Jo Tacon looks at
whether fleets are keeping a close eye on the true costs of
disposing ex-lease vehicles.
Go deeper with GlobalData
As clients clamour for cost-saving ideas
from their fleet providers, there is a general round of
belt-tightening within the leasing and contract hire industry. In
order to reduce costs for clients, fleet operators should
scrutinise closely every area of their business to look for
possible savings which should be passed on. None of this is news –
or at least, it should not be news – to anyone in the fleet
business.
But the recently-published independent report on
fleets’ remarketing methods, commissioned by grs, found that there
are significant potential savings to be made by many fleets in the
area of vehicle disposal (see Motor Finance 62, December 2009).
As a highly visible cost centre, fleet leaders will
say, when questioned, that of course they take every step possible
to minimise costs and maximise prices in the remarketing arena. Yet
a quarter of respondents to the grs survey said they do not measure
remarketing costs on a vehicle-by-vehicle basis, with 35 percent
reporting they did not keep track of refurbishment costs.
As the saying goes, “If you can’t measure it, you
can’t manage it”, so there is clearly room for improvement from
significant numbers of fleets when it comes to collecting metrics
to evaluate remarketing performance on a dynamic and detailed
basis.
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By GlobalDataChart 2: Benefits of introducing a new
channel
|
1st |
2nd |
3rd |
4th |
5th |
|
|
Sell outright |
25% |
10% |
25% |
20% |
5% |
|
Agent/value underwrite |
40% |
0% |
20% |
10% |
10% |
|
Reduces overheads |
30% |
30% |
10% |
10% |
5% |
|
Saves time |
5% |
10% |
30% |
30% |
10% |
|
Improves balance sheet |
5% |
30% |
5% |
5% |
35% |
|
Source: grs/Best practice in fleet |
|||||
Costs accounted for?
Survey respondents were asked which
remarketing costs they account for, and which is the single largest
cost (see chart 1, above).
Auction fees and transport, along with sales costs,
are the most-commonly accounted-for cost centres, respondents
reported, but again, the results show large numbers of fleets are
not receiving a true and complete picture of their remarketing
operation’s success.
The report states:
• 45 percent of respondents do not
include ‘funding’ in their remarketing costs
• 35 percent do not include staff time or
salaries
• 30 percent do not include
refurbishment
• 25 percent do not factor in the ‘time
on the books’ or depreciation
“It is surprising that, in an industry where
whole-life costs are so carefully calculated in the process of
acquisition, little analysis of true cost takes place during
remarketing,” the report notes.
In addition, two-thirds of respondents were not
able to estimate what the percentage cost of remarketing came to,
as a proportion of overall operating costs.
Management information
tools
When asked how disposal strategy could be
improved, the fleet decision-makers responded with a variety of
suggestions, which highlighted the areas which could be improved in
their current operations.
The report found:
• 25 percent said they would like better
management information
• 25 percent would like a reduction in
stock turn days
• 10 percent would like a reduction in
lead times
• 10 percent would like greater use of
affinity sales
• 10 percent would like greater use of
trade sales
• 5 percent would like to take a
multi-channel approach
There is a definite appetite for improvements in
remarketing practice and strategy, the report found.
When asked what factors would cause them to
consider the use of additional remarketing channels, greater speed
(85 percent) and certainty (95 percent) of sale were the
overwhelming choices.
Cost reduction in the areas of refurbishment (45
percent) and advertising (40 percent) were also heavy on
respondents’ minds.
When looking to additional remarketing channels, 40
percent of fleet decision-makers said that the ability of the
remarketing company to act as an agent in underwriting a residual
value was the most important factor, to their minds.
A reduction in overheads, the ability to sell cars
outright (“Clearly, this could be achieved by greater use of sales
to ‘known end users’,” the report observed), an improvement in the
balance sheet and time savings were all cited by respondents. (See
chart 2 below for a listing of these benefits by respondent
preference.)
“Remarketing channels which can add these wider
benefits would seem to be a solution to creating this broader, and
more cost-effective, strategic mix,” the report concludes, a
statement with which it is hard to disagree.
As technology is developed which makes it
ever-easier for remarketing professionals to monitor vehicle
disposal costs, an increasingly flexible approach to the issue is
necessary for fleets.
Whether working alone or with an outsourcing
partner, it is to be hoped that fleet leasing companies of all
sizes take a good, hard look at their disposal strategy during
2010, to the overall benefit of both fleet clients and the sector
as a whole.
