Fleet News

Fleet strategy: used car leasing

FLEET management consultant Colin Tourick explores the idea of contract hiring used vehicles.

Many manufacturers put large numbers of vehicles into the daily hire, short cycle and courtesy car markets and ask dealers to pre-register new vehicles for which they do not have buyers.

This creates a lose-lose situation – manufacturers running large, uneconomic factories rather than downscaling into more profitable units, a sharp decline in the price of nearly new cars and older vehicles, dealers having to use financial resources and extra space to hold vehicles on which they don’t make a profit and lessors and outright purchase fleets taking a knock because residuals fall.

Perhaps that should have been a lose-lose-lose-lose situation.

So I was particularly interested to read some research carried out by EurotaxGlass’s. The firm compared the number of vehicles available on forecourts with the demand for these vehicles, as measured by enquiries on Autotrader’s website.

Researchers found that 22% of used cars on forecourts are less than a year old but only 8% of customers want them. The figures at 18 months are not much better – at this age, they represent 21% of the stock, but are being chased by only 12% of used buyers.

Most are looking for three or four-year-old cars.

This situation provides a golden opportunity for fleet managers to exploit – lease nearly-new cars and vans on contract hire rather than brand new cars.

A three to six-month-old car has suffered its initial hit of depreciation, is within the manufacturer’s warranty and has had any new car niggles ironed out.

Contract hire companies should be able to buy these vehicles and lease them to fleets at much lower rental rates than the equivalent new car.

It might once have been a problem to ensure the satisfactory condition of these vehicles but this should be easy to overcome with a few digital images emailed by the dealer/rental company to the lessor and then on to the fleet manager to accept.

Sourcing the cars might have been a problem some years ago but there are plenty of these cars in the market right now – 275,000 six-month-old used cars and vans are defleeted by rental companies every year and around 100,000 cars are pre-registered and sold when three months old.

The web can make it relatively easy for leasing companies to source them. Some are doing a good trade in them right now. Others will say they have little demand for nearly-new vehicle leases. Ask them and create that demand. Everyone should win.

What would your drivers say if you offered them a choice between a new car or a much higher-spec used car with a few thousand miles on the clock? Is this an opportunity to avoid new car niggles, make your drivers happy and massively reduce your contract hire rentals? I think so.

  • What do you think? Would you or your drivers be happy with vehicles that aren’t new? Let us know at fleetnews@emap.com.

    At a glance

  • Lease three to six-month-old cars rather than brand new.
  • Initial depreciation hit would have passed.
  • Vehicle would be run in.
  • Vehicle would still be under warranty.
  • Cheaper to buy and therefore cheaper to rent out.
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