down. If you

can sell cars, sell them right now.”

Arney points to the recent months’ hyper

appreciation of cars as a market aberration.

Arney, like others, sold a few thousand cars

to rental fl eets last fall that were worth more

six months later, even with 15,000 more miles

on them. Th e market can’t sustain those pric-

es, Arney contends.

“Th ere was sort of a panic [in mid-April]

when prices peaked,” Arney says. “Large rent-

al companies gobbled up thousands of used

cars at auction that would have gone to deal-

er lots. Dealers grabbed what they could as

well. Th e Japan crisis, and then $4 gas, only

exacerbated the situation.”

But high prices are already starting to af-

fect demand as dealers are having a hard time

moving overpriced used vehicles. May’s used

car sales dipped about 1.4 percent compared

with the same month a year ago, according

to data from CNW Research.

Joe David Pacifi co of Pacifi co Marple Ford

Lincoln in Broomall, Penn., reports a case where

a dealer paid “well over invoice” for low-mile-

age Ford Fiestas. “Th ere’s not a lot of markup

in those cars as it is. You pay the freight and

the sale fee and you own the car for practically

MSRP. And they’re used. Who’s buying them?”

“Th ere is no doubt the bubble will burst at

some point this year,” says Art Spinella, pres-

ident of CNW Research. “As soon as the Jap-

anese new vehicle supply issue is resolved —

perhaps by September — pressure will be off

dealers to concentrate heavily on used mod-

els, which is the case right now.”

With new car supply more readily avail-

able, consumers can reject those high used

car prices. “Eventually some of the shoppers

who would have bought a used car will buy

a new car,” Kontos says.

Time to Sell

By the end of May, car rental companies

were keeping their cars 1.5 months lon-

ger than they had in January, according to

CNW Research. At the same time the aver-

age mileage of rental risk units sold at auc-

tion moved above 40,000 miles, according

to Manheim Consulting.

Aft er the summer, car rental companies

will be looking to dump those units, which

will have higher mileage than usual, putting

downward pressure on prices.

Spinella expects that as soon as supply of

new Asian-built product comes back online,

retail used values will fall 8 to 14 percent com-

pared with the beginning of June.

“I’m worried about placing orders for the

fall,” says Wilson of Th rift y Nashville. “We’ll

need to unload the cars we have now, which

could get brutal.”

Looking Long Term

When looking long term, a bubble bursting

may be the wrong analogy. Th at outlook may

be more akin to an air mattress defl ating —

owing to a shortage in off -lease volume.

Th e volume of lease originations fell by more

than 25 percent in both 2008 and 2009 year

over year, reports Kontos, when some players

pulled out of the market. Off -lease supply will

bottom out in 2012, which means “We can ex-

pect to see the beginnings of a recovery in off -

lease volume in 2013,” Kontos says.

How then should any car rental operator play

this roller-coaster market? Sound advice may

be to simply stick with what you do best.

“Th ree years ago the market was atrocious,

and there was nothing we could do about it.

We had to keep going and wait for things to

rebound,” says Rick Mullinax, executive vice

president of Midway Car Rental.

“We’re going about our normal activity

because we realize that there is a bubble, and

even though car prices are high, they’re go-

ing to come back down,” Mullinax predicts.

“I prefer to look at what our operating profi t

is without reintroducing last year’s car sales

to this year. Without those gains, are we still

making more profi t?”

“Th ere are things I can’t control, but I can

control my employee costs, the types of cars

that I buy, to a limited scope my rates and the

level of customer service we provide,” Mull-

inax says. “We’re running a marathon, not a

100-yard dash.”

ARN • JULY / AUGUST 201114

Car rental companies were busy restocking

fl eets when the industry was hit with order

cancellations in May due to the crisis in Japan.

NEW VEHICLE SALES INTO RENTAL FLEETS,

JAN-MAY 2010-2011 2011 2010 % Change

Jan ........97,709 ......118,634 ..... -17.6%

Feb .....134,575 ......151,271 ...... -11.0%

Mar ....159,683 ......147,134 ..........8.5%

Apr ....147,740 ......119,973 ........23.1%

May ....128,455 ......162,218 ...... -20.8%

ARN0711shortage.indd 14ARN0711shortage.indd 14 6/20/11 12:12:07 PM6/20/11 12:12:07 PM

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ARN • JULY / AUGUST 201116

❱❱❱ MARKET SNAPSHOT - JAPAN

AN INDUSTRY DEALS WITH DISASTER

In the wake of the March 11, 2011 earth-

quake and tsunami in northeastern Japan,

Japanese car rental companies are not only

suffering supply issues, they must rebuild infra-

structure and assist in the relief effort, accord-

ing to the Japanese Car Rental Association.

The Association reports that car rental

companies are having diffi culties in meeting

customer demand. The rental car supply is

worsening into the beginning of the summer

season due to the lack of supply of new cars.

To help meet demand, car rental companies

are keeping cars that they would have sold.

Because of the disaster, normal seasonal car

rental demand has dropped, though car rental

companies are supplying cars in the disaster

area for reconstruction efforts.

Park24 Co. Ltd., owners of TMN, reported

heavy tsunami damage to its locations in

Ishinomaki and the Sendai Airport, though the

company reported no employee casualties.

FLEET SIZES OF THE SIX LEADING JAPANESE-OWNED OPERATORS (MARCH 2011)

Toyota Nippon Nissan MAZDA Orix JaParen Rent a Car Rent-A-Car Rent-a-car Rent-A-Car Rent-A-Car Rent-A-Car

● Passenger cars 66,245 17,180 14,198 15,067 19,193 8,367

● Trucks, othercommercial vehicles 18,652 4,660 2,382 3,661 10,882 1,381

● Minibuses 1,230 183 145 203 77 66

● Others 3,464 125 24 43 643 29

TOTAL OPERATORS ● 2010............................................ 6,399● 2009............................................ 6,135● 2008............................................ 6,181

TOTAL FLEET SIZE NATIONWIDE

● 2010.......................................... 382,499● 2009.......................................... 376,593● 2008.......................................... 367,132

2010 FLEET BY VEHICLE TYPE ● Passenger Car ....................................................195,340● Trucks, other commercial vehicles ................162,632● Minibuses................................................................. 6,273● Other ..................................................................... 18,254● Total ......................................................................382,449

Times Mobility Networks Co., Ltd. (MAZDA Rent-A-Car)

Established in 1965, MAZDA Car Rental Corp. was

sold by Mazda Motor Corp. in 2004 to an investment

company, which in turn sold it to Park24 Co., Ltd., a

publicly traded car park company on the Tokyo Stock

Exchange. This year, Park24 transferred the car sharing

operation to Times 24 Co., Ltd., a new subsidiary. Park24

also changed the offi cial name of MAZDA Car Rental Corp. to Times Mobility Networks Co., Ltd.

