The fact that a lot of fleet policies are governed by emissions levels goes to show how crucial they are to new car fleets, and if you’re reading this magazine, specifically this issue, chances are you’re well aware.
But used car buyers are a different breed, and CO2 levels, while important, haven’t traditionally been as crucial a factor in their purchase decision. Even so, they’re intrinsically linked to lower running costs – so has the used car market caught up with the new one, to the extent where buyers are seeking out models based on their emissions?
According to BCA’s operations director, Simon Henstock, second-hand buyers are paying plenty of attention to clean and economical cars, but they still look at the bigger picture and bag as good a vehicle as they can for the money, rather than buying solely on efficiency qualities.
“All car buyers seem mindful of increasing costs and this is impacting on the decisions they are making,” says Henstock. “However, while the focus for. fleet managers may be to minimise emissions, the reality for most used car buyers is a lot more pragmatic – it often comes down to ‘what’s the best car I can buy with the budget I have available?'”
It’s the same story from Duncan Metcalfe, head of remarketing and logistics at Alphabet, who claims that rising costs aren’t having that much of an effect on used car buyers, and that they’re willing to foot the bills for less economical vehicles in many cases.
“We’re not seeing the poor state of the economy, fuel prices or tax rules having much of an impact on the attractiveness of low-emission cars.
“Most second-hand buyers would still rather have a better car and pay the higher road fund licence than opt for a low-tax, low-emission vehicle. A lot of the final buying decision depends on the intended use of the vehicle.”
Low fuel economy; high sales
Even though the bigger picture approach seems to be most popular with used car buyers, cutting their overheads is a massive consideration. BCA’s used car report shows that a vehicle with lower fuel economy than its predecessor is the main criteria for a sale, followed by lower road tax.
This tallies with the opinion of Jon Mitchell, UK sales director at Autorola, which is that buyers aren’t concerned with a vehicle’s environmental impact per se, but they are bothered about the amount of VED they have to pay, and will buy a cleaner car based on a favourable rate.
“Used car buyers are far more concerned about the amount of VED they will have to pay and a vehicle’s mpg than they are about purchasing a low-emitting vehicle. However, it stands to reason that these three elements will combine in the majority of used car vehicles that come to market.
“Largely, it won’t be the CO2 figure itself that determines a used car buyer’s choice of vehicle, but it follows suit because they are worried about keeping fuel and road tax costs as low as possible.”
A healthy return
With lower road tax and fuel costs firmly established in the minds of second-hand buyers, it follows that the swathe of eco sub-branded vehicles (Volkswagen’s Bluemotion, Ford’s Econetic, BMW’s Efficient Dynamics etc.) on the new market should see a healthy return used, and may even be worth procuring over and above a standard variant on this basis.
Metcalfe reckons that demand rather than price is what those vehicles have in their favour: “If somebody is looking for a small car, then to opt for a low-emission vehicle that would have a low road fund licence ticket makes perfect sense. Having said that, I would not say that eco sub-branded cars are actually worth any more money, but if two vehicles were sitting side by side at auction on the forecourt, why wouldn’t you choose the one with a cheaper tax?”
Not everyone is convinced though, mainly due to the lack of such vehicles in the marketplace in comparison with their conventional and far more common alternatives, and their relative youth.
Mitchell explains: “Very few car makes are seeing brand loyalty for their green car brands. Instead purchase price, mpg and five doors tend to be the reason for purchase.”
While tentative, Henstock says eco sub-brands do command more money second-hand, but that’s largely due to their rarity and the fact that they’re still quite new. “The numbers of these cars reaching the remarketing arena still remains low and – as the technology is relatively recent – it means the cars that do appear tend to be late-plate, higher-valued examples.”
Used vans, on the other hand, are showing signs of change to reflect a demand among owners for better efficiency. Traditionally, they have been purchased based purely on their suitability for the job in hand, with scant regard for anything else, but decent fuel economy – and even alternative fuels – are drumming up a lot more interest than they used to.
“Running costs have come to the fore in recent times, largely as a result of rising fuel costs,” says Henstock. “There is undoubtedly a lot of interest in alternative and more economical power choices to combat the rising cost of traditional fuels, with. end users looking for environmentally friendly and economical alternatives in the commercial vehicle sector.
“For example, on the rare occasions that electric LCVs reach the remarketing arena there is widespread interest, which suggests both buyers and sellers are looking very closely at the price performance of these vehicles.”
“Only time will tell”
The question for fleet operators is whether it’s worth procuring a more efficient vehicle – say, a BMW 320d Efficient Dynamics over a conventional 320d – based on the return you’re likely to get come defleet time.
Mitchell remains sceptical: “Only time will tell. We have yet to see these types of vehicles come through in any significant numbers in order to make a sound judgement. Fleets are certainly influential in setting the trends for the used car sector, so the decisions that were made three years ago are being borne out now and the decisions they are making now will play out in three years’ time.
“Fleets are buying vehicles based on usage, driver BIK bands and fuel costs while used car buyers are focused on ownership, and whether the model is a 3-series Efficient Dynamics rather than a standard 320d has no significance.”
Metcalfe, however, believes it is worthwhile, but not on the basis of the residual benefits alone because they’re still not high enough on used buyers’ shopping lists: “For a fleet manager grappling with the vehicle spec decision, I believe it is worth opting for these lower-emission models as they can reap the rewards while the vehicle is on contract.
“If you’re making the decision purely on the basis of recouped residual value, I don’t believe there is a premium at the point of disposal. The type of second-hand buyer that looks at the low-emission element of a vehicle is still in the minority.”
The residual value expert’s view
In contrast to the views of other remarketing experts here, Glass’s director of valuations and analysis Richard Parkin believes that used buyers have well and truly latched onto CO2 levels as a buying criteria.
“Whether it be on an Audi A3 or on a Mercedes S-class, buyers have focused on CO2 figures as they believe they deliver the lowest running costs. This has only intensified in the past few years with the economic downturn. Therefore the lowest petrol engines in the small to lower medium sector and diesel engines in all model ranges residually perform the best.”
However, he maintains that second-hand buyers aren’t necessarily conscious of the exact CO2 figures, despite the fact that they know they want a clean vehicle.
“Whether most buyers fully understand is another matter – it is perpetuated by the media and the dealers first, and then filters through to the end user.”
Parkin believes the trend began with smaller cars but has now established itself with used vehicles further up the spectrum, with more to come: “It first started with the smaller car sectors, but it has been filtering to all segments with the exception of exotica and top-end sports cars, although this may also change given another two to three years.
“As this began several years ago in earnest, circa 2009, we are to expect that a certain amount of increase in popularity is due to downsizing policies reconstituting what is available for resale.
“As this is now taking hold across virtually all segments there is a certain amount of ‘washing out’ as the newer, downsized vehicles appear on the used car market.”
