Fleet Leasing

Van residual values will 'tail back'

Tim Maffey, leasing asset management leader at GE Capital, believes on-going stock shortages means used values will ‘hold steady in the short to medium term’.

However, he added: “If the economy starts to pick up and new vans sales rise, then eventually these volumes will churn in to used, at which point stock levels will normalise and values fall from their current high.”

He shares views on both the impact of a stronger construction sector and a potential strengthening of the small business sector on used LCV prices.

Maffey explained: “If there is public funding support designed to boost the construction industry, for example, we’d expect to see a rise in the types of LCVs that service this type of heavy industry such as dropsides. This potential increase in new vehicle volumes will ultimately feed into the used market and there will be a corresponding reduction in future values.

“Away from the construction industry, successful small businesses that have weathered the economic storm of the last few years and, importantly, can get access to credit, may find themselves in a stronger position. With an increasing workload, they will look to acquire new or newer vehicles to expand or to replace their current ones. This should support new and used demand on the traditional, mainstream car derived vans and panel vans.”

However, he is wary of the impact of a struggling European economy and how LCV manufacturers might respond.

“Weak LCV sales in the rest of Europe mean there is always a chance that manufacturers will see the UK as somewhere to offload excess capacity. If distressed selling of new LCVs takes place such as high retail discounts or unrealistic short term rental deals, this will always have a detrimental impact on used values,” he said.

Meanwhile, Holder said that changes in the way that vans were operated would impact the mileage and age profile of vehicles coming off contract.

“As the average price of new vans increase and vans are generally more reliable than ever before, fleets are choosing to run their vehicles on four-five year contracts instead of three-four years. They also benefit from a lower monthly rental which is another consideration,” he said.

“Other major fleets are choosing to make contract amends halfway through a vehicle’s life to benefit from lower rentals and to sweat their asset over a longer period. This will mean older vehicles with higher mileages coming into the market in the next few years.”

A further marketplace change, he predicts is rising corporate demand for car derived vans as fleets focus more on downsizing their vehicles to reduce fuel use and maximise utilisation of space.

“Service history will become ever more important as the average age of vans increases. Well maintained vehicles in good condition will make the best money, while a standard spec white van will continue to carry a used premium,” predicted Holder.

“The trend of vehicles in a desirable colour and with good spec making high prices will continue, however in our opinion expensive options such as air conditioning and silver metallic paint will not have as positive impact on price as they have had in the recent market.

“Overall in the coming years we are unlikely to ever see the new van market return to the heady days of 2007, but slightly lower residual values coupled with a strong buyer demand should give the market stability over the coming years.”

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