(TMN) though the car rental service continues to use the brand name MAZDA Rent-A-Car.

● Total locations (May 2011): 439

● Airport: 53, Local: 386

● Corporate stores: 192, Franchisee locations: 247, Fleet size: rental car: 21,975, car sharing: 2,260

● Breakdown of business: Leisure: 30%, corporate: 35%, replacements: 20%, tour: 10%, other: 5%

● Car Procurement method: Purchase and lease. There are no buyback programs in Japan.

● Average hold times: N/A. (General averages in Japan: small, intermediate: 24 months,

luxury: 36 months)

● Popular rental models: subcompact Mazda Demio (Mazda2)

● Primary ancillary sales: Child seat, CDW

● Primary remarketing channel: auction

● Recession impact: Shorter rental days, and a move toward car sharing to cut personal

spending. Times 24 Co., Ltd.’s car sharing system offers rentals in 15-minute increments.

● Business boost: As part of a government tourism campaign, visitors from overseas countries,

especially from Asia, are increasing and are renting cars during their trips. Japanese car rental

companies have referral contracts with overseas car rental companies and travel agents that

funnel customers through these networks. TMN began an affi liation with Europcar in 2006

to strengthen its inbound business.

● Business hassle 1: Car rental companies must manage the fact that driving is only

allowed for overseas tourists with driver’s licenses issued through the Geneva Agreements.

● Business hassle 2: Per a revision of traffi c law in 2006, car rental companies must pay

parking violation fi nes incurred by renters. Car rental companies closely monitor violations and

train rental agents on how to mitigate violations.

● Environmental initiative: TMN is presently testing six Mitsubishi i-MiEV electric cars in its

car sharing fl eet.

● Environmental initiative 2: As of April 2004, all Japanese car owners, including car rental

companies, receive a tax break for buying a more environmentally friendly car.

This has resulted in a car rental fl eet of smaller vehicles, though it is also based on

customer demand for smaller vehicles.

JAPANESE CAR RENTAL INDUSTRY STATISTICS

COMPANY SNAPSHOT

■ Car Rental Companies Damaged

■ Approx. Cars Destroyed

■ Deaths (RAC staff)

(According to April 14 data from the

Japanese Car Rental Association.)

Prefecture

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ARN0711tml.indd 1 6/2/11 10:27:37 AM

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JULY / AUGUST 2011 • ARN 17

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ARN • JULY / AUGUST 201118

❱❱❱ MARKET SNAPSHOT - AUSTRALIA

COMPANY SNAPSHOT

Bayswater Car Rental

“My father started renting out cars from the family home in

Perth in the late 1950s,” says Arnold Kluck Jr., director. “He did

this because as a taxi driver-owner, the government restricted

him to a maximum of four taxis. Car rental seemed like a natural

progression.”

In 1988, Kluck moved to Sydney with his brother to start the

business there. Kluck’s father still runs the Perth offi ces with

another son. Bayswater is the largest independent car rental

company in Sydney and Perth.

● Total locations: 1 in Sydney, 4 in Perth

● Fleet size: 2,500

● Breakdown of business: Mainly local, leisure, insurance replace-

ment. Local 60%, interstate 30%, international 10%

● Car procurement method: 100% buy. Buyback programs are not

very common in Australia. Finance and leasing dominate.

● Average hold time: 30 months. Before the recession, average

hold time was 24 months.

● Popular rental models: Entire fl eet is white Toyota Corollas.

● Ancillary sales: “We cater to the frugal end of the market,” says

Kluck. “We’ve found this price point works with our budget con-

scious customers, with most clients buying at least one ancillary

product. We also charge for interstate driving, underage drivers

and electronic toll service.”

● Primary remarketing channel: “We sell our old Corollas to Toyo-

ta dealers for new replacements. There seems to always be retail

demand for a white Corolla, which keeps the dealers interested.

The used car market has held steady in Australia, as opposed to

the boom-bust cycle in North America.”

● Marketing/advertising: “We have had an on-going quirky ‘No

Birds’ campaign for 30 years. It means no frills. People think we

are crazy for running such an obscure slogan, and maybe they

are right. Our frontline staffs get asked dozens of time each day

‘What does ‘no birds’ mean?’

A large portion of our fl eet has yellow ‘no bird’ decals on the

front doors. This increases our profi le. We also spend ‘more than

we should’ on the Internet and in local newspapers.”

● Recession impact: “The fi rst couple of months were slow, and

then the federal government started handing out money ($1,000

to individuals and $2,000-4,000 to families) straight into personal

bank accounts. The next 18 months we were fl at out and have

never been busier. The government also gave tax breaks for buy-

ing cars, which helped too. The Australian economy rebounded

strongly, so these government measures have long since been

wound back. But it was good while it lasted.”

Legal/legislative threats: “At this stage there is no vicarious liability

for rental cars in Australia, although local authorities and insurers

are always pressuring and testing this. Australian state govern-

ments have limited taxation powers compared to the USA.

Therefore, they tend not to single out the car rental industry.”

● Biggest business challenge: “Marketing. The Internet has massively

changed the way we market ourselves. It is a continual challenge

to manage Internet marketing, social media and traditional press.”

● Industry comparisons: “We came to the Car Rental Show ex-

pecting to see differences in the way North America does busi-

ness compared to Australia. We were surprised how similar they

are. The Australian car rental market is a mature industry and

we feel our growth comes mainly at the expense of competitors

that fail to keep up.”

Arnold Kluck Jr., director of Bayswater Car Rental, stands next to

a white Toyota Corolla, the only model in the Bayswater fl eet. The

company has been known for its “No Birds” campaign for the past

30 years.

