Readers Sound Off on Residual Values, Electric Vehicle Ordering Times, and Several 2022 Predictions

Buyer’s Remorse

I watched the State of the Fleet Industry video for the week of Feb. 14, 2022, entitled, “EV Proliferation to Put Downward Pressure of ICE Residuals,” and it made me wonder if European countries will be having any “buyer’s remorse” about the big EV push as their market share increases? They have very high electricity rates, especially in Germany. Plus, they are becoming more dependent on outside countries for energy. 

May not be a good recipe.

Peter Belloli

Fleet Manager, MilliporeSigma

Burlington, Mass. 

European Lease Residuals

Good stuff on your discussion about European lease residuals in the State of the Fleet Industry video on “EV Proliferation to Put Downward Pressure on ICE Residuals” and whether their lower residuals might be connected with the growing market share of EVs.

Kelvin Lu

Director of Product Management & Marketing, Appconomy

Shanghai, China

EVs to Impact ICE Residuals 

I couldn’t agree more with Mike Antich’s Feb. 14, 2022, State of Fleet Industry video on ICE residuals. On a more broad-scale basis, I think there is a major bubble set to burst in the ICE used-vehicle market; its just a matter of when.

First, while there is clear pent-up demand for new vehicles, I don’t think there is such a thing on the used-vehicle side—the facts indicate that probably due to more price elasticity, everyone that wanted a used vehicle last year got one, albeit at absurdly high prices. The buyers couldn’t afford the insane price rise and stretched out payments to six years; this is already starting to show up in default rates.

Look at these facts:

• Cox Automotive estimated that retail used-vehicle sales finished at 22.2 million vehicles, an all-time record, and a 13% increase year-over-year.
• The average price of a used car is $28,205, a crazy 42% higher than December 2019.
• Used-vehicle loan terms over 72 months surpassed 60% for the first time ever in Q3 2021.
• In January 2021, one-year-old used cars were 1.3% pricier than new cars last month.
• As of January, auto defaults are now up for seven straight months.

If the above facts don’t make some folks nervous about residual values on ICE mainstream units in the future, I don’t know what might.

John Possumato, Esq.

Founder & CEO, DriveItAway Inc. 

Philadelphia, Penn. 

Cancellation of EV Orders

Recently, a small vocational fleet ordered two electric delivery vans. The manufacturer canceled the order without notifying the customer. The customer found out by calling their dealer, who was also surprised by the cancellation. The customer placed the order a second time. Again, it was cancelled by the manufacturer, and again, the dealership salesperson, had not kept on top of developments, failed to notify the customer. They placed the order a third time and are still waiting for their electric vehicles. It won’t be long before this customer decides to look at the competition. 

Author wished to be anonymous

Crazy Times

I believe this industry observation will align with other fleet managers. Of my 40 years in this industry through strikes, recalls, fuel shortages, technological failures and advances, these past two years have been the craziest time I can remember in fleet. Stay safe and be well.

Author wished to be anonymous

Valuable Information

Great job Mike Antich with the January 17, 2022 edition of the State of the Fleet Industry video entitled, “Tepid 2021 Fleet Recovery Sets the Stage for CY-2022.” Thank you for being such a great source of valuable information for our industry!

Corey Woinarowicz

Director of Business Development, NoCell Technologies, LLC

Aliso Viejo, Calif.

Market Adjustments Tyranny

Cancellation of EV orders have happened with some frequency in the past year or so with material shortages and production cutbacks at every manufacturer. I am a fleet guy and deal with many fleet dealerships; many have had their entire fleet stock order reduced or 100% cancelled. Many dealers are not accepting fleet orders, you can only order retail, and must agree before the order a price of $1,500 to $2,500 above MSRP.

Also, many EV reservations willl have a “Market Adjustment” bill due before you can take delivery, some as much as $30,000. My advice is to go to the dealer, initiate the factory order, and you and the dealer sign the factory order with a confirmed price. There are already cases going to court over the mark-ups prior to delivery.

Rick Sauter

VP – Operations, Allstate Leasing 

Towson, Md.

