Fleet News

Remarketing: Is it a red light for green vehicles?

IT is all well and good ordering a fleet of LPG vehicles – perhaps following a prick of conscience and a desire to run an environmentally-friendly fleet. But what happens when those vehicles’ fleet life comes to an end?

Re-sale values of alternative vehicles are often lower than petrol or diesel equivalents and auction buyers still view ‘green’ vehicles with an air of caution.

So what is the prognosis for fleets? Surprisingly, it is not all doom and gloom, as several key experts in the remarketing industry believe that fleets can still achieve a good price at auction – it may just take a little more legwork.

Rob Barr, group planning and communications director at Manheim Auctions, said: ‘Green fleets don’t necessarily have problems at disposal time – they just have to spend more time looking at the best way of marketing their specialist vehicles to buyers to get the best price in the current used market place.

‘For this type of low-volume vehicle, things can change on a monthly basis, hence the reason they have to work with their remarketing partner to sell the vehicles.’

As the used car market still seems to be warming up to the idea of green vehicles, it is likely to take time for buyers to change their opinion of these alternative fuels.

However, only what seems like a few years ago people’s perception to diesel was also cautious.

Jim Kerr, managing director at JTK Remarketing, explained: ‘Many of the issues surrounding green vehicles today are similar to the issues that diesel vehicles faced in the early days.

‘Even although there were some significant advantages from day one, more miles to the gallon and half the price of petrol it was a no brainer, but it still took some time to convince and change people’s perception of the diesel alternative in the market place.

‘It will take time for people to feel comfortable with alternatives and their reliability.

‘However, if there are financial benefits, as we have seen with diesel, there will be a desirability in the marketplace and I have no doubt that a premium will be achieved. However, the basic rules of supply and demand will always rule the market.’

How to maximise the values of LPG vehicles at selling time

  • Work with a remarketing group to find specialist buyers with an interest in LPG
  • Use a remarketing group with as many marketing channels as possible including the internet to ensure the vehicle is seen by as many buyers as possible
  • When purchasing LPG vehicles, opt for factory-fit over a retro conversion as they generate higher residual values
  • Don’t keep LPG vehicles on the fleet for too many years as buyers tend to see older, high mileage models as being unreliable
  • Have all paperwork relating to the conversion to hand

    How to maximise the values of LPG vehicles at selling time

  • Work with a remarketing group to find specialist buyers with an interest in LPG
  • Use a remarketing group with as many marketing channels as possible including the internet to ensure the vehicle is seen by as many buyers as possible
  • When purchasing LPG vehicles, opt for factory-fit over a retro conversion as they generate higher residual values
  • Don’t keep LPG vehicles on the fleet for too many years as buyers tend to see older, high mileage models as being unreliable
  • Have all paperwork relating to the conversion to hand

    LPG vs diesel

    LPG vehicles still need to increase in popularity at auction before buyers react, according to research by British Car Auctions (BCA).

    Several professional buyers were asked their opinions of LPG and diesel as part of customer research by BCA. The results show that many buyers remain unenthused by LPG, believing examples are difficult to source, value and retail.

    Buyers were asked to place in order of value three identically specified cars at an average 60,000 miles – a diesel, a petrol and an LPG/petrol.

    Diesel was placed first in terms of value, with petrol second, followed by LPG. Many respondents said they find it hard to value LPG models because the numbers in the marketplace remain limited.

    Tony Gannon, group sales and marketing director at BCA, said: ‘Professional buyers are ambivalent about LPG because they don’t see high numbers of LPG vehicles reaching the used market, which makes it difficult to gauge demand. When they can buy diesel power which has all the right connotations for the end-user – economy, value and desirability – the view is almost ‘why bother with LPG?’

    ‘There is an element of the chicken and the egg for LPG – if there were more, then buyers may feel more confident to buy for stock – as it is, buyers see LPG as almost an irrelevance in the marketplace.

    ‘Fleets operating LPG shouldn’t despair however – the few examples we handle all seem to find ready buyers if valued in line with market expectations. The message for fleets must be – be green to be good but don’t expect to see a financial return at remarketing time for being eco-friendly.’

    Factory fit vs retro-fit

    IN research completed by BCA, buyers were asked to rank criteria for valuing an LPG vehicle. Whether it is a factory or retro-fit came joint first alongside the age and mileage of the vehicle.

