Fleet Sales Don’t Compare to Retail Sales – Even With Trucks

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If you’ve been following the auto industry long enough, at some point you’ll hear someone talk about the negatives of fleet sales. What follows is a basic review of the difference between a fleet sale and a retail sale and an explanation of the fleet buying process. If you’re interested in why fleet-heavy truck sales figures from Ford, GM, and Chrysler should be discounted when compared to Tundra sales, this post might be interesting to you.

If not, you might want to skip it (there is some math involved). Here we go.

What’s A Fleet Sale?

There is a fair amount of confusion in the general public about what constitutes a true “fleet” sale. Auto dealers are likely to blame for this confusion because they often advertise special “fleet only” pricing to the general public, yet these public “fleet” discounts are nothing more than a sales gimmick.

Most auto manufacturers define a “fleet” as a business that owns at least 15 vehicles OR a business that purchases 5 new vehicles every year (see the fleet eligibility requirements for Ford, GM, and Chrysler). If you meet these requirements, you’re given a Fleet PIN code, J-status code, etc. This code gives dealers permission to offer you special fleet pricing that’s not available to the general public (more on that in a minute).

However, if your business doesn’t own enough vehicles (or buy enough new cars each year) to qualify as a true “fleet” business, you may still be able to work with the fleet salesperson at your local dealership. He or she will offer you “fleet” pricing, which in reality is nothing more than retail customer pricing presented as a special program. In the car business, this is known as a “fleetail” transaction.

Fleet vs Fleetail Sales

Dealers like “fleetail” business a lot. It’s more profitable than true fleet, and unlike true fleet it can be reported as a retail transaction. This is an important point – fleetail sales are considered retail sales in terms of reporting. That means that all the retail sales figures you see from manufacturers include this minor fleet/small commercial business.

So, to summarize: true fleet customers have a special PIN code, and everyone else is fleetail which is really just retail. Got it?

Fleet Pricing 101

Once you’ve got your fleet PIN code, your dealership fleet sales person can use all of these tools to find the best deal:

Special Orders: Trying to save every penny? A Ford, GM, or Chrysler fleet salesperson can build you a truck that has only the features you want to pay for and nothing else. Compare this to buying a new truck off the lot with a pre-set package and you can imagine the savings.

Volume discounting programs galore: The complexity of fleet discount programs can best be described as Byzantine – prices will very wildly depending on specific options, the exact number of vehicles ordered, the time of year, etc. There are a lot of different ways to slice this pie.

Special off-the-book discounts – If a big fleet customer is thinking about placing a large order, the dealership can call their manufacturer fleet rep for an even better offer than anything published in the fleet guide.

Special off-the-book financing rates – Big fleet orders cost millions of dollars, and they’re rarely paid in cash. Therefore, fleet sales people can call their financing company (i.e. Ford Motor Credit) and he or she can offer the fleet buyer a special interest rate, adjust the salvage value or term of the fleet lease contract, etc. to help the dealer earn the business.

Depending on make and model, dealers can offer true fleet customers a price that’s 10% to 20% less than dealer invoice price minus all incentives…plus special financing rates. For this reason, it’s often said that automakers make little to no profit on a true fleet customer.

Why Fleet Customers Are Fundamentally Different Than Retail Customers

Pretend that you are the purchasing manager for a large corporation, and that your job is to get the best possible value for your company’s dollar. When it’s time to buy a vehicle, there are three factors you should look at:

  1. Up-front cost and financing options. How much is the initial cash outlay? What is the time value of our money? How can we maximize cash flow?
  2. Salvage value. How much can we sell our fleet vehicles for when we’re done with them? Even better, how much can we get the manufacturer to agree to buy our vehicles for when we’re done with them?
  3. Operating expense. How much will it cost to use our fleet vehicles in our day-to-day business?

As a purchasing manager, you plug everything into a spreadsheet for each manufacturer, calculate your total cost, and then issue a P.O. No comparisons. No test drives. No consulting Consumer Reports or Edmunds.com reviews…just cold hard numbers. That’s your job.

To see which of the three factors has the greatest impact on a purchase decision, let’s run a theoretical comparison. Let’s say that all the vehicles we’re considering have the same operating costs, MSRP, and invoice price, but that:

  • Vehicle #1 is available with a 10% discount and a 20% salvage value
  • Vehicle #2 is the same as #1 except that the up-front cost is 5% lower
  • Vehicle #3 is the same as #1 except that the salvage value is 25% higher

We’ll also assume that the vehicles are depreciated 33% each year, and that the interest rate is 7% calculated on the total cash balance at the beginning of each year. The results?

