Thrifty Car Rental 2010 Annual Report Download - page 16

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For the 2010 model year, Ford, Chrysler and General Motors vehicles represented approximately
35%, 30% and 20%, respectively, of the total U.S. fleet purchases by DTG Operations. The
Company expects that for the 2011 model year, Ford, General Motors and Chrysler, will represent
approximately 45%, 22% and 16%, respectively, of total U.S. fleet purchases of DTG Operations.
Vehicle Residual Value Risk
Vehicle depreciation is the largest single cost element in the Company’s operations, and is
dependent upon the ultimate residual values of vehicles in the fleet, in addition to the overall mix of
Program and Non-Program Vehicles.
DTG Operations primarily purchases Non-Program Vehicles, for which it bears the full residual value
risk because the vehicles are not covered by a manufacturer’s Residual Value Program. Non-
Program Vehicles typically have lower acquisition costs and lower depreciation rates than
comparable Program Vehicles, and also allow the Company to reduce its risk related to the
creditworthiness of the vehicle manufacturers. The manufacturer does not set any terms or
conditions on the resale of Non-Program Vehicles other than requiring minimum holding periods. At
December 31, 2010, approximately 98% of all vehicles operated by DTG Operations were Non-
Program Vehicles.
Under Residual Value Programs, the manufacturer either guarantees the aggregate depreciated
value upon resale of covered vehicles of a given model year, or agrees to repurchase vehicles at
specified prices during established repurchase periods. These programs provide the Company with
a guaranteed depreciation rate per vehicle during the holding period, while minimizing the
Company’s residual value risk.
As the level of Non-Program Vehicles in the fleet has increased, the Company has assumed
additional risk related to fluctuations in the residual value of the vehicle, and has increased its
reliance on the used vehicle markets. The residual value market fluctuates seasonally with the
lowest values typically in the fourth quarter. Residual values depend on levels of supply and
demand for both new and used vehicles, seasonality in the residual value market, fuel prices and
consumer perceptions of manufacturer quality, and directly affect vehicle depreciation rates. The
level of the Company’s future investment in Program Vehicles will depend on the availability and
attractiveness of Residual Value Programs, although the Company does not anticipate any material
change in its fleet mix for the foreseeable future.
Vehicle Remarketing
DTG Operations typically holds Non-Program Vehicles in rental service for approximately 18 to 20
months. DTG Operations remarketed 73% of its Non-Program Vehicles through auctions and 27%
directly to used car dealers, wholesalers and its franchisees during the year ended December 31,
2010.
DTG Operations typically holds Program Vehicles in rental service for approximately six to eight
months. Generally, Program Vehicles must be removed from service before they reach 30,000 miles
to avoid excess mileage penalties under manufacturers’ Residual Value Programs. DTG Operations
must bear the risk on the resale of Program Vehicles that cannot be returned.
Fleet Management
The Company utilizes fleet optimization software (the “Pros Fleet Management Software”) from
PROS Holdings, Inc., a leading provider of pricing and revenue optimization software. The Pros
Fleet Management Software allows the Company to improve fleet planning and efficiencies in its
vehicle acquisition and remarketing efforts.
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