Fleet News

The key to successful car sales

‘WHEN you are deciding which cars to put on your fleet, think about typical used car buyers. They are operating on a budget and cannot afford to buy a new car. They will be thinking about the same personal, status, fashion, practical and transport needs as buyers of new cars – they just have less to spend.

They will want smaller cars because they are cheap to run or people carriers (MPVs) for family practicality.

If you are selling a significant number of large executive models you will not be selling the cars the average buyer wants. The prices you achieve will reflect the fact that the used car market does not favour these models.

Auctions are an efficient way to dispose of your vehicles. Generally they achieve the fastest sale at the lowest risk. It is generally believed that your risk ends when the hammer falls, but that will depend on the selling description you have chosen.

The problem is that selling a car at auction will usually achieve the lowest prices, as most people who attend are traders buying for resale.

They must buy to have stock to sell but have to leave enough scope to achieve their margin on resale. The speed and efficiency with which cars are sold at auction is impressive, and can save you money and management time.

Alternatively you could opt for selling direct through a dealer. They may simply buy your cars from you, take them on ‘sale or return’ or sell them for a share of the proceeds.

One useful approach is to agree that they will display your vehicles for a fixed period of, say, 40 days. If they sell during this period they will pay you, say, 90% of the sale proceeds. If they fail to sell within 40 days they will immediately pay you CAP or Glass’s Retail price less 12%.

Alternatively you might agree that they will retain 100% of any proceeds over a pre-agreed figure. These arrangements give them the incentive to sell the car quickly and at the best possible price. If you arrange for a dealer to sell your vehicles you should agree the deal in writing at the outset. If the dealer sells as your agent, you will be responsible to the buyer if anything goes wrong with the vehicle. If the dealer sells as principal, he has this risk.

Occasionally, as part of the negotiation for the sale of a new car, a dealer may be willing to buy it back at a future date. The buyback price will be an amount payable at a certain date and mileage.

The wording of the agreement is important as it can prevent unexpected tax consequences. Tax legislation normally gives capital allowances to the person who is expected to become the ultimate owner of the vehicle.

If you buy a car, expecting to keep it for a few years, claim capital allowances during this period and then to sell it back to the dealer under a buy-back, you may find you have given away your right to any capital allowances if the agreement says the dealer will become the ultimate owner of the vehicle.

Many fleets now sell direct to drivers. When selling to an individual you have to give a warranty under Sale of Goods legislation. You can protect yourself by buying mechanical breakdown insurance and giving this to the driver with the car. You are also legally required to ensure the vehicle is roadworthy, and that the brakes, steering, lights and tyres are in a legal condition.

If you fail to do so you face a fine of up to £5,000. As an alternative to selling the car to the driver, you could sell it to another employee, or to a friend or family member.

Unfortunately many drivers feel tempted to ask for work to be carried out on their cars before they buy them from the company. Some have dubbed this ‘preconditioning’, the tendency for a car to need extra work, new tyres, etc, in the few months before it is sold to the driver. Here again you can avoid this by setting out rules. The contract hire industry has a general rule that it will only pay for safety-related or legally-required work in the last three months of a contract.

It is also possible to set up a retail site for your used vehicles. A number of companies have fleets big enough to consider this. To many fleets, this is the Holy Grail, achieving a sale to an end user buyer at retail prices.

However, the retail site becomes a business in its own right, with its own risks and rewards, requiring specialist knowledge.

The internet offers an interesting route for the sale of used vehicles and without doubt it will grow into a major disposal route for corporate fleets. Currently, there are several organisations that can advertise used vehicles for sale on the internet, for a fee.

Geography is a limiting factor. If you have a potential buyer in Scotland but you are in London you cannot afford to drive the vehicle up there in the hope that they will buy it. Internet sales work best if a picture of the actual vehicle can be posted on the site.’

  • The article here is an abridged version from ‘Managing Your Company Cars’, published by Eyelevel Books in association with DaimlerChrysler Services Fleet Management. It can be bought online from www.tourick.com. Readers can get a £5 discount by entering promotion code 8705
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