Fleet News

Two-year replacement cycle call reinforced

REMARKETING expert GRS has backed claims that fleets looking for the strongest residual values should dispose of their vehicles after two years, instead of more traditional three and four-year replacement cycles. The market for three- to five-year-old vehicles is declining rapidly, the firm says, but demand for two-year-old models is still buoyant.

CAP Motor Research has suggested leasing firms should rethink their replacement cycles to help residual values and reduce rental rates for customers, but the call was dismissed by the leasing industry. However, Mike Pilkington, marketing director of GRS, says there's a strong trade shift away from older vehicles because margins are better on newer cars and most dealers feel they can buy nearly-new cars sight unseen with confidence.

Of 200 dealers covered by the firm's independent research, just 14% focussed on older cars. The fall in residual values – and, therefore, lower prices - is generally cited as the reason for the change of emphasis to nearly-new. Pilkington added: 'Lower margins on older vehicles, almost non-existent values for part exchanges, and the number-plate changes have not helped the cause of used cars. Consumers see an S-plated car as much older than two years, even if it was registered in January 1999.'

Because dealers are more likely to buy newer cars 'sight unseen', GRS predicts that this practice would help boost internet-based sales. However, 87% of dealers still want to see sale details by fax, while 42% claimed it was unlikely they would buy vehicles over the worldwide web.

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