Seasonality of Commercial Vehicle Sales and Rentals
Consumers buy or rent vehicles depending on the season of the year and in turn, this affects commercial vehicle sales and rentals.
- Commercial vehicle sales and rentals tend to follow some set seasonal trends where demand tends to peak in the spring and fall while the lowest sales are experienced in January, February, and early March. In the US, car dealers have a hard time selling in winter months when consumers seem to be demotivated about car purchases or hire. Both new and used cars tend to experience similar seasonal fluctuations in sales volume. For instance, both new and used commercial vehicles experience a significant drop between January and March. Naturally, consumers tend to make large expenditures of disposable income into other projects during the first quarter of the year, contributing to low auto sales. Car dealers often have to resort to aggressive discounts and deals to move inventory during off-peak season. However, the 4X4 sport utility vehicles are always in demand as they never experience the seasonal auto sales slump even in January and February.
- According to experts, commercial vehicle sales and rentals tend to peak during the warmer months. Of the various commercial vehicles, however, trucks and SUVs are always in demand as they are likely to sell relatively well throughout the year, regardless of the season. While seasons determine commercial vehicle sales, some factors can spike car sales even during off-peak seasons. Location and the commercial vehicle model can determine if a car dealer can make sales all year, regardless of the season. Car dealers tend to be generous with discounts when selling second-hand commercial vehicles, especially during the holiday season, particularly on Black Friday, Christmas Eve, New Year’s Eve, and New Year’s Day.
- The auto industry has always been one of the most vital elements in the US economy. Through the years, the automotive industry has contributed 2.5-3.5% to the overall GDP in the US. As a result, there have been notable trends in the automotive industry in the past several decades. Notably, there is a dramatic sales and rental drop of commercial vehicles in January, after peaking in November and December. During high peak seasons, commercial vehicle sales can go up by 10-15%. Experts explain that off-peak commercial vehicle sales can be partly blamed on the auto manufacturers’ habit of introducing new models for the year.
- Commercial vehicle sales quotas come in monthly, quarterly, and even yearly goals. Studies show that the last week of December records the highest amount of vehicle sales and rentals and can extend to January’s first week. In recent times, the COVID-19 pandemic has dramatically changed the car selling industry. More so, car sales have shifted online, which has discouraged more people, especially those that are not tech-savvy, buying or renting cars. As such, many car dealers have been forced to give discounts to both new and used commercial vehicles to entice car buyers and hirers.
- An article published by Statista provides that commercial vehicles’ sales have had their share of highs and lows, especially between 2005 and 2019. In 2019, between 12.7 and 12.8 million commercial vehicles were sold in the US, up from approximately 12.4 million units.
Commercial Vehicle Purchases
Commercial vehicle purchases are suitable for either personal use or business use,
- Reports indicate that younger and digitally oriented consumers are purchasing commercial vehicles, such as SUVs and vans for personal use rather than business use. These studies suggest that 72% of millennials, for instance, prioritize purchasing a vehicle to stay connected and to ease their social life. Further, 70% of millennials buy vehicles based on technology and infotainment features. Compared to other age groups such as Baby Boomers, Millennials take longer to decide the car to buy; on average 16.9 weeks, whether for personal or business use. Overall, most Americans consider commercial vehicle purchases too tedious. On average, 13.87% of Americans dislike the purchasing process, while 61% feel like they are being exploited.
- The coronavirus pandemic has also seen an unexpected sharp demand for used commercial vehicles for personal use. According to recent data, the average listing price for used vehicles surged to $21,558 in July, which saw a $708 increase compared to June. Experts agree that this is an unprecedented historical shift, not only season-wise but also in the used vehicle market, where listings are known to typically decrease owing to depreciation. More consumers are shifting towards the used commercial vehicle market than usual in the ongoing pandemic due to various factors such as financial obligations, fair CPO offers, and interest rates. As the demand for used commercial vehicles goes up, however, the prices may go up, and inventory may become severely limited.
- In the US, purchasing a commercial vehicle for business use comes with many tax advantages for the buyer, as only the commercial vehicle’s business use is deductible as a business expense, whether the car owner runs a business or is an employee. Only actual commercial use of the car is deductible as a business expense. Personal travel, commuting expenses to and from a place of business are not deductible. However, whoever is driving the car must maintain good records on business travel expenses to prove the miles allowed as a deduction. Today, buying a commercial vehicle can benefit both the business and/or the employee who owns a commercial car with the cost savings from tax deductions.
- More American consumers are buying commercial cars for personal use to avoid the public commute, especially with the ongoing coronavirus pandemic. Due to financial constraints, most of these consumers are going for second-hand vehicles to save money. There has also been a halt in the production of new vehicles, which has forced consumers to settle for second or third-hand cars. As a result, the prices of used commercial vehicles has shot up, despite the common belief that cars are depreciating assets. In July, there was a more than 16% spike in a used commercial vehicle purchase, while in June, up to 1.2 million commercial cars and trucks were sold, up 22% from 2019.
