Do Rental Fleet Cars Hurt Brands...GM?

Posted by: David Kiley on October 5, 2006

Forced to rent a car this week after the head gasket on my Subaru went South following a botched radiator flush and fill (i’m withholding the name of the chain until they decide if they are going to pay me $2,000 to fix my car) i ended up with a Chevy Cobalt from Enterprise.

I had only driven a Cobalt at a GM event when it first came out. I hadn’t borrowed one from the press fleet for an extended drive. But here is my thought about this Cobalt, which is peppering rental fleets across the country. Blech!

What I’ve got here is a stripped down Cobalt that a state social worker would be ashamed to have as their government issued fleet car. Cruddy cloth seats. No central locking button of any kind. This is that car that automakers tell me they build just to get a really low starting price on www.edmunds.com, but that nobody really buys.

Wrong. Rental fleets buy them. Let me just say…this car has made a terrible impression on me. How many drivers do you suppose have driven this car and gotten an equally bad impression? I know there are better versions of Cobalt. Im not an idiot. But for the average car renter, it’s a reach to expect them to think…”Ugh….this car sucks…but, I’ll bet if I opted for the premium version, it would really be nice.”

A few years ago, a marketing guy at Buick told me that GM had learned its lesson with rental fleet cars. Buick, he said, had long sold stripped down Buick Centuries and Regals to rental fleets—-cars that noone other than a state purchasing agent would buy. He went on to say how dumping so many stripped down cars on fleets had been one of the contributing factors to Buick’s demise. I can hear him now. “Do you realize how many traveling business people got a truly crappy impression of this brand that was aimed straight at them?”

Learned their lesson, huh?

I am anticipating that someone at GM will tell me that the rental fleets demand these stripped down cars. Oh? If GM is really interested in protecting its brands and models going forward, how about making the decision to either not build the stripped down one. If they don’t buy it, they don’t buy it.

Reader Comments

Chris

October 6, 2006 7:05 PM

Yes it can be a mixed deal for the automakers to sell to rental agencies. However, not all the rental agencies end up with the low-end versions of particular models, it just depends on the agencies purchasing procedures, etc. Actually in some cases putting cars into rental fleets can give an automaker a foot in the door and give "joe average" a chance to try out a car in more real world living conditions, almost like a paid test drive situation.

As far as producing "stripped" cars and selling them to the rental outfits, that is just DUMB. I don't understand why the American automakers refuse to better embrace "packaging" that makes even a low-end model a decent vehicle to drive. Honda has done this very successfully for a LONG time. Putting more models on the road with a bigger standard option list actually drives down the unit cost of those options and buys a heap of owner loyalty and satisfaction. ABS and airbags all around along with full curtain airbags should also be standard equipment since nowadays safety sells as well. ABS would be a much more successful safety feature if everyone had it and was used to how it properly functions.

Seriously, give me a well equipped car with the options that I really want, not a bunch of useless who-ha whiz-bang stuff that will just go haywire in 2 years and cost me a fortune to fix.

Frequent Renter

October 7, 2006 1:47 AM

First, the Cobalt and similar cars are in the "low cost transportation" end of the car rental spectrum. It does not matter which brand you rent, they will be "comfortably equipped" and not a luxury version.

Second, Enterprise might be a large rental company, but their purchasing decisions on vehicles and equipment are not universally followed by other such companies.

Third, most of the vehicles in the larger vehicle classes (than the Cobalt you rented) DO have more equipment on them as STANDARD from the factory. Still, they are nicer "transportation", but not totally luxury-loaded vehicles.

Fourth, when the rental companies consider which models and what equipment to get, they have to consider fix-up issues when a renter might trash the vehicle out (for which the fine print in the contract says they can charge your credit card with to pay for). They know about depreciation and what's a good "buy" for them, but some of them can and do skimp on equipment and then rent the car for the same as a car with more equipment.

Rather than take the default mode on rental car companies, do some research beforehand and find which companies have the better equipped models and in what size classifications. Typically, you'll find the middle-level models with a little more than the expanded factory standard equipment--i.e., models which Middle America might desire to purchase later. IF the rental company participates in the manufacturer "programs", you can bet that those cars will not be the least expensive ones on the market, but nicer as a necessity to bolster their later resale value at the dealer auctions. I suspect that rental companies that purchase their vehicles outright will be the ones to skimp on equipment and rent for marginally less money than a larger national chain.

I have rented vehicles for many years, usually heading toward the mid-size or larger vehicles. I've not been disappointed in the level of equipment on those vehicles. I've also found many that I would not mind keeping or purchasing one like them.

