Fleet News

Partnership pays auction dividends

CREATING multi-channel disposal routes for its end-of-contract fleet vehicles is reaping Lombard Vehicle Management seven-figure savings a year.

The company, owned by the Royal Bank of Scotland, has created a network of 'remarketing partners' who buy the bulk of its end-of-contract vehicles. It also sells a proportion of its vehicles via a physical auction and also to company car drivers themselves.

While Royal Bank of Scotland recently acquired dealer group Dixons Motors, Lombard's commitment to its existing remarketing centres is obviously important as the company recently treated a number of key remarketing partners to a day out at Palmersport's Bedford Autodrome as part of a Lombard trade day.

'We view our relationship with our remarketing centres as a partnership which works to our mutual benefit,'said Lombard's remarketing manager Ian Trapp.

'A successful remarketing department will take out as many middle men as possible, but also forge a good relationship with a network of partners.'

It was only three years ago when Lombard put 88% of end-of-contract vehicles through a physical auction – today that figure is just 27%.

At the beginning of each year, Lombard informs its remarketing partners of the cars that are due to be defleeted throughout the year.

Each partner is contracted to buy 66% of Lombard's used cars at a pre-agreed percentage of market prices reported by used car market specialist CAP. While this gives Lombard stability, it also means that its partners in many cases do not have to employ a dedicated used car purchaser.

'Our partners know they have a guaranteed supply of vehicles,' said Trapp, 'and we ensure these cars are of a certain condition. They know what is coming up and they can pre-market them before they are ready for sale.'

Another disposal route is via a joint venture with Camden Motors which sells a set number of Lombard's used cars and shares the profits.

Lombard also offers fleet drivers the opportunity to purchase their own company cars – currently about 10% do this – and twice a month the company holds its own mini-auction of predominantly prestige models, such as Jaguar and Porsche cars.

By the end of next year, Lombard aims to have created a website so its partners can see the vehicles that are due to be defleeted. This process will save both Lombard and the remarketing centres time and effort.

Trapp said: 'Our aim is to allow our partners to visit the password-protected site in their own showrooms, search for a car a customer has requested and then show that customer the search results – and hopefully a car they will want to order.'

Lombard contacts its fleet customers 16 weeks before a vehicle's lease is due to expire to remind them of their obligation with regards to the vehicle's wear and tear. 'This works well and as a result we have the lowest return of damaged vehicles', Trapp claimed. Such a move also guarantees its partners a 'supply of quality used vehicles'.

'The disposal of vehicles is the hardest it has been for a number of years,' said Trapp. 'Year-on-year the market has seen a dip in residual values. I think it will improve, but not dramatically.

'If we hadn't built up the relationships we have now and if we were losing because of residual values then we wouldn't be cost-effective in the marketplace.'

He also suggests that the residual values of diesel cars will hold up, in contrast to market fears that the upsurge in demand for diesel cars among company car drivers eager to lower their benefit-in-kind tax bills under the new emissions-based tax system will lead to a glut of cars in three years' time.

'I think Joe Public will want these cars in three years' time,' he said, 'especially as many of today's diesel engines are refined.

'Diesel take-up has risen dramatically and there has been a lot of scaremongering about oversupply in the future but we believe they will be desirable to the used car buyer.'

In terms of satellite navigation fitted to a fleet vehicle, Trapp believes fleets will reap their rewards while using the vehicle and not when it is sold as a used car.

He said: 'We do make some money back from navigation systems from the car's residual value but fleets make their money when such systems save their drivers from getting lost or having to sit in traffic jams.'

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