Fleet News

Fleets promised more realistic values

Glass’s is promising greater accuracy in residual values for customers in the first major revamp in the way it calculates prices in two decades.

The company says the move will provide fleets with more realistic values at de-fleet time and during lifecycle, helping them to improve their forecasting.

The biggest change is a redefinition of values to reflect a ‘typical’ vehicle rather than a ready-to-retail condition which becomes less likely on older, higher-mileage cars and vans.

Instead of offering a trade and retail value, the vehicle market experts will now offer six values per vehicle (four trade and two retail) to allow more accurate assessments to be made of cars and vans being remarketed.

Glass’s makes 5.3 million observations (vehicle transactions) a year – 4m retail and 1.3m trade, with the latter
mainly at auction houses.

Under the new system, condition grades will now be aligned with those used by the main remarketing companies, while trade and retail values will be uncoupled.

Vik Barodia, Glass’s director dealer sector, explained that although retail prices were based on current trade prices, there was usually an eight- to 12-week lag between when the trade price was set and the transaction price agreed with a retail customer.

He said basing a retail price on the same month’s trade value could lead to problems by the time the vehicle was sold. As an example, Barodia cited convertibles whose used values were seasonal: trade prices peak early in spring while retail prices peak in summer.

Margins are therefore squeezed on the peak price trade examples when they were retailed.

Glass’s users were surveyed prior to the amendments with 82% saying they wanted to retain the detailed mileage tables rather than change to three set mileage parameters. More than 80% wanted greater guidance on vehicle condition.

Barodia said: “Ready-to-retail cars skew accuracy. The values we produce now will be for a typical car in typical condition at typical mileage.

“Trade values will be redefined as something people are more likely to see in the marketplace.”

More than a million trade vehicles will now be observed and graded from the Glass’s Trade value which would be the typical observed auction price at a given point in time.

Grades are high (cars that would benefit from slight cosmetic work), average (a significant amount of cosmetic work and some bodyshop attention) and low (a significant amount of cosmetic and bodyshop attention).

Barodia added: “This is a cleaner and more robust way of valuing cars. We have become more scientific about valuations and our customers should see them as a better reflection of actual trade values.

“We will be able to show more realistic values for fleet operators at defleet time or during the lifecycle because we’re basing it on something more robust.

“Fleets that have adopted longer lifecycles where there is a greater variance from ready-to-retail condition should see a more honest reflection of values, and the insurance industry and daily rental providers should also benefit.”

The move comes just a few months after CAP launched Black Book Live for cars where analysts publish trade price changes as soon as they are identified rather than wait until the traditional monthly update.
 

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