REMARKETING: Defleeting – Power to the people

Fleet managers have more control over the defleet value of their vehicles than they might suspect, as there are a variety of ways in which they can impact the performance at auction. Paul Barker finds out more

It seems the most obvious of points that the price a car is sold for come disposal has a huge impact on its total running costs over the time it’s on a business car fleet. But some operators are making serious and costly mistakes in the way they defleet, which, with a little preparation, planning and process, rather than financial expense, could be rectified.

“Never lose sight of the fact that condition will always be the overwhelmingly important factor for fleets to consider when remarketing their vehicles,” says Simon Henstock, UK operations director at auctions giant BCA. “It is also one area that fleet managers have a greater degree of control over, particularly if the age and mileage parameters are decided elsewhere.”

As well as ensuring drivers are aware of their responsibilities to care for what are basically company assets, fleet managers should also prepare the driver for their change of vehicle.

“Processes need to be put in place at defleet minus 30 or 60 days whereby the company car driver is contacted to ensure the service history is up-to-date and the service history has not been lost,” states Autorola UK business director Jon Mitchell. Missing service stamps can have a key impact on the price achieved at auction (see ‘Doing your sale a disservice’, opposite page), and can simply be a matter of calling the dealership that carried out the service. They will have records of the work, so will stamp the book if it’s brought in.

“It would make all the difference at the time of defleet,” says Mitchell. “There may even be an argument for fleets to introduce a penalty or a clause in business users’ contracts to ensure their vehicles are returned with everything in order,” he continues. “If fleet operators review their strategy to incorporate such processes, everything is more likely to be in place at the time a vehicle comes off fleet, which will make it a more attractive proposition at auction.”

Other costly missing items can include DVD satnav discs and in-car entertainment codes. Ensuring cars are correctly prepared is especially pertinent with premium or sports vehicles, as it increases the chances of the car not finding a buyer. “If prestige vehicles are not perceived as in A1 condition they are less likely to be sold than volume vehicles, which will still sell at auction, albeit not so well as their clean siblings,” says Mitchell.

The defleet process, however, actually starts with the decisions made when acquiring the vehicle, and leasing firm Leaseplan’s head of remarketing James Hopkins has a cautionary tale of where spending more money reaps dividends. “While marque will often determine broad resale value, certain vehicle specifications can introduce a surprising amount of variance,” he says, pointing to diesel Audi A5 models with built-in satnav going for around £2000 more than those without, when the option cost £1100 when the car was first specified.

“There is an increasing trend for in-car specifications to hold their value,” continues Hopkins, although less expensive choices also have an impact. “At the moment, white vehicles are significantly outperforming models in other colours due to consumer demand,” he concludes.

“A similar trend was seen in the mid-2000s with metallic silver vehicles, so colour trends should be a key factor considered by fleet managers.” BCA’s Henstock backs up the point, calling for the fleet experts in a company to have more power when vehicles are chosen.

“Remarketing is directly affected by decisions made when the vehicles are purchased, and therefore planning should begin before the car even comes onto the fleet,” he says.

“Make, model, specification and colour are all important at remarketing time and for that reason alone fleet managers should have input into the vehicle procurement process.”

The business car experts in a company are also those likely to have the most sensible ideas about achievable prices at auction, with vehicles not selling due to unrealistic ambitions still being an issue. “Holding costs for a vehicle may be less visible than outright selling price but they can have a significant adverse impact on fleet costs,” says Henstock.

“Vehicles deteriorate with age and generally drop in value and this cost only stops when the vehicle is sold. “For sellers, it is critical to get vehicles offered and sold in the shortest possible time. To allow vehicles to remain unsold for weeks or even months is poor business practice that will have a direct effect on the bottom line of the vendors concerned.

“Accurate appraisal of each individual car is a vital part of the remarketing process to ensure that each car is valued in line with its conditions and market expectations,” Henstock continues. “Get the valuation wrong and it only becomes apparent when the car fails to sell, with a provisional bid some way off the reserve.” Alex Wright, managing director of Shoreham Vehicle Auctions, agrees. “As much effort needs to go into setting the reserve, researching the market and adjusting the reserve if necessary as it does making sure the product is ready for sale, because the buyers are putting in that much time and research too,” he says.

Wright also recommends a communication channel between vendor and buyer, ideally in person at the sale, or if not then on the end of a phone. This is especially useful to get quick decisions in the instance of a vehicle not hitting a reserve price level. Accurate descriptions and a good quantity and quality of pictures helps avoid getting to a situation where vehicles fail to sell as they help drum up interest. “Ensuring vehicles are accompanied by at least six images, accurate descriptions and are available to view three to four days before an auction will ensure the number of buyers bidding on a vehicle is maximised,” Wright continues.

“If a vendor’s vehicle arrives on-site the day of the sale and then expects it to make the best possible price they are not allowing an auction firm to do their job properly.” Wright says Shoreham Vehicle Auctions monitors its web traffic and claims the success rate increases if traders know what’s offer, with three days prior to a sale being the optimum point.

That allows the auction house to market the vehicle as part of the sale, and give potential buyers the chance to make a decision on bidding. “We will entice more buyers if we have the stock, provenance and pictures in advance,” says Wright. “Sellers should not make the mistake of treating the auction as a last resort – without a doubt the ones who work in advance are those who gain the most.” Whether to spend money on repairing small problems with a vehicle is always a difficult decision. “Pre-sale repairs should be considered if they enhance the resale potential and the value of the vehicle,” says BCA’s Henstock.

“This is a simple costs exercise in terms of the value of the vehicle and the damage-repair cost, and your remarketing partner should advise on the best course of action on a vehicle-by-vehicle basis,” he concludes. “Smart repairs are relatively cheap to conduct and can improve the resale value by hundreds of pounds, but poor quality damage repair can adversely affect value.”

Vehicle quality Assured

BCA’s operations director Simon Henstock says buyers tend to gravitate back to sellers that they know offer good-quality used vehicles, and one way to create that image is offering a limited mechanical warranty on cars being sold.

Its own BCA Assured programme launched in November 2011 and consists of a 30-point mechanical check service designed to increase buyer confidence and therefore achieved prices. Buyers have 500 miles or 48 hours to contact BCA post-sale if the vehicle doesn’t match the description across elements including warning lights, tyre depths, fluid levels and suspension, while BCA also conducts a limited gearbox check.

“This provides another level of product confidence for trade buyers and is particularly important for online purchasers who do not get to see the vehicle ‘in the metal’,” says Henstock. 

Doing your sale a disservice

Online remarketing specialist Autorola highlights the importance of up-to-date service records with a recent example of a four-year old, 90,000-mile prestige car that had no service history.

“It is highly unlikely that in four years the car was never serviced but because it had no provenance, the reserve was not reached,” explains Jon Mitchell, Autorola business development manager. He says the closest bid was only three-quarters of the car’s normal value, adding a large chunk to the company’s vehicle costs.