MARKET ● Total revenue (2011 est.) ........$3.1 billion● Total operators .......................................410● Locations .............................................. 1,846● Total fl eet size (est.).................................. 60,000

MAJOR MARKET SEGMENTATION

● Households ..........................................25 %● Airport operations .............................35% ● Non-airport operations .....................40%

MARKET SHARE, MAJOR COMPANIES ● WTH Pty Ltd (Avis Rent A Car System) ........................ 13.5%

● Hertz Investment Holdings Pty Ltd: ...................................9.3%

● Thrifty (Australia) Pty Ltd .....................................................7.0%

● Budget Rent-A-Car (Avis Budget Group) .........................6.5%

● G1 Holdings (Australia) Pty Limited (Europcar) .............4.8%

AUSTRALIAN AUTO RENTAL INDUSTRY STATISTICS

SOURCE: WWW.IBISWORLD.COM.AU

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JULY / AUGUST 2011 • ARN 19

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ARN • JULY / AUGUST 201120

Starting Aug. 1, auto insurance companies

in Minnesota will be required to allow

customers the freedom to choose any

auto rental company if the customer has car

replacement in his or her collision coverage.

Insurers are allowed to recommend a company

to a consumer, but are prohibited from making

this a stipulation of service.

SF 508, signed into law by Gov. Mark Day-

ton May 25, mandates that insurance claims

representatives will have to give customers ob-

taining a replacement car rental a verbal advi-

sory, which reads, “Minnesota law gives you

the right to choose any rental vehicle compa-

ny, and prohibits me from requiring you to

choose a particular vendor.”

Th e road to that legislation was paved by

a precedent-setting bill in New York State, a

Minnesota anti-steering law already in place

regarding glass repairs and a grassroots ef-

fort by a local car rental operator who saw

that change was needed.

Laying the Groundwork

“I lived at the Capitol just talking with as

many people as I could and monitoring the

process because we didn’t have any funds for

lobbyists,” says McKenzie Prokosch, account

relations manager for Choice Auto Rent-

al, a locally owned provider of insurance re-

placements.

Prokosch spent most her time meeting

with the legislative commerce committee

members and organizations in support of the

cause. “I don’t have any political experience,

but I wasn’t afraid to ask questions, whether

it was to the [committee] members or their

legislative assistants,” she says.

More than 40 auto body shops joined in

by signing a letter sent to legislators urging

them to pass SF 508. Th e Alliance of Auto-

motive Service Providers and the Minnesota

Auto Dealers Association were also on board,

along with eight other auto rental companies.

“Th ere are a lot of other locally owned com-

panies here fi ghting the same battle,” she says.

“We just wanted to be able to compete, and also

for consumers to know they had an option.”

A New York anti-steering bill passed last

year helped to lay the groundwork for Proko-

sch and the authors of the Minnesota law. Th e

grassroots eff ort in New York gave these small

rental companies the incentive and hope for

a victory in Minnesota.

“I was expecting it to take years,” says Proko-

sch, referencing the New York process, which

had taken four years. Th e Minnesota legislation

was pushed through in about four months.

Adjustments Made

A registered opponent of the bill, the Amer-

ican Insurance Association (AIA), called

the bill “anti-reform” and stated that it went

against freedoms of the marketplace in a pre-

pared statement April 13.

“Th e bill is defi nitely opening up the free

market and allowing people to compete. And

when there’s competition, obviously you get

the best service and best rate for the consum-

er,” a main point used throughout the legis-

lative process, Prokosch says.

Th e Insurance Federation of Minnesota

(IFM), a nonprofi t insurance trade associa-

tion, opposed the original bill due to vague

wording. Th e original bill stated that insurance

companies would not be allowed to “pressure”

the insured to a certain rental company. Th e

word “pressure” was changed to “require.”

Once the word was changed, IFM moved its

stance to neutral.

Th e bill was also opposed by insurance agen-

cies because it called for a written notice to

the insured, which is what the New York law

states. Th e added expense of this written no-

tice would have cost the insurance companies

an estimated $4-5 million annually, accord-

ing to Prokosch. “I had no interest in adding

an expense for anyone,” she says.

Prokosch says the verbal advisory is proba-

bly better anyway, since so many people don’t

read their policy thoroughly. “It’s right in peo-

ple’s faces as it is happening,” she says. She also

cited that there’s already a verbal advisory for

auto glass replacement, so it wouldn’t be for-

eign for the insurance claims representatives

to add this to their protocol.

Th e anti-steering bill received overwhelm-

ing support, with only two voting against it in

the Minnesota House. Th e bill received unan-

imous support in the Senate.

Leveling the Playing Field

Part of Prokosch’s role at Choice Auto

Rental is to communicate the company’s ser-

vices with insurance agencies. She says many

times in the past she wasn’t allowed to do so,

but SF 508 opens this door.

“It’s a benefi t for [insurance companies] to

know what’s out there,” says Prokosch, add-

ing that she understands the benefi t of an in-

surance company having a preferred vendor

in an attempt to get a better deal. “So we went

at it basically as a consumer awareness issue

and then also to level the playing fi eld for oth-

er businesses,” she says.

Th e next step for Minnesota’s car rental

businesses, Prokosch says, is to make sure the

auto shops are also aware of the change.

“Consumer’s preference will now be the

deciding factor on who handles the rental for

them,” Prokosch says. “On August 1, everyone

involved with the claim, insurance companies,

body shops and rental companies, will be saying

the same thing to the customer: ‘You are able

to use any rental vendor you prefer!’”

Since the passing of this law in Minne-

sota, Prokosch has fi elded numerous calls

from other states looking for similar change

in their market. “Th e interest and suggested

need for change has been overwhelming,”

Prokosch says.

A grassroots effort results in anti-steering legislation in Minnesota.

LOCAL OPERATOR DRIVES CHANGE

BY JOANNE M. TUCKER

ARN0711antisteer.indd 20ARN0711antisteer.indd 20 6/27/11 1:57:46 PM6/27/11 1:57:46 PM

ARN0711antisteer.indd 21ARN0711antisteer.indd 21 6/27/11 1:57:49 PM6/27/11 1:57:49 PM

ARN • JULY / AUGUST 201122

Growing up in the heart of tornado

alley, Jeff Neuenschwander, an Avis

licensee serving Southwest Missouri,

had been through it all before — but not

like this one. Th e tornado that hit Joplin on

Sunday, May 22 was classifi ed as an F5 (out

of 5) on the Fujita Tornado Intensity Scale.

Th is is the most devastating tornado in the

country since 1947.

