Mike Pilkington, managing director of Paragon Automotive, looks at shaping vehicle disposal strategy.
Leasing companies have, by and large, not worried too much about reconditioning end of term vehicles, instead opting to defleet straight into auctions. With any decision made at the defleet stage, there is an opportunity cost that will impact on the wholelife cost of the vehicle. When the market is buoyant it is even more difficult to quantify the impact of this approach.
The market moves in cycles and whilst it is good now, and is set to remain so, it is always prudent to plan for a downturn, that will be supply or demand led. A remarketing manager can manage risk in this environment by using as wide a variety of routes to market as possible.
It is important to consider that each remarketing channel requires a different standard of refurbishment. Online channels, which are rapidly expanding, will require a more ‘retail ready’ level of refurbishment than auctions. Similarly, dealers in central London need vehicles that can be retailed with the minimum of fuss.
While the auction model is successful it is prone to oversupply at different times and around certain profiles of product. An efficient and effective defleet strategy will exploit a variety of channels. This will help to maximise returns and mitigate risk, more than justifying the additional cost of refurbishing a vehicle.
Choosing a partner that understands the varying requirements and can work flexibly is the key to managing this process for remarketing managers.
No one channel has all the answers but if they are to be exploited effectively, it starts with a clear understanding of what level of reconditioning will be required to achieve the fastest sale and best price.