In a recent advertisement for Honda Accord, it was described as having the highest resale value within its class. I’m not surprised. How well a motor vehicle holds its value depends on several factors. Of course reliability is important no doubt, but there is something else. It has to do with retail versus fleet sales. What if the car that you are contemplating buying is sold in the hundreds of thousands under the heading of Fleet Sales? Most of these fleet purchases are made by rental car companies who demand very deep discounts from manufacturers. Later these one, two or three year old cars are “dumped” on the used car market.
I learned this first hand when Leigh asked me to help her sell her grandfather’s car, a 3 year old sedan purchased new for $25,400. The car sold for $7,000 [she was lucky] even though it only had 14,000 miles on the odometer and was in excellent condition. Why so little? It was the number one make and model of car purchased by rental car companies during the year it was originally purchased.
Leigh’s grandfather thought at the time that he was getting a good deal, a deep discount on his purchase. So much for “first cost” when buying a car. He paid dearly in terms of lifecycle cost, losing more than 70% of the purchase price. Maybe he should have purchased a Honda! If he had he would have netted at least $5,000 more.
According to a recent article in Automotive News [Retail joins fleet in driving growth, January 10, 2011, p. 4], Honda America accounted for only 1.6% or 33,000 of all the fleet sales (2.1M) in 2010. In contrast, Honda sold 1,197,500 of its vehicles to retail custsomers. In sharp contrast in terms of fleet sales, General Motors accounted for 29.2% or 609,000 motor vehicles; Ford-29% or 604,900.
Ironically, I recently bumped into the owner of a large Honda dealership. I hadn’t seen him since we were in graduate school together. I praised his reputation as a quality dealer. He responded, “They are great cars and Honda, wonderful people to work with. But once you sell a Honda to a customer, they’ll hold onto it or at least keep it in the family. I never have enough Honda trade-ins to keep my lot filled.”