Ford is stripping out short-cycle rental sales and switching its model from risk to buybacks as it moves to take greater control over the de-fleet and remarketing of rental cars.
The initiative is part of a drive to boost residual values and drive more used car business through its retail network. Ford believes this approach is contrary to the actions of some rival manufacturers who are being forced into more short cycle business due to widespread over-capacity.
Nigel Sharp, Ford of Britain managing director (pictured), estimates over-capacity is 30% Europe-wide – effectively four cars chasing three sales.
He claims short cycle sales accounts for 25% of all car registrations in the UK, worth up to 500,000 units, when dealer demonstrators, rental and driving school sales are all taken into account.
Ford has 15% of this market, around 75,000 sales. On pure rental, its volume is around 40,000. It is looking to reduce this to 25,000-30,000, with a far greater proportion on buyback.
“Our view is not to over index, but neither do we want to miss out on business opportunities. It’s about planning the business better and controlling de-fleet,” said Sharp.
“Historically we do business as risk – we sell and they dispose of the vehicle. In the long-term we foresee that we will do more buyback so that Ford dealers become the place to go for young used cars.
“We want to control the remarketing of these cars, reducing the amount that goes to auction.”
The benefits to fleets will be improved residual values, which means lower running costs for outright purchase fleets or lower lease rates for those on contract hire. Ford will be able to better control refurbishment and push customers into its dealer network.
“Residual values are a real focus for us. We want to be industry leading. We are looking at how the premium brands behave, which means we control how cars return to market,” Sharp said.
Ford’s three pronged attack
- Reduce the volume going into short-cycle
- Buyback short-cycle cars so they can be reconditioned and better presented at re-sell
- Focus more on the specification of the cars to ensure they are equipped to sell into the used market.