    Those responding said that they were concerned about how the unit was fitted, with the belief that it would be problematic to retail a car with retro-fitted LPG.

    Concerns over age and mileage focused on the older, higher-mileage examples, with worries that early LPG units were unreliable.

    Jim Kerr, managing director at JTK Remarketing, said: ‘In general, alternatively-fuelled vehicles with a factory-fit option will always have a premium over the aftermarket fit alternatives.

    ‘The market is presently in the minority and as such these vehicles need to be remarketed to a target audience with all the proper paperwork clearly showing when and who did the conversion.

    ‘On the other hand as gas becomes more readily available and with many manufacturers starting to offer gas as a factory option, it will make these vehicles very desirable when the traditional fleet vehicle hits the used car market in three years time.’

    Rob Barr, group planning and communications director at Manheim added: ‘Cars that we predict will sell better in the used market are the LPG and CNG Volvo models – which feature factory built conversions that are integral to the car – and the Toyota Prius from a hybrid point of view.

    ‘The buyer knows that the conversions are factory built and has extra peace of mind over future reliability. Volvo dealers know how to service and maintain them effectively so long-term reliability shouldn’t be any different to a normal car and so secondhand buyers are more prepared to look at running an alternative fuel car, rather than one that boasts an aftermarket conversion.’

    Low cost vs residual value loss

    GROUPS backing the use of LPG favour its low retail price and economical benefits.

    However, earlier this year industry figures warned of the need for caution, as low residual values and poor supply infrastructure were marring LPG’s popularity (Fleet NewsNet, August 25).

    Martin Ward, national research manager for CAP Motor Research, said fuel savings could be eclipsed by poor residual values and a lack of refuelling locations.

    He said: ‘The people that were going to have LPG have had it and are now reverting back to very economical diesel engines.

    ‘If it was going to take off, it would have done two years ago. I don’t think there’s a future in it.’

    LPG commercial vehicles

    COMMERCIAL vehicles running on LPG are becoming more popular and Manheim Auctions says it has seen a steady supply of LPG vans coming back through its auctions, mainly from the public sector and green fleets which have their own bunker stock of gas.

    Research by Manheim into prices of LPG and diesel car-derived vans has shown volatility across the market.

    In the first quarter of 2004 LPG vans sold on average for 115% of CAP, but by the third quarter of 2005 they had dropped to 79% of CAP. Meanwhile diesel prices in the same period remained at between 93% and 90% of CAP respectively.

    Diesel currently maintains 26% of its cost new price, while LPG has dropped to 14% of its new value. Bearing in mind the LPG van costs more to begin with these figures suggest that LPG vans are good value for buyers.

    Alex Wright, director, commercial vehicles at Manheim Auctions, said: ‘Out of those LPG vans we see at auction many receive bids, mainly because prices are much cheaper than a standard diesel van of the same ilk.

    ‘Those smaller businesses that are switched onto the fuel savings and who know they have a good network of stations locally that supply LPG won’t hesitate to buy the van, even if it is a more specialist conversion from a local authority.’

    Manheim has supplied key like-for-like comparisons for the values achieved at auction for an LPG model and a diesel equivalent. In each case the diesel achieves a significantly higher value.

    Fuel Vehicle Mileage Price
    LPG: Vauxhall Astravan 1.6 LPG Envoy 00W 82,000 £1,500
    DIESEL: Vauxhall Astravan 2.0 Di Envoy 00W 71,000 £2,125
    LPG: LDV Convoy 3.5T LWB Hi Loader 2.0LPG 01/Y 75,000 £1,400
    DIESEL: LDV Convoy 3.5T LWB Hi Loader 2.5D 01/Y 43,000 £2,195
    LPG: Renault Kangoo 1.2 LPG 660 01/51 82,000 £1,475
    DIESEL: Renault Kangoo 1.9D 660 01/51 114,000 £1,730
  • Leave a comment for your chance to win £20 of John Lewis vouchers.

    Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

    Login to comment

    Comments

    No comments have been made yet.

    Compare costs of your company cars

    Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

    What is your BIK car tax liability?

    The Fleet News car tax calculator lets you work out tax costs for both employer and employee