Charting the storm as it crossed the state,

Neuenschwander discovered it was heading

toward the house of Melinda Miller, the man-

ager of his Joplin store.

“I texted her to see if she was OK, literal-

ly as I was watching the debris cloud on the

radar on TV,” says Neuenschwander, who

lives halfway between Springfi eld and Jop-

lin. With the phones out, Miller texted him

that her house was damaged and she wasn’t

able to drive her car. “At that point I took off

to try and fi nd her,” he says.

Neuenschwander arrived a half hour be-

fore dark. Th e initial emergency response

teams waved him through thanks to an or-

ange vest he was wearing.

“You could see the devastation and the

gas fi res,” he recounts. “I tried to fi gure out

where her house was but I couldn’t tell the

streets; there were no street signs and no

houses. I could hear people screaming, and

there were people trying to dig out others

who were trapped.”

Neuenschwander never did fi nd Miller’s

house, but he ultimately found her in the

neighborhood.

“We didn’t know until aft er it was all over

how bad our house was,” says Miller, who was

in the hallway with her boyfriend and three

dogs when the roof was torn off . “And then

we walked down the road and saw that just

a few houses away there were houses that

were completely leveled.”

Neuenschwander loaded them up and took

them back to the safety of his house.

The Disaster Response

Th e next day, as the scope of the devasta-

tion unfolded, Neuenschwander sprang into

action. He contacted his lending institution

and asked for some fl exibility with his lines.

He suspended the cars scheduled for auction

and returned them to fl eet.

He got on the phone to the Manheim Auc-

tion in Springfi eld, and within 30 minutes

15 drivers had signed up to help move cars.

“No one asked how far they were going or the

pay,” he says. “Th ey just showed up.”

Reservations fl ooded in from a wide

range of disaster relief providers, includ-

ing the Red Cross and the White House.

Neuenschwander’s team moved cars with-

in his four franchise locations and took ve-

hicles from Avis Budget Group’s regional of-

fi ces in Dallas and Bentonville, Ark. “Th ey

[Avis Budget Group] took a very proactive

approach to off ering us employees and help

After escaping destruction by the Joplin tornado, an Avis licensee and his team aid the relief effort.

CAR RENTAL STYLE

BY JESSICA CARRICK

The Avis location at the Joplin Regional

Airport, undamaged by the tornado, became

a hub of activity for disaster relief provid-

ers and local residents needing insurance

replacements.

ARN0711disaster.indd 22ARN0711disaster.indd 22 6/22/11 2:47:26 PM6/22/11 2:47:26 PM

THE ABRAMS CREDO

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WE’RE GOING TO DO...IT’S THAT SIMPLE.

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Delivering on our wordfor 3 decades.

Preserving the Entrepreneurial Spirit of the Auto Rental, Car Sharing, and Transportation Industries,

WORLDWIDE, since 1982.

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ARN0711abrams.indd 1 6/22/11 1:28:00 PM

on the ground and started pushing cars to-

ward our area,” he says.

Neuenschwander’s fl eet increased 25

percent to meet demands. “We’ve been out

of cars essentially every day since this hap-

pened,” he says. “We’re doing everything we

can to get vehicles in here for this response.

And they are still coming in.”

While many vehicles have been rented to

workers organizing the relief eff ort in Joplin,

75 percent have been to residents.

Miller says the insurance rentals are tak-

ing longer to get approved. Most rentals are

for at least a month, and many will be one-

way drops. “We’ve rented pickup trucks to

people who have lost everything and are

moving back to wherever they came from,”

Neuenschwander says.

“Just about everyone from our Springfi eld

staff worked overtime through the [Memorial

Day] holiday weekend,” says Neuenschwan-

der, who even worked the counter until mid-

night. “We had employees on their days off

down in Joplin to answer the phones, to try

and talk to the insurance companies that are

trying to get cars for their adjusters, who are

trying to get cars for their customers.”

Employee eff orts haven’t gone unnoticed. “It

has been fantastic to see people come together

to respond,” Neuenschwander says.

JULY / AUGUST 2011 • ARN 23

Jeff Neuenschwander took these photos with

his cell phone as he searched for Melinda

Miller, one of his rental location managers,

an hour and a half after the tornado hit her

neighborhood.

ARN0711disaster.indd 23ARN0711disaster.indd 23 6/22/11 2:47:34 PM6/22/11 2:47:34 PM

ARN • JULY / AUGUST 201124

What don’t we have enough of?

Time and money are two things

that come to mind. In business,

when we don’t hire the right people for the job,

we’ve wasted both.

Th ink of how much time and money it ac-

tually costs to employ someone. Besides obvi-

ous expenses such as salaries, federal and state

taxes, benefi ts, uniforms and training, there

are soft or unexpected costs incurred, such as

loss of productivity or sales, advertising and

recruiting for replacements and the possibil-

ity of paying unemployment benefi ts.

All told, the employment process can cost

from 40 percent to 1.4 times an employee’s

base salary. A car rental agent with an entry

salary of $22,000 per year could cost $33,000

to employ — at the low end.

Now consider the cost of having to replace

an employee, as much as 150 to 250 percent of

the employee’s annual compensation. A sea-

soned car rental agent with a $44,000 annual

salary would cost at least $66,000 to replace

when it’s all said and done.

Traditional Versus Behavioral

Interviewing

You can save time and money in hiring —

and gain a better candidate — by approaching

the interview process diff erently.

Studies show that the typical traditional in-

terview is a predictor of future performance

only about 10 percent of the time. Traditional

interviewing relies on standard and straight-

forward questions that are easily answered

by candidates. Th ey eff ectively tell interview-

ers what they want to hear, but not what they

need to hear.

If an interviewer can glean information about

past experiences or hypothetical situations, it

becomes a better gauge of the candidate’s true

worth. Behavioral or situational interviewing

has a success rate of 55 percent.

A study by the Society for Human Resource

Management (SHRM) defi nes behavioral-

based interviewing as “a thorough, planned,

systematic way to gather and evaluate infor-

mation about what candidates have done in

the past to show how they would handle fu-

ture situations.”

Here are some examples of behav-

ioral interview questions:

● Give me an example of a time when you

had to deal with a diffi cult coworker. How did

you handle the situation?

● Describe a time when you performed a

task outside your perceived responsibilities.

What was the task? Why did you perceive it

to be outside your responsibilities? What was

the outcome?