Time to Cash In

I would like to add a comment to the Market Trends blog, “Supply Constraints Prompt Fleets to Implement Vehicle Preservation Strategies.” With soaring used-vehicles prices, now is the time to cash in on surplus units in your fleet!

Jason Shellabarger

Service Manager, Tri-State Truck & Equipment, Inc.

Casper, Wyo. 

Don’t Pay Market Adjustment

If you don’t want to pay over window sticker, then call me. You will remember those dealers who charged over window sticker. I have always been fair, honest, and transparent. 

Bob Pierce

Medium-Duty Truck Sales, Mark Allen Chevrolet GMC

Glenpool, Okla. 

Voiding Warranty Coverage

I want to add some additional observations to the March 2022 issue Market Trends editorial entitled, “Sloppy Maintenance Documentation Can Void Warranty and Post-Warranty Goodwill.” As companies are forced to extend the “normal life” of their vehicles in response to the inventory shortage, the need to thoroughly document maintenance performed is greater than ever.

Manufacturers take after-warranty, or goodwill coverage, into consideration on a case-by-case basis and it hinges on impeccable maintenance records—if there’s gaps in your maintenance program, you could be on the hook for thousands of dollars.

Will Maccabe

Account Executive, Enterprise Fleet Management

Birmingham, Ala. 

Happy to be Retired

After watching the State of the Fleet Industry video episode entitled, “CY-2022 Starts a New Cycle of Uncertainty,” some of us are so glad that we retired last year. 

Steve Dragon

Author of Children’s Books

Birdsboro, Pa.

Steve Dragon is the former fleet sales manager for Faulkner Fleet Group and retired from the company on April 1, 2021, capping a 30-year career in fleet. Later in his fleet career, Dragon became a children’s book author. His second children’s book, Were You Born a Dragon Too?, was released in March 2021. 

– Editor

Pent-Up Fleet Demand

I read the Market Trends blog on entitled, “Fleet Pent-Up Demand to Add Pressure on 2023-MY Ordering” and I could not agree more. It has been rough with short ordering windows and it seems the pent-up demand will become apparent in high order rates anticipated again for MY-2023. 

 Author wished to be anonymous

Vehicle Lifecycle Strategy

How do you know you have the right vehicle lifecycle strategy? Adopting a vehicle lifecycle strategy is about more than cutting costs.

Here’s my fleet analysis:

• Refreshing a young fleet every five years is a flat expense, while unplanned repairs in an old fleet disrupt your cash flow.
• Showing up on time in a quality vehicle delivers a strong message. Running late or canceling will leave customers frustrated.
• Adding vehicle decals gives you free advertising just from driving.

Lars Nielsen

Business Development Manager, Mike Albert Fleet Solutions

Jacksonville, Fla.

Predictions are on Target

Mike Antich’s blog, “15 Predictions that will Impact Fleet in CY-2022” provides many truisms. I think that if someone asked you, you would make a similar forecast. It is good to have it collected in one place.

In Poland, inflation, fuel, and wages will be a factor in the cost of the fleet.

Drivers’ wages are one factor. The RV (residual values) are doing well because there is a demand for cars and 2022 will not change that.

Services can shake up profitability. It was always a relatively small fragment of total cost of ownership (TCO) because the analyses were for 2-3 years, and the most important was the loss of value and fuel. During this period, the warranty works. As the lack of vehicles forces longer use, you enter the “wild area.” In addition, mileage instead of 150,000 kilometers is up to 200,000 kilometers and we have jumps from several analyzes I remember that in the range of 150,000-200,000 kilometers. There were exchanges of expensive elements and it did not make economic sense to exceed the magic 150,000-kilometer figure.

But, for this, we have problems with the lack of employees in the services, an increase in wages, an increase in the prices of energy carriers, etc. So two elements accumulate—the cost of the service increases, the need for servicing increases. The supply of services and service technicians has been constant and the demand may temporarily increase for one to two years. 

Paweł Grabarczyk

Indicata Business Development Mgr., Autorola Sp. zo.o. 

Warsaw, Mazowieckie, Poland