I feel that it is the manufacturer's vehicle rental programs that have led to upgraded standard equipment on the "base" model vehicles in many of the larger price classes and even in the lower price classes too. Look at the standard equipment level on a 2007 Chevy Impala LS, for example, or the Buick LaCrosse CX or Buick Lucerne CX. More power equipment than was standard in the 1960s or 1970s of similar vehicles.

And if you get enough rental activity to graduate to the National Car Rental Emerald Aisle Executive Selection, you'll find vehicles that are very nicely equipped. Even some Pontiac Grand Prix GTs, Impala LTZs, LaCrosse CXSs in the mix. The normal Emerald Aisle selection is not bad either.

Manufacturers' car rental programs can also be effective marketing tools (when the vehicles are more nicely-equipped AND the rental customer is not disgruntled about having to rent a vehicle in the first place).

The vehicle feature programs that GM (Buick and Pontiac) have done with National have been for vehicles with upscale equipment levels. National had an exclusive on the LaCrosse for the first six months of production, also using them to showcase XM Radio.

I know that "beauty" or "crappy" can be in the eyes of the beholder. A business frequent renter will seek out the car rental companies with the best value and equipment level for the price, whereas Enterprise has been observed to concentrate on new car dealers and body shops for their "consumer" business. Yet in some markets, Enterprise has some pretty classy vehicles -- but not at the lower end of the total vehicle spectrum (where a Cobalt or similar would be). Also, the better vehicles will usually be at the larger airport car rental locations than in the neighborhood locations (where transportation is more important than luxury accomodations in said transportation).

Therefore, with all due respect, do NOT talk bad about a rental vehicle just because you had to suddenly take pot luck in getting one for temporary transportation at a not-so-great rental rate. Obviously, you would not purchase a Cobalt anyway, although it is a pretty decent little vehicle in base form at a decent price point.

Many have talked about how the car rental market allegedly damages the reputations of the vehicle manufacturers. Yet if you consider that it is not in the rental company's best interest to continue to purchase vehicles which always seem to be broken (even if under warranty), their fleets will have vehicles with a proven reliability track record--whether Ford, GM, DaimlerChrysler, Kia, Honda, Nissan, or Toyota. Yes, there are Toyotas and Hondas in rental fleets, too! What damages a vehicle's resale value more is manufacturer-subsidized cheap leases to get their vehicles on the road, with the vehicles all coming off-lease and hitting the dealer auctions at pretty much the same time (Infinity in the 1990s?).

The only thing that manufacturers' rental programs damage is the total corporate profits, which would be minor in the whole grand scheme of things.

In the case of Buicks and other upscale brands, the program cars also let buyers who could not afford them "new" afford them after two years and 25K miles (usually at less than $20K). Many might claim that only older people buy Buicks, but it has been observed (and not tracked by the numbers people!) that younger family people buy them when the price gets to what they can afford.

All rental car companies are not the same. Some have better prices and some have better-equipped vehicles for the same price. Being an informed shopper is as important in this area as in other consumer activities.

Respectfully,
Frequent Renter

Linda

October 7, 2006 12:41 PM

I totally agree. I too had a rental (Cobalt) from Enterprise. Bleh or Blech.........either is being too kind.

Darryl

October 8, 2006 5:39 PM

You make a great point. There is an exception that proves your rule in that it demonstrates that "try it before you buy it" can work both ways. That's the ford mustang gt500h (hertz edition). Used to be the only way you could drive one of these hopped up mustangs was renting it at hertz. They originally did it in the 60's but recently did it again. Once they saw the demand then they made it available for the public to buy.

lee collier

October 11, 2006 4:54 PM

(One of the biggest problems with rental cars is the depreciation they cause in the market.Take a Chevy Impala versas a Toyota Camry in Canada in 06 Chev Impala loses half it's value in the first year Camry is worth 1,800 more.As long as G.M. continues to dump on rental fleets there cars are worthless.

Stuart

October 13, 2006 4:22 PM

Poster above:
theres a GT-H (based on the mustang GT)
and the GT500 (5.4SC 500HP)
There is no rental GT500H

Small car blogger

October 19, 2006 5:12 AM

Typically this only happens in the "economy" or "compact" rental car categories. Which, by the way, is another discussion all by itself. Since when did economy come to mean the same thing as compact? A compact car, could be a very stylish, comfortable, and performing car (think Mini, and certain hatchbacks). Economy class should be reserved for those like, well, the Cobalt.

peking

August 30, 2008 11:02 AM

Does antone know how much dealerships pay for fleet cars they buy to resell on their used car lots?

Scotty Mack

June 24, 2009 11:07 PM

When you elect to rent the cheapest car in the fleet, don't complain about what you get.

I'm in the rental car business and it continually amazes me how many people ask for the least expensive car and then turn their noses up when they actually get "the cheapest car."

Don't expect filet mignon when all you are willing to pay for is a cheeseburger!

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