● Tell me about a time during your previ-

ous employment when you suggested a bet-

ter way to perform a process.

● Describe a situation in which your stress

level was high in dealing with a customer.

Asking these types of questions will allow

you to interpret how a candidate has reacted

to real-world situations in the past. Howev-

er, some planning and preparation are need-

ed for this type of interviewing to work any

better than the traditional methods.

Document Effective Behaviors

You must place a value on certain behav-

iors within your company. In the car rental

industry, as in most industries, companies

are looking for employees who have strong

communication skills. Additional skills you

should be looking for include: customer ser-

vice, sales, initiative, integrity, listening, phone

skills and problem solving.

Before you interview candidates, under-

stand the job you need to fi ll. Perform a job

analysis to gather and analyze the data, and

then document the data. Employee surveys

and observations are ways to gather your

data. Analyzing the data will require you to

rate the eff ectiveness of the employees that

you have observed or surveyed. Document

what you consider to be the most eff ective

behaviors and create a standard that you will

use to evaluate the answers your candidates

give you in the interview.

In addition to the skills listed earlier, you

may further discover what skills a success-

Behavioral and situational interviewing techniques reveal how potential em-ployees would handle future work situations. Interpreting the answers will give you a better gauge of a candidate’s true worth in your company.

A NEW APPROACH TO THE HIRING PROCESS

BY TOM SABOL

PHO

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ARN0711interview.indd 24ARN0711interview.indd 24 6/23/11 6:49:57 AM6/23/11 6:49:57 AM

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ARN0711savmor_cls.indd 1 6/22/11 3:57:36 PM

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ARN0711budget_cls.indd 1 6/20/11 7:33:05 AM

ful employee has. For example, you may not

have realized that handling stressful situa-

tions calmly was an aspect of customer ser-

vice skills. It’s a good idea to re-evaluate the

position on a regular basis.

To understand those skill sets, look to your

most successful employees. What are the traits

they possess, and does a candidate’s handling

of a past situation match what you are look-

ing for in an employee? Did the situation the

candidate described, the actions they took and

the outcome of the situation relay their profi -

ciency in the skills you require?

Be sure to use a standardized evaluation

form to chart how each candidate handles

the situations. When notating a candidate’s

response, determine if he was able to spe-

cifi cally describe the situation and the task.

What was the action he took? What was the

outcome? Rate his answers (1 - 5) compared

to the skills needed.

Situational Interviewing — Resolving

the Task at Hand

Situational interviewing is similar to be-

havioral interviewing; however, situational

interviewing relies on the interviewer creat-

ing a specifi c scenario in which the candidate

must imagine performing the task and resolv-

ing the situation.

Th e benefi t here is that the candidates all

have to respond to the same hypothetical sit-

uation. It relies less on how they have done

things in the past and more on the situation

at hand. Situational interviews also don’t re-

quire the candidate to have specifi c experi-

ence as it pertains to the scenario.

When creating the hypothetical situation,

base it on a key task they might perform as your

employee. Select the task from the data gath-

ered during the job analysis. It is easier to as-

sess the best fi t by creating a standard hypo-

thetical situation that all the candidates have

to maneuver through.

Some hypothetical situations include:

● Rent Me a Car: Have candidates rent you

a car. How would they handle a customer that

seems to be pressed for time? Did they off er

additional products? Did they listen to the cus-

tomer’s need and suggest an upgraded vehi-

cle? Th ey may not know the systems or your

policies, but you can evaluate their sales acu-

men or their customer service skill. Did they

communicate well in their answer? How well

did they handle the problem? Did they take

initiative when handling the scenario?

● Working as a Team: Describe a situation

at the counter in which the candidate has a dis-

agreement with a coworker. Customers are

present. Did they handle the situation profes-

sionally and with integrity? Did the customer

suff er because of the disagreement?

Based on what you determined when do-

ing your job analysis, you now have an idea of

the behaviors and skills that should be demon-

strated during the candidate’s response. Re-

cord your ratings on the standardized evalua-

tion form using the suggested 1-5 scale.

When the interviewing has been complet-

ed you can go back and objectively determine

who will be the best fi t.

Tom Sabol is a human resource professional

for Leslie Saunders with more than 10 years

of experience in recruiting, training and de-

velopment. Sabol is a certifi ed Professional in

Human Resources (PHR) and member of the

Society for Human Resource Management.

JULY / AUGUST 2011 • ARN 25

ARN0711interview.indd 25ARN0711interview.indd 25 6/23/11 6:49:59 AM6/23/11 6:49:59 AM

Q What are some non-traditional

signs or indicators that business

is beginning to pick up?

K. Michaels - Independent Rent a Car

Central Florida

A It is safe to say that everyone has a dif-

ferent opinion about the current eco-

nomic condition — where we are or

when it will end. Keeping your pulse

on the following items will add a diff er-

ent perspective to your version of a re-

covery:

● Look for changes in hotel occupan-

cy and non-seasonal rate increases. Un-

like car rental operators, hotel operators

cannot cut capacity in their room avail-

ability. Occupancy in the hotel industry

is a consistent indicator.

● Truck rentals and equipment rent-

als begin to increase.

● Your top performers and best em-

ployees begin to have other career op-

tions and off ers. When things turn

around they will be the fi rst to be ap-

proached by a customer or competitor

for a job.

● Walk-ups and reservations with

less advance notice will increase.

● Independent car rental operators

will increase their fl eet.

● Your competitors may begin to

offer services or customer experience

items that may have been recently cut,

such as adding customer service greet-

ers and frontline staff, new and more

unique fleet choices, new location

signs and other general location im-

provements.

● Your local politicians will change

their message from blaming each other for

the downturn to taking individual credit

for the turnaround.

Regardless of how you feel about the

current economic climate, the more sourc-

es of information you can obtain will allow

you to form your own opinion.

QHow do we change our incentive

plan to prevent sales associates

from leaving the counter or engag-

ing in customer profi ling?

Station Manager

Airport rental operator, Western Canada

ATh e good news is that you do not have

to do anything to your incentive plan.

Don’t change it. It is not the role of the in-

centive plan to hold sales associates ac-

countable; it is the role of the manager.

Th e bad news is that many managers do

a very poor job of holding associates ac-

countable for these poor and unprofes-

sional sales practices.

