Moral hazard and the market for used automobiles

I examine a moral hazard problem faced by the owners of fleet automobiles. Because fleet vehicles are generally not driven by their owners, the drivers of these vehicles do not bear all of the costs of either neglecting or abusing the vehicle, causing these vehicles to depreciate faster than owner-operated vehicles. Empirical estimates show that, after controlling for mileage, fleet vehicles depreciate approximately ten to thirteen percent faster per-year than owner-driven vehicles. I argue that at least part of this increased depreciation is attributable to moral hazard.