Business, rental and government new car sales are declining

– By Marc Sibbald – 

I remember attending a manufacturer fleet presentation many years ago and hearing that fleet is important because it represents more than 50% of new car sales. This made me feel proud of the industry and the contribution it was making to local economy and jobs.

At the announcement of the 2015 VFACTS record result I noticed that fleets weren’t buying as many cars as before.

The overall result has increased since 2009 when business, government and rental purchased 485,994 vehicles compared to 516,454 in 2015. But as a percentage of total sales it has decreased from 51.8% to 44.6%.

Since the GFC fleet managers have focused on reducing costs and fleet sizes so this result shouldn’t be a surprise. And the mining downturn certainly slowed down the number of 4X4 diesel utes that were sold in 2015.

Tony Weber, Chief Executive FCAI, attributes the strong growth in private sales to competition by manufacturers and the attractive finance offers that were available to consumer in 2015.

While these things will drive overall growth, the decline in fleet purchases as a percentage of total new vehicle sales could also be because of novated leasing. As companies remove under utilised vehicles from their fleets they tend to offer salary packaging as an alternative.

The VFACTS data doesn’t identify or recognise novated vehicles as a category though industry sources suggest novated leasing is far from saturation point with many employees still experiencing the financial benefits for the first time in 2015.

As the leading manufacturer with a good product range and strong commercial vehicle offering, Toyota’s sales to fleet are above market average at 58% of total sales.

Tony Cramb, Executive Director Sales and Marketing at Toyota, responded to a question from Fleet Auto News at the VFACTS announcement saying that private Toyota buyers had an average ownership period of seven years.

This suggests private buyers aren’t the reason for record new car sales. And the drop in the percentage of fleet purchases, while the overall number continues to increase, could be explained by the popularity of novated leasing where ‘private’ buyers are replacing cars every three years instead of seven.