Following these techniques will greatly

reduce these troubling behaviors:

● When the cat is away the mice will

play: It is critical that your management

team establishes its presence on the coun-

ter during peak rental hours. Managers

should ensure that rentals are processed

equally by every associate.

● Set fair and obtainable stretch tar-

gets: If incentive targets are set unrealis-

tically it will create an unfair expectation

for your team and their internal motiva-

tors will get the best of them. If no one in

the location is receiving a payout, there is

a problem.

● Go inside the numbers: Remov-

ing subjectivity and hearsay from the

scenario will greatly enhance the man-

ager’s ability to hold the staff account-

able. Review individual associate length

of rents, average rentals by hour worked

and incentive earning per agreement.

Calibrate all these trends versus the lo-

cation’s team average.

● Play the devil’s advocate: Ask

your associates if they have ever been

pre-judged or treated differently when

they made a purchasing decision

somewhere else.

Applying these techniques and hav-

ing a relationship-focused approach

with your frontline team will improve

your team’s rental productivity and en-

hance your customer’s experience.

Q&AQ&AQ&A

• Email your car rental operation-

related questions to Auto Rental News

care of chris.brown@bobit.com.

• Consultants from the Khoury

Group will come up with concise,

insightful answers to help you better

run your car rental operation. Feel

free to contact the Khoury Group

directly at questions@thekhoury-

group.com.

ARN • JULY / AUGUST 201126

PHO

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SHI

C A R R E N T A L Q & A

ARN0711qa.indd 26ARN0711qa.indd 26 6/23/11 3:10:11 PM6/23/11 3:10:11 PM

Free Webinar

Visit

www.autorentalnews.com/webinar/WTP

To register or learn more

ARN0711qa.indd 27ARN0711qa.indd 27 6/23/11 3:10:13 PM6/23/11 3:10:13 PM

AF1010jobfinder.indd 1 9/21/10 9:04:40 AM

ARN • JULY / AUGUST 201128

products & vendor news

Franchise Services of North America Inc. (FSNA) is preparing for the

U-Save, Auto Rental Resource Center (ARRC), Xpress Rent A Car and

Rent-A-Wreck of Canada combined convention October 23-25, 2011.

The convention, to be held at Caesars Palace in Las Vegas, is cel-

ebrating the 30th anniversary of U-Save and the 32nd anniversary of

Rent-A-Wreck of Canada.

FSNA is contacting companies now regarding exhibition space.

Additional information to come regarding sponsorship levels, hotel

accommodations, booth transport and more. Contact Melinda Ganus

at 800-438-2300 ext. 146 or melinda.ganus@usave.com for more info.

Bluebird Announces 2011 Users Conference

Bluebird Auto Rental Systems’ Users Conference

2011 will take place Sept. 21-22 at Caesars Atlantic City,

N.J. If reservations are confi rmed by August 31, the cost is

$89 per person. If reservations are confi rmed September 1

through September 14, the cost is $105 per person.

RSVP to Melanie Pancoast at (973) 989-2423 or Mel-

anie@barsnet.com.

Rooms can be reserved directly by calling Caesars At-

lantic City at (800) 345-7253 by September 6. Be sure

to tell them that you are with the conference. There is a

special Bluebird Conference group rate of $131 a night

for a single room in the Centurion Tower.

Private Equity Firm Invests in CarTrawler

ECI Partners, a UK mid-market pri-

vate equity fi rm, has invested in CarTrawl-

er, the Dublin-based provider of online

car rental distribution systems. The fund-

ing from ECI will be used to support the

continued growth of CarTrawler organi-

cally and through acquisition, according to

CarTrawler.

In addition, Mike McGearty, the former COO of Car-

Trawler, has been announced as the new chief executive.

Bobby Healy will continue as the company’s chief technol-

ogy offi cer (CTO) and Niall Turley will remain director of

supply.

Chris Watt, director at ECI, will join the board. Richard

Prosser will also join the board as chairman. Prosser former-

ly served as managing director of the Specialist and Emerging

Markets division of TUI Travel Plc, a leisure travel business.

CarTrawler, the car rental distribution system with more

than 550 suppliers in 175 countries, and Galor Systems, de-

veloper of web-based travel management system Trav-

el Booster, announced a cooperation agreement on June 1.

Through the interface with Travel Booster, CarTrawler will

now distribute its full content to all members of the Travel

Booster network. Travel Booster users will benefi t from the

largest selection of car rental options from leading and inde-

pendent car rental suppliers worldwide, in 29 languages and

multiple currencies.

“CarTrawler provides car hire services to airlines, hotels,

hostels, online travel agents (OTAs), tourism information

websites, travel and transportation (car rental, rail and fer-

ry) sites, and retail travel agents (corporate and leisure trav-

el agents),” said Robin White, VP sales EMEA, CarTrawl-

er. “Travel Booster extends our reach even further through

its enormous database of distribution partners around the

globe.”

“Partnering with the best car rental distribution system in

the world adds a tremendous amount of content to our net-

work, benefi tting all Travel Booster users,” said Orly Livno-

ni, CEO of Galor.

e

d

MCGEARTY

CarTrawler and Travel Booster Sign Cooperation Agreement

FSNA 2011 Convention Set for Oct. 23-25

ARN0711products.indd 28ARN0711products.indd 28 6/23/11 1:26:58 PM6/23/11 1:26:58 PM

Think the grass is greener somewhere else?

It just might be

Search for jobs in your fi eld at www.fl eetjobfi nder.com

AF1010jobfinder.indd 1 9/21/10 9:04:40 AMARN0711products.indd 29ARN0711products.indd 29 6/23/11 1:27:04 PM6/23/11 1:27:04 PM

*Vehicles noted have higher (or equal) 2008-over-2009 values because the average mileage of the 2008 models going through the auction is less than the 2009 average mileage.

Data provided by Manheim Market Report, a daily price guide based exclusively on auction transactions. The data is based on sales at Manheim’s 80 North American auctions. The Manheim Index

(Manheim Used Vehicle Value Index) at www.manheimconsulting.com provides “trend” data for the most recent 12 months and is updated monthly with commentary and segment analysis.

