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Fleet Management, Vehicle Valuation

What Is Happening with Changing Vehicle Valuations?

June 1, 2023

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If you have been paying attention to the world of vehicle news, you have probably noticed something important: Trends in car valuation have been a bit difficult to track. No, it’s not just your imagination, as the value of cars has been shifting of late. Various factors are causing this shift, but one thing is clear: Fleet managers have more challenges than ever when tracking the value of car vehicles and trying to determine the impact these shifting values will have on their business.

So, why are these shifts happening, and what can your rental company do about it? Let’s take a look.

What Is Causing Vehicle Valuation Swings?

First, remember that it is not just in your head: Car vehicle values are changing. As noted by many news sources, there are various reasons for these seemingly baffling changes that have seen both new and used car values bounce around over the past few years.

First, car inventory remains low — lower than it has been in years. There are many reasons for this relative dirth in car inventory, including continued supply chain issues and a lack of computer chips. However, despite these decreases in value, used car prices continue to fall. In theory, this shouldn’t be the case: Why is the value of used cars shrinking while inventory also shrinks?

This seeming contradiction gets to other challenges within the vehicle valuation world, and specifically how broader economic challenges are impacting car rentals. Inflation, of course, is a major problem that is impacting countless areas of the economy. However, some areas feel this impact more than others — including the price of cars, which have seen major increases since the current inflationary period. As a result, people are hanging onto cars for longer, driving down the value of used cars.

The macroeconomic picture also drives the value of used cars down, even while new cars rise. Interest rates are rising, making getting loans more expensive. As this trend accelerates, new cars become increasingly out of range for the average American and more expensive for businesses. The result is that price is rising, even while demand and the ability to make car purchases are falling.

What Impact Is This Having on Car Use Patterns?

Of course, drivers and fleet managers are seeing this impact everywhere. However, the problems are particularly noticeable among car rental companies that have to regularly cycle new cars in and out.

First, the obvious: People are driving more with the value of used cars falling and new cars becoming more expensive. The average customer has been holding on to their car for years, trying to wring as many miles out of it as possible. This sudden frugality means that people need to repair cars more often. It also may alter their driving patterns, as they try to rely less on cars for longer trips.

However, this change in pattern may also mean that people understand their cars are more fragile than ever. As a result, they may avoid taking their car to certain places — like on long business or recreational trips. As such, your car rental company may have a greater opportunity than usual to pick up more rental business.

How Are These Changes Impacting Rentals?

These changes in driving patterns can be felt across the entire car rental spectrum.

On the one hand, there could be benefits from a supply chain perspective. Falling car values mean buying used cars may be more affordable than ever. Indeed, if you have gaps in your fleet, this may be the perfect opportunity to purchase and grow your available vehicles — provided you are buying used vehicles. Unfortunately, the reverse is also true: If you are a rental fleet manager who is looking to trade in cars, you aren’t going to get nearly the same value out of your car.

More impactful may be the imprint that changing car values will have on your demand. There are many facets to consider here:

Ultimately, the impact of fluctuating vehicle value depends on the positioning of your fleet. Who do you market to? How has your specific slice of the car rental audience responded to these vehicle valuation changes? More importantly, how are you enhancing the value of your car? What technological tools are you taking advantage of to protect the value of your fleet and get the most bang for your buck?

Partner With Zubie

At Zubie, we get it: You need to get more value out of your car than ever before. This increasing financial pressure means you must invest heavily in technological tools to keep your cars safe and on the road for as long as possible. We offer a variety of specific tools, like vehicle valuation and vehicle health trackers, that can ensure your fleet is operating with maximum efficiency and get your car on the road as fast as possible.

Want more information on how our tools can get the most out of your fleet? Contact us today to learn more about how we can help you manage the current economic environment.

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