Avis 2015 Annual Report Download - page 25

17
OUR FLEET
We offer a wide variety of vehicles in our rental fleet, including luxury cars and specialty-use vehicles. Our fleet
consists primarily of vehicles from the current and immediately preceding model year. We maintain a single fleet of
vehicles for Avis and Budget in countries where we operate both brands. The substantial majority of Zipcar’s fleet is
dedicated to use by Zipcar, but we have developed processes to share vehicles between the Avis/Budget fleet and
Zipcar’s fleet primarily to help meet Zipcar’s demand peaks. We maintain a diverse car rental fleet, in which no
vehicle manufacturer represented more than 21% of our 2015 fleet purchases, and we regularly adjust our fleet
levels to be consistent with demand. We participate in a variety of vehicle purchase programs with major vehicle
manufacturers. In 2015, we purchased vehicles from Audi, BMW, Chrysler, Fiat, Ford, General Motors, Honda,
Hyundai, Land Rover, Kia, Maserati, Mazda, Mercedes, Mitsubishi, Nissan, Peugeot, Porsche, Renault, Subaru,
Toyota and Volkswagen, among others. During 2015, approximately 21%, 17% and 7% of the cars acquired for our
car rental fleet were manufactured by Ford, General Motors and Chrysler, respectively.
Fleet costs represented approximately 25% of our aggregate expenses in 2015. Fleet costs can vary from year to
year based on the prices at which we are able to purchase and dispose of rental vehicles.
In 2015, on average, approximately 49% of our rental car fleet was comprised of vehicles subject to agreements
requiring automobile manufacturers to repurchase vehicles at a specified price during a specified time period or
guarantee our rate of depreciation on the vehicles during a specified period of time, or were vehicles subject to
operating leases. We refer to cars subject to these agreements as “program” cars and cars not subject to these
agreements as “risk” cars because we retain the risk associated with such cars’ residual values at the time of their
disposition. Such agreements typically require that we pay more for program cars and maintain them in our fleet
for a minimum number of months and impose certain return conditions, including car condition and mileage
requirements. When we return program cars to the manufacturer, we receive the price guaranteed at the time of
purchase and are thus protected from fluctuations in the prices of previously-owned vehicles in the wholesale
market. In 2015, approximately 64% of the vehicles we disposed of were sold pursuant to repurchase or
guaranteed depreciation programs. The future percentages of program and risk cars in our fleet will depend on
several factors, including our expectations for future used car prices, our seasonal needs and the availability and
attractiveness of manufacturers’ repurchase and guaranteed depreciation programs. The Company has agreed to
purchase approximately $7.2 billion of vehicles from manufacturers over the next twelve months.
We dispose of our risk cars largely through automobile auctions, including auctions that enable dealers to
purchase vehicles online more quickly than through traditional auctions, as well as through direct-to-dealer sales.
In 2015, we continued to expand the number of states that can participate in our Ultimate Test Drive consumer car
sales program, which offers customers the ability to purchase our rental vehicles. Alternative disposition channels
such as Ultimate Test Drive, online auctions and direct to dealer sales represented approximately 34% of our risk
vehicle dispositions in the Americas in 2015 and provide us with per-vehicle cost savings compared to selling cars
at auctions.
For 2015, our average monthly vehicle rental fleet size (including U.S. rental trucks) ranged from a low of
approximately 494,000 vehicles in January to a high of approximately 690,000 vehicles in July. Our average
monthly car rental fleet size typically peaks in the summer months. Average fleet utilization for 2015, which is
based on the number of rental days (or portion thereof) that vehicles are rented compared to the total amount of
time that vehicles are available for rent, ranged from 65% in January to 75% in August. Our calculation of
utilization may not be comparable to other companies’ calculation of similarly titled statistics.
We place a strong emphasis on vehicle maintenance for customer safety and customer satisfaction reasons, and
because quick and proper repairs are critical to fleet utilization. To accomplish this task we employ a fully-certified
National Institute for Automotive Service Excellence technician instructor and have developed a specialized
training program for our technicians. Our technician training department prepares its own technical service
bulletins that can be retrieved electronically at our repair locations. In addition we have implemented policies and
procedures to promptly address manufacturer recalls as part of our ongoing maintenance and repair efforts.
CUSTOMER SERVICE
We believe our commitment to delivering a consistently high level of customer service across all of our brands is a
critical element of our success and strategy. Our Customer Led, Service Driven™ program focuses on improving