- In February, total car sales are projected to have gone over 1.3 million, up 1.8% from last year, proof that Americans are still buying cars exponentially, despite the harsh economic times as industry analysts had predicted. Car buyers in the US have had to process the scarcity of Asian model SUVs and trucks. There have been plans to increase finance interest rates or upfront down payment due to low supply.
Rentals for Personal Use Vs. Business Use
Commercial vehicle rentals are either used for personal and sometimes business purposes.
- Whether new or preowned, buying and operating a car has proven to be expensive. The interest rates are also discouraging more Americans from buying cars, forcing them to rent commercial vehicles for personal use. On average, a used car goes ranges between $20,000 and $37,000. Since buying a car is not an investment, most Americans are gravitating towards commercial vehicle rentals. By renting a vehicle such as a pick-up, consumers are avoiding significant expense for a fast depreciating asset. Unlike buying a car, renting a vehicle for personal use saves one the stress of losing a third of a vehicle’s value in the first year of ownership. Therefore, more Americans prefer to rent a commercial vehicle to save up on money they would have spent financing a car loan.
- Industry experts predict that the commercial vehicle rental and leasing market will reach $116.72 billion by 2027. More so, in-vehicular user experience in commercial cars for personal use is expected to grow significantly compared to business use. The coronavirus outbreak has affected various industries, including the auto industry, which has, in turn, spiked car prices. As a result, more people are shying away from buying new cars and instead opting to go for rentals. For instance, North America has shown immense and rapid growth in the demand for commercial rental vehicles. The implementation of updated technologies and persistent companies has continued to enhance the vehicle user experience, thus auguring the US’s car rental market.
- More reports indicate that before COVID-19, the truck rental industry expanded as the demand for industry services spiked. Lease trucks continue to become an option for Americans that do not want to commit to the rigorous car buying processes for business purposes. As the economy continues to improve, albeit slowly, rental vehicles’ demand is likely to go up for various purposes, including personal use and robust business activities.
- Renting a commercial vehicle for business use is becoming popular in the US, especially as more Americans continue to learn that rentals are cheaper than buying or owning a vehicle. Renting commercial vehicles for personal use saves the renter maintenance costs and many other financial overheads that come with owning a car to run businesses. Rental commercial vehicles for business use also save users the cost of repairing wears and tears to keep the vehicles operational. In essence, renting a business vehicle saves users costs that come with heavy taxation.
- Commercial vehicle rentals have increased in market size, based on their revenue, which stands at $22.6 billion. Customers’ demand for travel, time spent on leisure and sports are some drivers attributed to the growth of rental vehicles for personal use. As a result, the demand for commercial rental vehicles has continued to increase. In contrast, high competition in the car rental business is posing challenges in the industry.
Different Types and Uses of Commercial Vehicles
Commercial vehicles come in different types, such as RVs, limousines, and passenger buses or vans. Different commercial vehicles serve different purposes.
- Commercial vehicles come in various forms, such as recreational vehicles (RVs), limousines, passenger buses or vans, and SUVs. Commercial vehicles’ classification depends on how they are used, although the categories can be narrowed down to either personal or business. In essence, a vehicle’s functionality can be determined based on its use.
- The commercial vehicle production in the US is said to be steady and growing since the Great Depression aftermath in 2008 and 2009. Since 2010, the production of these vehicles has jumped from 5 million to 8.5 million units in 2018.
- The RV is a commercial vehicle ideal for users that are wary of seeking to save on flying and accommodation costs. A recreational vehicle has proven to be a critical commercial vehicle, especially with the ongoing COVID-19 pandemic, as it is self-contained. The RV also provides a safe and secure environment for its users, particularly those skeptical of using public facilities such as public restrooms. Studies indicate that the RV industry generates $114 billion annually, pays $12.2 billion in taxes, and supports over half a million jobs in the US. It is estimated that 25 million Americans use the RV each year for commercial and personal purposes.
- Americans rent limousines for various reasons and occasions; mainly, the prestigious experience that these commercial cars give. Unlike the RV, the limousine is associated with opulence, lavishness, and immoderation. Often, limousines are used to attend functions such as proms, weddings, bachelor and bachelorette parties. Besides, limousines are also used for business events to make a statement to corporate clients. Limousine fleets come in different forms, including limo buses.
- Passenger buses or vans are ideal commercial vehicles for users looking for a bigger means of transport than the usual midsize sports utility vehicle (SUVs), yet something smaller than an RV. A passenger bus or van can be considered based on the adventure or family-size and the overall seating capacity required for the adventure. Only a few automakers have managed to manufacture full-size vans that can accommodate 8-15 passengers. Besides the seating space, renters may consider several factors when looking for the ideal commercial passenger van. Other essential elements include cargo space, configurations such as short or high roofs and long wheelbases, upfitters that can be converted into full-size or ultra-luxurious during camping. An article published by Statista shows that the passenger bus or van rental is growing expeditiously and is projected to go up to approximately $34.5 billion by 2024.