REMARKETING: How to maximise residual values

Date: Thursday, February 15, 2018

Careful planning from the initial point of purchase is needed in order to achieve the
best results at resale time, writes Tim Cattlin

Whilst outright purchase price, fuel consumption and maintenance costs are high on the agenda for anyone calculating the total cost of ownership of a vehicle, the factor that is the most important and influential on the final fiscal outcome is the residual value that the van achieves on resale.

Therefore, a carefully considered strategy from the initial vehicle specification through to it appearing in the auction hall can achieve a faster sale and enhance the return made.

Initially specifying a van with some consideration for its eventual resale can reap big benefits. Andy Picton, chief commercial vehicle editor at Glass’s, the used vehicle revaluation experts, explains: “The used market is currently very much driven by ‘car-like’ specification, to the detriment of the more basic low-horsepower, low-specification ‘fleet’ model. So, a well-maintained, higher-specification model will always catch the eye. The increased initial cost will be offset by the higher RV worth of the vehicle, so should prove cost-effective in the long run.”

James Davis, director of commercial vehicles at Manheim, agrees, saying that “any feature that adds desirability to subsequent retail buyers of used vans is key, mirroring cars in many respects”.

Meanwhile, Steve Botfield, senior editor of commercial vehicles and motorcycles at automotive data firm Cap-HPI, adds that the decision when considering specification at the front end will have an impact at the disposal period, with the second and subsequent purchasers deciding the value and desirability of a vehicle’s specification.

Sounding a note of caution though, Gareth Kaye, group van franchise director at dealer group Imperial Commercials, says: “[Specification] will always have an influence, but if it’s £1,200 for metallic paint and air-conditioning and in three years they only improve the value by £500, you have to ask, what the point was for the operator?”

A headache for fleet managers is how to achieve the best return when disposing of a large number of identical vehicles within a short time frame. Traditionally, a strategy of distributing vehicles to various auction centres across the country would reap benefits, but, with the advent of online bidding together with accurate vehicle condition reports, this is less likely to work today.

Duncan Ward, UK commercial vehicles operations director for BCA, says: “Ten years ago geographical differences were more pronounced, and while some still exist, digital channels such as BCA’s Live Online mean vehicles can be sourced nationally.”

Dylan Thomas, auction manager at Hitachi Capital Vehicle Solutions, explains how his business is adapting to change: “We now sell vehicles 24/7 with our remarketing partner and, with options such as special premium events, there are more shop windows to sell in.”

Kaye of Imperial thinks that a strategy should be adapted dependant on the vehicle type being disposed of: “White panel vans need splitting. For others, not so much – we put 25 tippers into one sale and the result was excellent as people focused in on the fact there was an opportunity to acquire at least one or two.”

All the industry experts we spoke to agree that presentation was probably the single most important key to achieving the best sale price.

Manheim’s Davis says that for the typical wholesale van that’s five to six years of age, replacing broken or missing trim is preferable to body repairs and painting. “This is because dealers typically like to see the severity and type of damage and have no doubt in their mind over the quality of repair,” he explains.

However, he adds: “‘Body mopping’ creates a great first impression – providing the van’s condition and age warrants it. A £50 investment could see a van make £100-£150 more and, of course, it could make the difference between getting a bid or not.”

Botfield of Cap-HPI advises that sellers need to ensure that any repairs carried out to vehicles prior to sale are cost-effective. “Any investment in reconditioning must provide a return both in the cost of refurbishment but also the time in which it takes to complete the process from the date of defleet to the date of disposal,” he says. “There are, of course, exceptions to this rule, when the most desirable and sought-after vehicle is offered for sale and where the general condition plays second part to the vehicle – within reason.”

Time is of the essence, warns Kaye. “The time to refurbish damage beyond a Smart repair might mean that the increase in price is offset by holding the unit for an extra 30 days,” he explains.

Meanwhile, Andy Brown, managing director at CD Auction Group, thinks vendors take an individual view on pre-sale repairs: “Many are realistic and prefer to sell without getting poorly conditioned vans refurbished, even though it may not achieve the best price.”

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