The fall in average resale values for ex-fleet/lease vehicles is
taking a heavy toll, Jo Tacon finds
For fleets looking with dismay at the falling prices ex-fleet
and lease cars are attaining at auction, there is little cheer on
the horizon. The worrying prospect that all of the predicted profit
on a lease will be wiped out by a drastic fall in the price
achieved through remarketing is one that more and more fleet
leasing companies are having to face up to – and, consequently, to
plan for. But just how bad is it out there?
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Grim picture
“For the first time in a number of years, we are seeing the used
car market under quite severe pressure,” says Tim Naylor, public
relations manager at British Car Auctions (BCA). However, while
volumes have not been too badly affected, with BCA still selling
“between 10-11,000 vehicles per week”, it is prices which have
really suffered. The average resale value achieved for an ex-fleet
car in January of this year was £6,726, but by June, that figure
had fallen to £6,189, a reduction of 8 per cent.
“A market where buyers are telling you they will pay one price
while vendors are expecting another can be very difficult to
operate in,” Naylor says. “The key thing for remarketers is to keep
close to their vendor partners and keep them advised of what the
market will bear. For example, at the moment professional buyers
seem unwilling to go much beyond the £7,000-8,000 price band.”
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By GlobalDataChris Tubbs, head of asset risk, technical and UVM at fleet
lessor LeasePlan, concurs with Naylor’s view: “It’s much tougher
than this time last year.” Compounding the woe caused by falling
prices is the fact that “buyers are much choosier”, according to
Tubbs: “No-bid has increased quite considerably.” Any car with
damage is struggling to attract interest from traders, he adds, as,
in the situation where book values are dropping rapidly,
“retailers’ focus has shifted to moving stock on as quickly as
possible to avoid a portfolio loss.”
Outlook bleak?
While 4x4s are an obvious loser in the tougher market (see box),
largely due to their fuel inefficiency, the picture is not
uniformly downbeat. Jeff Paterson, chief car editor at data company
EurotaxGlass’s, points out that “there is more of a consistent
demand for the smaller stuff”, with superminis still performing
reasonably well, and diesel doing better than petrol, with an
especial weakness for upper petrol models. However, he believes
that the “extremely low” values which are being seen do not
represent the true value of a car, and that this is in part because
“the trade has talked itself into this situation”, he says.
“Dealers just don’t know which way to turn.”
He is not optimistic about the near future. “This has the
potential to be one of the worst downturns we’ve seen,” Paterson
says. “There’s so much economic pressure at the moment which does
not look like it will ease before the end of the year.” Naylor
agrees: “There’s nothing currently to indicate that residual values
will recover in the later part of this year, or next year – but at
the end of the day we have to reflect the market as it is.”
This is bad news for fleets, as Naylor says: “At the end of the
day, fleets have to sell those cars. There are always more coming
off fleet, and unless they are sold, they will simply depreciate
and cost fleets money.” One small bright spot, however, is that
vehicles currently coming off lease are more diverse in terms of
size and model than they would have been a few years ago, thanks to
the greater prevalence of user-chooser arrangements. “Fleets are
more diverse nowadays – it’s not just all four-door saloons any
more. This broadens the appeal to buyers,” Naylor says.
Naylor still believes auction is the best option for the
majority of stock, but suggests fleets have to be realistic on
reserve prices, particularly for cars being re-entered for sale.
“Currently, the highest bid the vehicle is offered for sale is
rarely bettered, and, of course, cars don’t get more expensive as
they get older. In a falling market, that is not the strategy to
adopt.”
Paterson’s advice is to spruce up vehicles before attempting a
sale, and to make sure they are seen by as wide an audience as
possible, but adds that, fundamentally, “there isn’t a great deal
fleets can do to stimulate a market that is in decline.”
LeasePlan, Tubbs says, is looking to grow its driver sales, as
well as investigating other sales routes, such as online options
and the shifting of ex-fleet stock to mainland Europe, although he
says this latter channel will not be worthwhile for more than a
“small minority” of vehicles. “Auction is the traditional route,
but looking to alternatives can’t be a bad thing,” he opines.
CAMDEN FLEET SOLUTIONS
Let’s bid for cars online, says lessor
Camden Fleet Solutions (CFS) has launched an online remarketing
service, letsbid4cars.co.uk, which will offer “good quality
vehicles at trade prices for retail sale”, CFS said. Over 3,000 of
Camden’s motor retail partners have access to the site, where they
can search for the cars they require, with hundreds of cars
featured each week, according to CFS.
MANHEIM
Fuel-efficient vehicles keep their value better
In news that will surprise no-one, Manheim’s Market Analysis
report for June has found that the residual values for
fuel-efficient vehicles are holding up well when compared with the
market as a whole. The average price in the supermini segment
increased by £140 in June compared with May, up 4.2 per
cent.
The widely-reported collapse in 4×4 values, meanwhile, was
confirmed by the report, with larger off-road vehicles’ June values
falling 13.9 per cent month on month. Meanwhile, BCA’s Pulse report
for May found that, at auction, performances against CAP have
fallen sharply since the start of the year (see chart).
Motor Finance Issue: 45 – July 08
Published for the web: July 25 08 16:25
Last Updated: July 25 08 16:33