ARN • JULY / AUGUST 201130

AUDI A4

2008 4D SDN 3.2L QUATTRO 19,600 19,500 19,700 19,900 19,800

BUICK LACROSSE

2009 4D SEDAN CXL 15,250 15,250 15,250 15,250 15,250

2008 4D SEDAN CXL 11,850 13,200 12,500 11,650 10,750

CHEVROLET 1500 SILVERADO 2WD V-8

2008 REG CAB 4.8L 13,300 12,400 11,850 13,400 13,050

CHEVROLET COBALT

2009 4D SEDAN LS 8,550 9,100 9,150 9,100 9,150

2008 4D SEDAN LS 6,850 7,000 6,950 6,550 6,700

CHEVROLET COLORADO 2WD I5

2008 EXT CAB 3.7L LT 10,750 7,750 8,850 10,200 9,050

CHEVROLET EQUINOX AWD V-6

2008 4D SUV LT 11,850 13,050 13,200 12,400 12,950

CHEVROLET HHR

2009 4D SUV 2.2L LT 7,200 7,100 7,350 7,300 7,050

2008 4D SUV 2.2L LT *9,850 *9,850 *10,250 *9,850 *10,050

CHEVROLET IMPALA V-6

2009 4D SEDAN LS 3.5L 10,100 9,900 10,300 10,800 10,450

2008 4D SEDAN LT 3.5L 9,850 9,850 *10,700 10,600 9,750

CHEVROLET MALIBU V-6

2009 4D SEDAN 3.9L LT 8,750 11,050 11,700 10,950 10,950

2008 4D SEDAN 3.9L LT *11,750 10,200 11,300 *11,500 10,050

CHRYSLER 300

2009 4D SEDAN 13,550 14,150 13,950 15,250 14,350

2008 4D SEDAN 11,600 11,850 12,450 12,350 12,500

CHRYSLER SEBRING V-6

2009 4D SEDAN LTD 9,950 9,350 10,050 9,650 9,250

2008 4D SEDAN LTD *12,450 *11,900 *10,650 *10,450 *11,300

DODGE RAM 2WD V-8

2008 QUAD CAB 5.7L 16,500 14,300 14,250 16,450 16,050

FORD CROWN VICTORIA

2008 4D SEDAN LX 14,600 14,600 10,100 10,000 12,150

FORD EDGE

2009 FWD 4D SE 15,950 13,350 17,200 15,500 16,150

2008 FWD 4D SE *15,950 *14,700 15,850 *16,000 *16,200

FORD EXPEDITION EL 2WD V-8

2009 4D SUV 5.4L XLT 21,200 20,750 20,750 20,300 20,750

2008 4D SUV 5.4L XLT 18,450 18,950 18,950 19,850 19,350

FORD EXPLORER 4WD V-6

2009 4D SUV 4.0L XLT 15,700 15,400 14,950 13,000 15,350

2008 4D SUV 4.0L XLT 13,200 *15,800 *15,050 12,950 13,550

FORD F-150 2WD V-8

2009 EXT CAB 5.4L XLT 17,400 14,400 14,900 17,400 16,850

2008 EXT CAB 5.4L XLT 15,200 12,850 13,750 15,350 15,450

FORD FOCUS

2009 4D SEDAN SE 11,450 11,200 11,650 11,700 11,650

2008 4D SEDAN SE 10,600 10,850 11,250 10,000 10,850

FORD FUSION 4-CYL.

2009 4D SEDAN SE 11,350 11,900 12,800 11,200 11,800

2008 4D SEDAN SE *12,950 *12,600 *13,450 *12,850 *12,250

FORD RANGER 2WD V-6

2008 2D EXT CAB 3.0L XLT 14,150 12,450 14,600 13,050 13,650

FORD TAURUS

2009 4D SEDAN SEL 11,150 10,850 11,350 12,400 12,800

2008 4D SEDAN SEL *11,200 10,300 11,300 9,750 11,100

JEEP GRAND CHEROKEE 4WD V-8

2009 4D WAGON LAREDO 20,850 21,800 22,700 21,650 22,050

2008 4D WAGON LAREDO 18,850 15,000 15,500 16,600 15,700

JEEP PATRIOT 4WD V-6

2009 4D SUV SPORT 13,450 13,450 13,250 13,450 13,450

2008 4D SUV SPORT 11,700 12,000 11,900 11,700 11,400

LINCOLN MKX AWD V-6

2009 4D CROSSOVER 24,850 24,850 24,850 24,850 24,850

2008 4D CROSSOVER 22,200 21,050 21,650 22,550 22,050

LINCOLN TOWN CAR

2009 4D SIGNATURE LTD 19,700 20,750 19,850 19,850 18,600

2008 4D SIGNATURE LTD 18,750 18,850 19,250 19,250 *19,250

MERCEDES-BENZ S-CLASS

2009 4D SEDAN S550 62,150 55,550 60,050 60,050 65,300

2008 4D SEDAN S550 50,250 47,400 49,050 49,700 50,300

NISSAN ALTIMA

2009 4D SEDAN 14,350 12,750 13,050 14,100 14,650

2008 4D SEDAN 14,200 *13,650 *14,250 *14,150 13,850

PONTIAC GRAND PRIX

2008 4D SEDAN 9,350 10,000 9,800 8,450 9,300

PONTIAC VIBE

2009 4D WAGON 9,700 9,850 10,800 9,800 9,350

2008 4D WAGON 8,750 8,750 8,750 8,750 8,750

SAAB 9-3

2009 4D SEDAN SPORT AUTO 16,750 16,750 16,750 16,750 16,750

2008 4D SEDAN ARC AUTO 11,750 12,450 12,900 12,600 12,100

SUBARU OUTBACK

2008 4D WAGON 2.5L LTD 18,100 18,400 17,500 17,350 16,800

TOYOTA CAMRY V-6

2009 4D SEDAN LE 14,950 14,900 14,050 14,600 14,300

2008 4D SEDAN LE 13,850 12,850 13,250 14,050 *14,300

TOYOTA PRIUS

2009 4D HATCHBACK 18,550 18,450 18,250 19,100 19,150

2008 4D HATCHBACK 16,350 17,050 16,600 17,850 18,450

TOYOTA TACOMA 2WD V-6

2009 DBLCAB 4.0L PRERUNNER 21,050 20,200 21,050 21,100 21,250

2008 DBLCAB 4.0L PRERUNNER 19,500 18,500 19,450 18,950 19,900

VOLKSWAGEN JETTA 5-CYL.

