Fleet News

Marketwatch: UK run-outs keep residuals constant

WELL-managed model run-out programmes by manufacturers in the UK are minimising the hit on residual values outgoing models are experiencing.

The huge number of car launches is pushing residual values down, although research suggests that the UK is the best-prepared European country in minimising the effect.

According to investigations by GE Commercial Finance, Fleet Services (GECFFS) this year is expected to see the highest number of new car model launches ever, at more than 70. But well-specified run-out cars and unwillingness to flood the market with outgoing models by carmakers is helping fleets lessen the drop in residual values.

Mark Chapman, European asset management director for GECFFS, said: ‘Old model run-outs in the UK tend to be well managed by manufacturers.

‘We rarely see the market flooded with the previous model and their attractiveness is maintained by the adding of desirable specification options in the run-up to new model introduction. Because of this, the preceding models maintain appeal for the used buyer. Even though we are seeing more and more car launches, we cannot see this factor changing significantly, especially in the short to medium term. All in all, it is good news for UK fleets.’

Elsewhere in Europe, the changes in model are not handled as well.

Chapman said: ‘When we set RVs on existing models, we build in something called Model Life Factor (MLF) to take account of the impact of the release of new models on their predecessors and the potential reduction in demand they may cause as buyers turn to the new version.

‘To put it into perspective, the MLF that we set for UK cars is typically around minus 1-2% as the vehicle ages and we anticipate that this will stay at that level despite all the new models we will see this year. However, in some European countries, the MLF can sometimes run into double figures and we have seen instances as high as 20% on models in their last year of production.’

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