Fleet News

Fleets need to be realistic about residual values

Fleets refusing first time bids for defleeted cars in the hope of achieving better prices next time round are costing themselves thousands of pounds.

In the current rapidly changing market, significant numbers of fleets are getting their valuations wrong and are pinning their hopes on hitting unlikely reserves, or are trying to achieve the 98% of the trade guides to get bonuses and failing.

This is resulting in cars having to go back to auction again, incurring costs and losing value.

“Re-entered vehicles are struggling to get the buyer’s attention unless there has been a sensible price adjustment and conversions for this stock are currently much lower,” warned BCA communications director Tony Gannon.

“This underlying issue of unsold stock must be addressed – it will not go away - and we are working closely with our customers to encourage them to bring vehicles to the remarketing arena that are priced inline with current market values.

"It is important that vendors are realistic about the current broad economic conditions in the UK.

"This is not a seasonal price adjustment, but is a more fundamental re-aligning of prices in the retail and wholesale market.”

With cars increasingly difficult to sell, some auction houses are seeing poor quality cars go round as many as half a dozen times.

Depreciation in some cases is running as high as 5% per month, and stocking and re-cleaning costs are adding to this, meaning if any vehicle remains unsold for just 60 days the car incurs costs of around £250, says remarketing experts VIP.

Experts claim that the industry’s obsession with getting 98% of CAP Clean – generally because bonuses for remarketing staff are set at that figure – means vehicles that should be sold at below that figure are remaining unsold.

Then, as market conditions dictate that the cash value of the car will drop it may achieve 98% of CAP.

However, this will be for a lower figure, meaning that it has actually been sold for less money than it would have if the first offer had been accepted.

Martin Keighley, director at VIPDATA explained: “This is a further example of the lack of experience in the fleet remarketing arena.

"You don’t need to be an expert to sell clean cars in a buoyant market, but today’s market requires experience and skills not seen for four or five years and this is costing the fleet industry millions.”

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