A clean, unmarked vehicle can fetch hundreds of pounds more than a similar model in poor condition – but it is surprising that some fleets are still failing to take advantage of simple means to boost residual values.
Even small scratches or dents can knock pounds off a vehicle and it is up to fleet managers to ensure drivers hand back vehicles with acceptable fair wear and tear. Martin Potter, Manheim Auctions’ corporate sales director, has produced a list of simple ways fleet managers can boost residual values:
BOTH the interior and exterior condition of the vehicle is critical to the money a car makes at auction.
Sell two identical Ford Mondeos at the same auction – one that has been valeted and has benefited from minor refurbishment and the other that is dirty inside and out with dents and scratches – and guess which one makes the most money and sells on its first visit to the halls.
Removing dents from a body panel, touching up chips and scratches on the front of a car and machine-mopping the paintwork – particularly on dark or solid colours – can add nearly £400 to the price of a car. Take heed of this advice in a market where supply exceeds demand when a car is competing with lots of others to find a buyer.
BUY executive cars and 4x4s with high specifications. This could include leather interiors, air conditioning, cruise control, a high specification stereo or satellite navigation. Three years on they will be more desirable than their basic specification counterparts. This is especially true in the executive vehicle and 4x4 sectors where specification bumps up prices.
REVIEW replacement cycles annually and do not simply adopt the same cycle across the fleet. Divide up individual vehicle types and work with the auction supplier to evaluate the best replacement cycles accordingly.
Manheim Auctions has seen that by extending replacement cycles from three to four years vendors risk losing a further 20%-30% in the value of each car in that final 12 months. Used prices can fall by more than average in the fourth year and when increased maintenance costs of an older car are taken into consideration, the move sometimes does not add up. By following Manheim’s recommended replacement cycles two or three-year-old cars are coming back into the used car market making up to 10% more than CAP predictions.
HOLDING out for that extra £50 per vehicle can be false economy. Trust the auctioneer that he is doing everything possible to sell the car at the best price.
If the car is £25-£50 adrift of the reserve, accept the bid with immediate effect, sticking to the ‘first offer is often your best offer’ adage. The quicker the car sells, the sooner fleets turn an asset into hard cash.
THE used market can change on a daily basis and knowing what makes the money in what area is essential when setting reserves. Set the wrong reserve and the car will not sell, but if you work with the auctioneer to set realistic residuals then the car is more likely to sell first time. Completing thorough vehicle checks during the lifespan of a vehicle can mean less work needs to be done at disposal time.