Vehicle 1 Vehicle 2 Vehicle 3
MSRP $23000 $23000 $23000
Invoice (90% of MSRP) $20700 $20700 $20700
Discount $2070 $3105 $2070
Total up-front cost $18630 $17595 $18630
Salvage value $4600 $4600 $5750
Interest expense $2606.9 $2462.07 $2606.9
Total cost to own $16636.9 $15457.07 $15486.9

As you can see, salvage value has less effect on total cost than up-front pricing. This is important to understand, because it’s the key to the fleet business – no one cares if your fleet trucks don’t hold their value. The most important number is the up-front price.

Therefore, fleets aren’t buying the best trucks, they’re buying the cheapest trucks…which is why fleet sales don’t matter. Fleet buyers aren’t voting for the best product – they’re voting for the lowest cost.

Granted, we’ve made some assumptions:

  • Operating costs aren’t identical, but they’re close…according to Intellichoice, the maintenance costs for a 2010 F150, 2010 Silverado 1500, and 2010 Tundra are all within $100 of each other per year.
  • We’ve also assumed that up-front pricing is the same, but clearly that’s not the case. Manufacturers tinker with fleet pricing in order to maintain production. Chrysler was running near 40% fleet earlier this year, and it’s no secret Chrysler’s ultimate survival is still to be determined. Anyone want to guess if they were offering fleet customers an incredible discount last year just to keep the factories running?
  • We’ve assumed a 7% cost of money, but historically that’s incredibly low. As the cost of money increases, the importance of a lower up-front price increases as well.
  • We haven’t given cash flow enough weight in our calculations. A lot of companies would rather pay a little more in the long run than risk capital. That’s one more reason that fleet buyers are more concerned about up-front costs than they are anything else.

Do retail buyers think the same way as fleet buyers? No.

First of all, retail discounting isn’t nearly as dramatic, so the up-front cost differences are smaller for retail buyers than they are for fleet buyers. Secondly, a retail buyer is much more concerned about resale/salvage value because their rate of depreciation is much slower. Finally, retail buyers consider a lot more than price – safety, perceptions of quality and reliability, tow ratings, comfort and convenience, etc.

Retail consumers are buying a specific make or model because they think it’s the best, but that’s simply not true for fleet buyers. They’re buying the cheapest truck available. Therefore, fleet sales should never be compared to retail. Ever.


Filed Under: Auto News


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  1. Cater says:

    HEXmate: Your a typical person that tries to turn ever-ones words around. Read it again and your questions will be answered. and for the record.. Toyota isn’t a “FLOP” Government owned GM, FORD, Chrysler, is a flop. Your a flop when you have to ask for billions of dollars in handout because you cant make a product that sells, or is worth selling.

  2. Jason (Admin) says:

    Cater – Ding ding ding – winner. That’s exactly why Hexmate has been banned from commenting here.

    I honestly don’t understand why he takes the time to comment – I delete his comments as soon as I see them and I don’t even bother to read them.

    Talk about a waste of time…

  3. Mickey says:

    Just like a dog who chases the pork chop on a stick tied to his owner’s neck. The owner needed someone to play with. That reminds me of you there Hexmate. You’re that dog…….Someday Jason people will understand why fleet sales aren’t good for the average consumer. Especially when it comes to resale. Like Ford trying to do. Anticipated top resale value. “Anticipated”? I thought that was for ketsup…. How about today’s resale who is on top. That’s what people need to know not anticipated. That’s like counting your eggs before they hatch.

  4. Marko says:

    Hater. Back on the meds please.

  5. Mickey says:

    Hexmate says:

    Actually Jason nobody is reading your drivel here but I like to post because it is rather interesting to see the comments from your cohorts here that are reading it. Really the only one wasting their time would be you because there is nothing in your diatribe that is grounded in reality. It’s just stuff you make up so you can try and feel good about the flop you want to promote. LOL!

    Hexmate you keep trying but the ones who are amused is the people who read your crap. Let’s see what we got here. “Jason nobody is reading your drivel”. But yet you keep on responding like that little dog chasing his pork chop. You have no friends and it’s obvious. Now you mention his flop he wants to promote…… I thought you just wrote “Jason nobody is reading your drivel. Well guy it’s apparent who didn’t make it past the fifth grade. Before you talk next time at least see what size shoe you wear before you put it in your mouth. You best stick to your big3 forums. They’re more than you can handle. Just your first reponse proves anything you write isn’t trustworthy because you can’t tell the truth. I’m not going to give you an inch because of your lack of education. You lost your bet to Jason now man up and call it the day. You give sore losers a bad name. You want to cry go to your big3 forums and cry all you need and maybe someone will throw you a towel. Get the poicture there Hexmate! You’re not welcome!

