Fleet News

Residual value boost for fleets

A positive outlook for used car and van values after 2011 means fleets could achieve more for de-fleeted vehicles than they have set in their current residual value predictions.

Experts are forecasting that there will be a shortage of cars and vans coming on to the used vehicle market and that this will push values up.

While this will benefit outright purchase fleets, companies that lease their vehicles will also benefit as strong used prices will be reflected in reduced monthly rates.

Leasing companies typically review their rates three times a year to reflect any upturn (or downturn) in used vehicle prices.

Inchcape Fleet Solutions reduced its monthly rates at its last two reviews as a result of the high prices its ex-fleet vehicles are achieving.

This picture is set to continue, as Professor Peter Cooke of Buckingham University¹s Centre for Automotive Management says in the latest BCA used car report.

"It is realistic to expect the basic laws of supply and demand to push up used vehicle prices," he said.

Predictions suggest that by 2012 there will be around 2.5 million fewer cars aged below five years coming to the used vehicle market.

"There has been a pan-industry awakening that the overall stock of lower-mileage ex-business used cars was, and is likely to be, severely reduced over the next few years," said Cooke.

"Forecast new car and LCV sales for the next five years may well create a surprisingly buoyant used vehicle market."

Lee Hamlett, head of technical risk at Inchcape Fleet Solutions, agrees: "With the supply shortages there is every reason to expect values will stay a little above current levels."

However, he warned that used values may drop because they are currently higher than long-term patterns suggest they should be.

Other factors such as the October comprehensive spending review could reduce demand.

Despite this, the prices paid for ex-fleet vehicles from 2012 onwards should remain strong, says CAP.

"Based on current economic forecasts, 2012 sees better conditions or at least reduced uncertainty as consumers become accustomed to the economic climate," said CAP's Mark Norman.

"Any price reduction trend established in 2011 will therefore level out and in some cases return to above trend. In 2013, if current economic forecasts hold true, stronger retail recovery will inject further confidence and although money will still be tight for consumers they will be more prepared to make significant spending commitments."

This is also the case with light commercials.

"Recovery will begin toward the end of 2012 and the benefits of reduced registrations in 2008/9/10 will be felt in terms of used undersupply providing a boost for values," explains CAP's commercial vehicle expert and Monitor editor Tim Cattlin.

Mike Pilkington, managing director, Manheim Remarketing, says the lack of supply in the used car market is already being felt.
"This lack of supply is undoubtedly helping support prices in the current market," he said.


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