SIR – I am extremely concerned that CAP Black Book is responsible for driving down used car prices. I am sure this is not the intention of the editors of CAP but I firmly believe it is occurring.
Although CAP claims the data for the guide comes from a variety of sources, including auctions, main dealers and leasing companies, it seems to me that too great an emphasis is put on auction prices.
They state that they import thousands of disposal prices from both the major auction groups each month.
This may have been a reasonable reflection of used prices some years ago but in my view the auction is very much the last resort for most vendors of cars these days, leasing companies, public sector fleets, main dealers, utilities, remarketing companies have now all found alternative routes to market that in the main produce at least a 10% better return than the auction. These alternative routes to market include the sale to employees, employees friends and family, leasing company websites that are aimed at dealers and public, trade sale centres, the internet using a variety of car specific search engines and many more innovative ways of improving returns.
Therefore at auctions you will find the thousands of finance house repossessions and voluntary returns (you know what condition these are usually in), dealer 90-day stock that has not sold and unsold cars that failed to sell via all the above disposal routes.
It is not surprising that many of these unloved cars are sold cheaply. I believe that the auctions are becoming logistics companies dealing in moving volumes of cars. There is little incentive for them to push prices up as they are almost always paid a fixed price on sale and look to improve their own margins by selling additional services.
I am not suggesting for one minute that auction houses are not a viable route for disposal but they have become for most companies the fourth or fifth choice unless of course you want to turn your cars into cash quickly or you are selling something special or rare.
One might argue, ‘does it matter what CAP value gives the cars, as it is only a guide?’.
Well, if that were only true. Due to the brilliant way in which the CAP Data is delivered, it is sucked into the computer systems of the banks, finance companies Insurance companies, leasing companies, auction houses and so on, and becomes the standard data set to which stocking loans are allowed, maximum loans on finance agreements, total loss claims with insurers and the standard to judge the performance of disposal managers.
The values they place on cars become self-fulfilling prophecies. It is not unusual for a trader to be happy to pay £5,000 for a car if it is booked at £5,000, but if a week later it books at £4,500 that’s all he wants to pay and claims that is what it must be worth.
Such is the power of this guide that it impacts on companies’ profitability and people’s livelihoods yet there is nothing like the level of transparency that is claimed and up until recently major changes to values could be made by one individual. I am reminded of the time when in July 2002 CAP dropped the value of the Ford Ka Collection by £925 in the month, some 19.6% of its value. This affected the whole of the range and it has never recovered to this day. More recently I read the editorial that says supermini prices have risen by 1% but then says one specific model the Fiesta 1.25LX was around in large numbers and moved its value back by 6% in the month. When asked to justify the statement I was told that 154 were sold in the previous month.
If one considers that organisations like British Car Auctions sell 10,000 to 12,000 cars a month I hardly think that 154 Fiestas would make that much impact on values and I fear that the evidence of large volumes of these cars entering the market may have been anecdotal. I have highlighted these cars but I am sure your readers will be able to provide many other examples.
At the same time, I find it difficult to square the circle when their other product CAP Monitor which predicts future values, stated that this Fiesta 12 months ago would be worth £5,530 today but Black Book says it is worth £4,700. Clearly £830 (15%) is a major error of judgement for which our industry pays heavily.
I am sure that I am not alone in believing that CAP Black Book is responsible for driving down used car prices by reporting the worst-case scenarios. Or as Terry Wogan would say: ‘Is it me?’
Managing director, Sandicliffe Motor Contracts
CAP view on residual values
CAP replies: Mr Middleton raises some important issues and we welcome this opportunity to respond.
Having any degree of influence in a market carries with it a duty to be both meticulous and responsible. This is why we continually review our research methods and sources to ensure their independence and objectivity. We honestly feel that our current research methodology and data collection processes are more robust and rigorous than they have ever been, but perhaps we have not been communicating our approach effectively enough.
The information contained in the Black Book is based upon sale prices from all sales channels taking account of variations including year of manufacture, vehicle colours, condition, mileage and day of sale. We guard against channel bias to ensure that no single source can unduly influence the results. We also have a team of researchers who independently verify the data received from these sources, again to ensure that third party influence is impossible.
Additionally, we are seeking to identify a form of independent verification of our techniques to further reassure ourselves and our customers that we are accurately reflecting the market place. If this explanation is news to any one of our customers, we have failed in our communications and we will therefore review the outline we currently provide in the Black Book and expand it appropriately.
Nonetheless, I recognise that Mr Middleton believes we rely too heavily on auction prices and I want to reassure him that this really is not the case. We would be failing in the duty of care we owe to our customers if that were true. Our integrity is crucial to our place in the market and something we will never jeopardise.
In the case of CAP Monitor, our valuations are based upon the findings contained in the Black Book combined with analysis. We have in fact been in discussion with parts of the leasing sector about the individual elements we take into consideration in determining a valuation, and how we model their impacts. It is our intention for these processes to become transparent and to ensure our methodologies complement those favoured by others in the industry.
To this end, we are also developing plans to invite representatives from all parts of the leasing sector talk to us about their views on forecasting. Mr Middleton’s comment is therefore very timely. We would like to take advantage of this opportunity to invite anyone interested in participating in a dialogue of this kind to contact us.
I do not know whether Mr Middleton will be satisfied by this response because I am well aware that the industry is considerably more complex than I have outlined. But I hope I have emphasised how extremely important it is to us that we fully understand the sector from our customers’ standpoint, and the sources of information that they personally find most valuable. I would therefore like to invite Mr Middleton to come and talk to us about the issues he has raised. Equally, we would welcome contact with any other customers who would like to express a view or who are interested in supplying us with information.
Our customers are our greatest asset and we take their views very seriously. Our door is always open to those who wish to see at first hand how we conduct our research and our forecasting business.
Managing director, CAP Motor Research
Playschool way to fill in a form
SIR – Burdensome bureaucracy pains us in various ways. It has always amazed me that every constabulary has its own particular design of form for the reporting of driver details following detection for speeding. There is absolutely no consistency in their design, meaning that the job of completing one of these forms takes longer than would otherwise be necessary. Why hasn’t the Home Office instructed all police forces to effect economies of scale by using the same form throughout the UK?
Thames Valley Police has now found a novel way to put an even greater burden on anyone completing one of their S172 forms. Instead of just writing in the details of the errant driver, they now expect respondents to painstakingly draw characters in boxes by joining up the dots (they even give instructions on how to do this). In the eyes of Thames Valley Police, businesses are obviously not places of work – they are playschools.
Managing director, Bruker BioSpi, Coventry
Excess payment may be down to employee
SIR – In response to Stewart Whyte’s Helpline to the request from a firm to a recently departed employee for a £250 excess, I do understand that his answer is only based on the facts given. However, we have a similar system on our policy. Each driver has to complete a driver’s form, with a section saying that if they are involved in an ‘own fault’ accident, we would expect them to pay the £250 excess (we added this as we had a poor accident record at the time and were advised to do so by our insurers).
This also applies to additional drivers and appears on their forms. I have had many occasions where drivers have simply signed the form and not read the contents. This could be the case of the gentleman concerned. I had a case only last week where we insured a hire van and the additional driver had filled in the form and signed it but had not read the contents.
The van came back having had a minor scrape (own fault) and she was appalled to learn that I would be expecting her to pay the excess. So you see it is not necessarily the company trying to make money from the employee. However, I must say that I do not agree with them trying to get back loss of no-claims bonus, as one incident shouldn’t make any difference to their policy.
Name and address supplied