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Beware commissions ‘smoke and mirrors’ FLAG warns Local Authority fleet vendors

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Local Authorities that think they are getting a good deal when an auction company reduces commissions on ex fleet vehicle and plant sales may actually be losing out in real terms, according to Mike Grey, commercial vehicle sales director at The Fleet Auction Group (FLAG).

As government cut-backs force Local Authorities to look at all potential ways of saving money, reduced commissions seem, on the face of it, like a real chance to reduce costs. Some auction companies are taking advantage of this apparent saving opportunity but it’s no more than ‘smoke and mirrors’ Grey claims.

He believes that such reduction to vendors are all too often made up by charging higher ‘buyers commissions’. The result is buyers have effectively to pay more for each vehicle they purchase, and so tend not to bid as high. The net returns for Local Authorities, Grey says, are thereby often actually reduced.

“Realistic vendor sales commissions allow lower buyers premiums;” he says, “which in turn motivate buyers, and result in higher prices being achieved on the auction floor; with appropriately greater net residual values for the Local Authority.”

“When buyer’s premiums are fixed at an attractive level, rather than varied according to how much the vehicle finally sells for, this motivation/higher price/greater return result is even more pronounced,” he adds.

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