Looks aren’t everything, but making sure unwanted vehicles are in the best possible condition when it’s time to defleet goes a long way to maximising the return.
Fleet managers can employ a range of measures to increase residual values: planning the defleeting in advance; evaluating all stock realistically; and making sure all relevant documentation is available.
However, a crucial step to putting the brakes on depreciation when ex-fleet vehicles go under the hammer is addressing any minor damage. It will pay dividends in the auction hall and help fleets avoid costly end-of-contract charges when a vehicle is judged against what’s fair wear and tear.
But with fleets facing even heftier penalties (Fleet News, July 16, 2009), Harvey Death, managing director of Gladwins Body Repair Centres, is urging fleet decision-makers to completely reassess how they defleet.
“Too many fleets are falling foul of the system and are being hit with higher rectification bills at the point of termination,” explains Death.
“It’s important that they get an independent assessment; they have the vehicle inspected by somebody without a vested interest, find out the associated costs and then make those repairs.”
He believes fleet operators need to start questioning every aspect of the defleeting process and whether it’s delivering them the best value.
“It’s a huge marketplace out there and currently it’s not being serviced very well,” claims Death. “Fleets are either going to mobile offerings or it is being left to the remarketing facility.
“They need to start questioning how they are defleeting and see what packages are available, at what cost and the level of service that’s achievable.”
Marie Jarrold, fleet manager at BCA, believes planning in advance is crucial to maximising values. “Decide the route for stock liquidation, calculate the cost of each different process and the best cash return from each route,” she says.
But it can also pay to put right minor damage as it occurs, rather than having to face a bigger bill restoring an uncared vehicle to an acceptable condition.
“We advise fleet managers to include a ‘fix it as soon as possible’ rule in driver handbooks as we have always advocated that company cars should be kept tidy and smart at all times,” says Mark Llewellyn, managing director of Revive! Auto Innovations.
“This tends to mean that drivers take more pride in the cars and they are kept in a much better condition.”
Smart or cosmetic repairs can tackle most small area scuffs, scrapes and scratches, as well as repairing damage to alloy wheels.
“There has always been a debate in the industry about how much remedial work should be done on a vehicle before returning it to the lease company,” says Llewellyn.
“But now we are hearing reports of charges of £900 or more imposed for paintwork and wheel trim damage.
“It makes good commercial sense for fleet managers to invest in essential bodywork repairs before sending company vehicles back at the end of the contract,” he continues.
“Using a professional smart company to inspect and repair vehicles can save thousands of pounds for even small fleets. The key is understanding what’s an acceptable state for a car to be in.”
Minor damage will always affect bids in the auction hall, but where end-of-contract charges are not be the prime consideration for an outright purchase fleet, that doesn’t mean absolutely everything has to be repaired.
“Take advice before embarking on any repairs,” says Mike Pilkington, managing director of Manheim Remarketing.
“Investing £200 in a smart repair to tidy up the alloy wheels and a few scratches may be money well spent and could add £400 to the price of the vehicle, but spending double that amount may not necessarily add any more to the value.”
It’s essential the fleet operator has a good understanding of the remarketing sector, or better still knows the business “inside out”, according to Mark Sinclair, director of Alphabet.
“For example, seasonality is a key issue,” explains Sinclair.
“Knowing when to sell and when to store 4x4s or cabriolets makes all the difference to how much money they will fetch.
"Similarly, some unusual vehicles can fetch considerably higher percentages of CAP if remarketed skilfully.”