  6. Jason (Admin) says:

    Mickey – I’m of the opinion that fleet sales are just fine provided they don’t effect resale…but that’s the problem, just as you say.

    Ford’s resale value for the F150 is significantly lower than the Tundra, and the only logical explanation are fleet sales. Ford sells a lot of trucks, but how many of them are sold for a huge discount?

    Toyota definitely sells fleet vehicles – mostly Camry, Corolla, and Prius. The amazing thing is that every one of Toyota’s fleet models hold their resale value. The reason? Toyota doesn’t give away the keys to the factory just to sell some more vehicles.

    I’m as certain as anyone could be that a used F150 would be worth a lot more if Ford wasn’t so gung-ho about winning that “best selling truck” contest every year.

  7. Mickey says:

    Understand Jason. Sorry you have to deal with the circus in Hexmate. Funny thing he got caught in his own B/S.

  8. TXTee says:

    That dude hasn’t given up yet? Talk about no life. Thanks for the article. I always figured fleet to public was a joke but good to know if you want more bare bones to go through that department. I got the best deal on a previous loaded vehicle through the fleet salesperson. They do volume and have different motives than other sales people from what I’ve seen.

  9. Mickey says:

    I agree TXtee. How’s Texas?

  10. TXTee says:

    Hey there, Mickey. I see the Blue Beast has broken 100K and still going well. Weather is flip-flopping like crazy here and I’m only home on the weekends, but no complaints. It’s always better than when I was stuck in Cali.

  11. Mickey says:

    Sounds good. I don’t have to travel as much and as far now. I switched jobs. Now work for the govt. Better benefits. Yes the weather is something else here. Way too many freezes and etc. Yes made it passed the 100k window. At 102228 miles.

  12. Mickey says:

    Hexmate you can sit here all day call people names and critize them the same way. I’m glad you let me sue the educational system. At least Hexmate I went to school so what’s your excuse? You have proven how much of aslug you really are. Just by coming back to try and atagonize Jason won’t work. You can be man which we know you can’t be. You’re nothing but a lonely boy who has nothing better to do. Now boy go play with your dog like I mentioned before. Make sure you use that porkchop. The thing about you there H or anonymous/Hexmate you are full of hot air.

  13. TXTee says:

    You gotta love an idiot with no life. Uhm no I’ve owned more than a Tundra. It was not bought fleet. I purchased ANOTHER vehicle through fleet. Stop jocking my ride and worry about your POS you roll in.

  14. Mickey says:

    Well said there TXTee…..

  15. Jason (Admin) says:

    TXTee said “Stop jocking my ride and worry about your POS you roll in”.

    Awesome line. Great work lady.

  16. TXTee says:

    Thanks, I try to keep it PG. 😉

  17. Mickey says:

    Here’s alittle funny video making fun at Ford’s (Ferd’s)
    Also Jason I just heard of a major recall on Fords and didn’t catch what vehicle or the issue at hand. Maybe Justin knows.

  18. Jason (Admin) says:

    Mickey – I saw that video on Jalopnik last week. Pretty funny (only they could have stopped it half way).

    The recall looks like it was for door latches. Seems pretty minor…maybe there’s another one that I didn’t see.

  19. bob migliori says:

    Ford Pickup resale numbers ( depreciation ) may have more to do with the volume of vehicles they sell and less to do with the downward pressure exerted by fleet incentives. Fleets do not turn their vehicles usually prior to 30-36 months Alot of major fleets are running them for a longer period some to 60 months dues to therecession and the cost of replacement. So I would argue that supply and demand has more to do with resale then incentives. Honda is an interesting study in resale even with incentives. Our company took advantage of an incentive on Ridgelines which at the time had a 4300 incentive. This did little to affect theresale of the Ridgline if anything.

  20. Jason (Admin) says:

    Bob – I think volume may be a factor, but there are plenty of examples of high volume vehicles maintaining extraordinary resale value, so I’m inclined to disagree.

    After all, the Tacoma is the best selling truck in the compact segment, and the Camry is the best selling car in America, and both have the highest resale in their class.

    Conversely, the Ram 2500 is the lowest-volume HD truck, and it’s also one of the worst trucks in the market in terms of depreciation.

    So, I’d say resale has a lot more to do with consumer expectations and beliefs than it does anything else.

  21. Bob says:

    I’m new to the game of fleet sales and have a question. You mention up front costs of $17 to $18 k, but assuming this is a financed deal, why so much down?

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