DISPOSAL: Speculative specification (continued)
06 November 2009
What with RVs having taken a hit and contract lengths extending, Tom Webster looks at how best to spec your cars to ensure they sell in the years to come
The green pound
Another development still fairly new on the block is the eco-friendly option. As a result there has been some hesitancy from the used market when it comes to accepting the new technology.
"Economy in general will continue to grow in importance," says Cap. But it also points out that "hybrid cars and other innovations in fuel economy will form a greater proportion of the market, but this will be more supply- than demand-led".
This potential lack in demand for hybrid or fuel-saving technology could have a knock-on effect on residual values, as the few second-hand buyers looking for a hybrid vehicle would have plenty to choose from.
Glass's King explains why there is less demand for second-hand green vehicles, saying: "While these vehicles make sound choices for those affected by such taxes, there is little incentive for a used-car buyer to opt for such a model. What's more, the cars in question are often relatively poorly equipped. As a consequence, resale values could be impacted if there is an excess of supply in future."
One solution therefore is to not just chase the lowest CO2 emissions figure by cutting out all of the optional extras.
"When specifying new cars, fleet operators and vehicle owners certainly need to be aware of what makes used cars desirable, but as part of a package of considerations that should include purchase price, running costs, taxation and legislation and both the driver's and the company's needs and expectations," says BCA's Henstock.
Features such as steel wheels may help improve a car's CO2 rating and fuel economy, but they won't improve the looks and therefore its chances of selling for the best price at the end of its contract. Drivers are also unlikely to thank you for putting them in a sparsely equipped car just so you can cut the company fuel bill.
Vehicles such as the latest Toyota Prius or the Honda Insight are wise to this and offer a choice of larger alloy wheels to allow the driver to maximise the looks of their car. This does have a marginal effect, but the larger wheels only add 3g/km and 4g/km for the Prius and the Insight respectively. This won't affect the tax band but may give it an advantage at resale time.
Another method to boost your residual values is to mix up your fleet. "BMW's 520d has enjoyed a good deal of success thanks to its efficient, low-emissions powertrain," says King. "But it is important for fleet managers to retain a balance of derivatives, including larger diesels and some petrols - such as 525d and 530i - to give the fleet diversity and broad appeal, and to prevent over-supply of a lower-end model."
The obvious downside to this is that anyone running a less efficient vehicle will take a big hit on the day-to-day running costs. Fuel costs, benefit-in-kind tax, road duty and capital allowances will all suffer thanks to a policy that actively seeks to add higher-end models to balance residual values.
Jason King also warns of the danger of being caught up in the latest fashion when it comes to the first part of a car that a buyer will notice - the paint job.
"Choosing suitable colours will become more significant for fleets, as finishes that are 'of the moment' when new could be a long way past their sell-by date after five years," he says. Cap's spokesman agrees with him, saying that metallic paint is increasingly important across all but the very base models.
Unfortunately there are no guarantees. As Henstock says: "None of us know what the market conditions are going to be like in four or five years' time, but there are certain steps you can take to make your fleet cars more attractive to buyers."
The usual and common-sense advice of keeping cars in as tidy and low-mileage a condition as possible still applies. "Not all vendors will have moved to a five-year cycle so your cars might be competing against three-year old, 60,000-mile examples," says Henstock.
Mark Jowsey of KwikCarcost also feels that the over-riding problem that will face fleets trying to get rid of older cars than normal will be an age-old one - condition.
"There is likely to be a lot more four-year old fleet cars going for disposal from later this year and it is not unreasonable to assume that these may not be looked after with as much care by users who were just about to get a new car," he says.
It's clear, then, that doing the basics is even more important with a car that has had its contract extended compared to one that is leaving you at the end of an originally planned period of time.
One thing that will seemingly never change is the desire of used buyers to be in the best vehicle their money can buy, and often that means they won't look at the toys inside the cabin, but at the badge on the grille.
Jowsey feels that the car's brand is still going to be more important than pure spec for the used car buyer. "The used car buyer will want some toys on their car, but a presentable, full-service-history premium-brand car will do better than a scabby or poorly maintained high-spec mainstream car."