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Friday, May 1, 2015

Notes from the International Car Rental Show April 2015

Ruggles/Wards/Bobit Media

I was recently privileged to attend the International Car Rental Show, held at Bally’s Las Vegas. I have attended this show in previous years and always came away with something noteworthy. This year, for the first time, the show included a break out track for auto dealers. While my primary interest was keeping up with all things car rental as they impact residual values going forward, I felt compelled to attend the car dealer sessions. And was I in for a shock.

It turns out that many things I thought were settled, aren’t. It seems that many dealers still send their customers to 3rd party car rental companies for loaners and rentals, even when the rental is being paid for by warranty or a service contract sold by the the dealership. Last I knew these third party car renters also sell used cars. Shouldn’t those car renters be paying dealers for introducing them to new prospects, not the other way around. A dealer doing a good job selling service contracts should be penetrating at least 60%. That’s a lot of rental car days paid for and the customer is as happy as if the dealer actually paid for their “loaner.”. Why send that revenue stream elsewhere? It turns out that many dealerships are too lazy to “do the paperwork” each time they roll a car on a rental or policy adjustment “loaner.” After all, if the rental car isn’t charged out to a specific department, a service contract company, policy adjustment, or to the customer, the sense that the car rental business doesn’t make money takes over the dealership.

What does it cost to NOT have a rental car operation? What does it cost the dealer when he/she is at the end of a stair step program and needs a few unit sales to reach a plateau, especially one that is retroactive? What does it cost to not have those units registered in your market for MSR (Minimum Sales Requirement) purposes? What does it cost to not have off rental units available as organic pedigreed pre-owned inventory and you have to go out and buy inventory at wholesale? What does it cost for the lost pre-owned sales when third party renters sell YOUR customer a pre-owned vehicle because YOU introduced them? What does it cost when your customer becomes impatient at the time it spends to be transported to the third party car renter. What happens when you customer has a beef with your third party car rental company?

I discovered there are still dealers who hang a dealer plate on a piece of used vehicle inventory and put it out as a loaner. What does that cost? What are the insurance ramifications?

Well, I found out a lot of things at this most valuable conference. I found out that despite the fact that dealer garage keeper liability carriers have policies for rental units, they tend to NOT accept a mixture of DRAC (Dealer Rental Car) units and rental units they insure. I also discovered that there is an increase in guaranteed value rental units, known as factory program vehicles as opposed to rental risk units. This allows automotive OEMs to have better control of rental units and cycle them when it benefits them. This could be the beginning of some of the bad behavior that caused used vehicle values to crater in years past, especially with the tidal wave of off lease vehicles heading our way in the next few months.

Bottom Line: This was a VERY beneficial conference to attend and one I highly recommend to auto dealers now that the break out track sessions for dealers exists.