2009 4D SEDAN S 12,450 11,100 11,850 12,150 13,050

2008 4D SEDAN 11,400 *11,100 11,400 11,550 11,100

VOLVO S40

2009 4D SEDAN 2.4L 13,650 12,950 13,650 13,650 13,650

2008 4D SEDAN 2.4L 12,550 *13,350 12,000 10,550 13,350

SOUTH NORTH MID WESTMODEL EAST EAST WEST CENTRAL COAST

SOUTH NORTH MID WESTMODEL EAST EAST WEST CENTRAL COAST

use

d c

ar

pri

ces

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

THE GRAPH ABOVE REFLECTS ACTUAL AUCTION PRICES RECEIVED BY SELLERS OF COM-

MERCIAL FLEET VEHICLES. THESE VEHICLES GENERALLY HAVE HIGH MILEAGE. THE TABLE

BELOW REPRESENTS THE WHOLESALE VALUES OF MODELS REGARDLESS OF SELLER.

WestCentralMidwestNortheastSoutheast P .R .

APR-10

MAY-10JUN-10

JUL-10AUG-10

SEP-10OCT-10

NOV-10

DEC-10

JAN-11FEB-11

MAR-11

APR-11

MID-SIZE CAR FULL-SIZE PICKUP FULL-SIZE VAN SUV

AVERAGE AUCTION SALE PRICE – COMMERCIAL FLEET VEHICLES

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JULY / AUGUST 2011 • ARN 31

ad index

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Auto Rental News Webinar:

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Sponsored by WTP Advisors .....................autorentalnews.com/webinar/WTP ...............................27

WTP Advisors ................................914-733-7715 .....................wtpadvisors.com .........................15

COMPANY PHONE WEBSITE PAGE

The Advertisers’ Index is provided as a courtesy to Auto Rental News advertisers.

The publisher assumes no responsibility for errors or omissions.

www.autorentalnews.com

Vice President & Group PublisherSherb Brown — (310) 533-2451

Executive EditorChris Brown — (310) 533-2499chris.brown@bobit.com

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ARN0311lancer.indd 1 2/11/11 12:21:32 PM

Girl we couldn’t get much higher. Come on baby, light

my fi re!” If there’s anything that gets fl eet consignors

hot these days it’s the prospect of selling into this

strong wholesale market. Maybe Jim Morrison was singing

about used car prices?

Th e Manheim Used Vehicle Value Index reached another

historical peak in May. But the numbers are starting to soft en

moving into mid-June. For the week of June 13, Kelley Blue

Book reported that values for subcompact, compact and hybrid

cars have started to decline for the fi rst time since January. Black

Book values show that the same week marked the largest over-

all decline in vehicle values in more than three months, with

the exception of one week in early May.

Have used car prices peaked? To understand the mar-

ket forces at work, everything should be viewed through the

prism of supply.

Th e Japan crisis hit in March, just as the industry was return-

ing to some normalcy aft er the recession, bankruptcy and a new

manufacturing business model had already drastically reduced

supply. Th at giant sucking sound you heard this spring was the

car rental industry taking whatever it could out of the market

— both new and used — to replace lost orders. Th is aggravat-

ed already tight wholesale supply and drove up prices. At auc-

tion, small cars were selling for $500 to $1,000 more than they

cost last fall — with 10,000 more miles on them.

Th is is clearly a market aberration that is in the midst of

correcting itself. If you’re in a position to sell your small cars,

sell now. Fuel prices have topped out and the Japan supply is-

sues are working themselves out. Th e market will never be bet-

ter than this. Listen to the Lizard King: “Th e time to hesitate is

through. No time to wallow in the mire.”

If the market is coming down, by how much can we ex-

pect, and when?

Coming Soon

Post Labor Day will bring the usual selling off period, though

this year the market will see more than its fair share of off -rent-

al units with 50,000 miles on them — rental companies held

those units through the Japan supply crunch to meet summer

demand. However, “Th ere may be a week or two where the

market looks like it will fall off the cliff , but I don’t think that

will be sustainable,” says Alec Gutierrez, manager of vehicle

valuation for Kelley Blue Book. Dealers are still hungry for

inventory, Gutierrez says. Th ere will be no glut.

Fuel prices won’t crash as they did in 2008, at the onset of the

recession. Back then, fl eets got right-sized in a painful adjust-

ment to fuel price trends. In terms of model mix, fl eets aren’t

getting stuck with vehicles they can’t sell. No such pricing cha-

os is expected this time.

This Fall

Art Spinella of CNW Research expects prices to slip in the

third and fourth quarter by three to fi ve percent. Gutierrez con-

curs. “If supply weren’t an issue, then perhaps we would see

these values drop more than 5 percent,” he says.

By November, the market will begin processing the dearth

of volume of off -lease units from the recession, which will keep

supply tight and prices afl oat. And though the Japan pipeline will

be fl owing again, no one is expecting a fl ood of new cars.

“Lack of vehicles in dealer inventory is not going away any-

time soon,” reports a national fl eet dealer. “We’ll struggle with

vehicle inventories over the next year.”

Looking Further

Off -lease supply will stay tight through all of 2012, until

the lease returns from the 2010 recovery start hitting the mar-

ket in 2013.

New car sales will rebound. Total sales could reach 12.6

million this year, a million more vehicles than last year’s 11.6

million total. If half of those sales involve a trade in, another

500,000 units will enter the wholesale channel, says Tom Kon-

tos, Adesa’s chief economist.

“It may ease some of the tightness of supply but probably

not enough to off set the off -lease decline,” Kontos says. “More

things are working against a growth in supply in the next 18

months than for a growth in supply.”

Aft er that, it’s hard to predict too far into the future. Th ere is

always the specter of over production and deep new car discounts

— and thus a spiral of back-end values. A booming economy

and lower unemployment could lead automakers astray, and

some upstart marques could make a market share play.

Yet, for a change, market watchers are guardedly optimis-

tic. No one has lost their cynicism about how this could be

screwed up again. It’s just that, at least for the foreseeable fu-

ture, the new manufacturing business model is easier to adhere

to than deviate from.

The used car market is at its valuation peak – but the so-called bubble may be bettercharacterized as an air mattress defl ating. It’s all about supply.

BY CHRIS BROWN

Sell Now?

rent ALERTFOR UPDATES, VISIT WWW.AUTORENTALNEWS.COM

ARN • JULY / AUGUST 201132

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