REMARKETING: Increase vehicle marketability by repairing cracks, dents and scuffs
28 October 2010
De-fleeted cars are invariably damaged in some way or another. But how important is it to repair them before they make it to the auction hall? Rachel Burgess reports.
The importance of preparation in the remarketing chain cannot be over-estimated, according to BCA director Tony Gannon. "Sellers should be considering every tool in the remarketing preparation box - that might mean repair to trim and paint, dent removal and a machine-operated polish," he says.
BCA data shows that Smart Prepared, its pre-auction preparation service, has high conversion rates, particularly for first time entered and sold. In a strong market, preparation may mean a significant increase in return for the seller, and when demand is slower it could be the difference between selling or remaining un-sold. "Whatever the market conditions, sellers should ensure their vehicles stand out in the crowd. If residuals come under pressure, then professional buyers become more cautious about buying for stock and may avoid any vehicle that requires repair or refurbishment if better examples are available," says Gannon.
"Pre-sale preparation gains even more significance if vehicles are to be sold online. The virtual bidder does not have the luxury of physically inspecting the cars they bid on, so they must have confidence in the condition and the presentation of the vehicles."
Phil Newstead, general manager of Dent Wizard, says the appearance and condition of a used car is key no matter how old it is: "Initial impressions are very important as a car that looks 'clean' will be perceived as being clean. This doesn't mean that a car needs to be perfect but that key areas should be able to pass close inspection. What works and how much will it cost? Alloy wheels in good condition, a windscreen without chips, an undamaged bumper, paintwork that is consistent and without scratches and a tidy interior will all reassure a potential buyer.
"An alloy wheel will cost £50 to refurbish, a windscreen chip can be repaired for £45, a coloured bumper can be repaired for £55, minor scratches can be polished out for £18 per panel and interior trim repairs can cost from £55."
Newstead adds: "However, customer expectations will be much higher for a two/three-year old car costing £8000 to £10,000 which will be expected to be 'as new' rather than for an eight-year-old car costing £2000 which will be expected to have suffered some wear and tear. So being smart about the amount of smart repair undertaken, and spending just enough to make a difference, will retain your profit potential."
Leasing company Alphabet is encouraging its clients to prevent damage in the first place. Director Mark Sinclair says: "The bottom line on end-of-contract repair charges is rather like the old message about cigarette smoking - the best way to stop is never to start. There is a definite financial payback for fleets that put effort into educating and incentivising drivers to look after their cars correctly."
He continues: "More of our customers now pass on all or some of the cost of refurbishment or loss of value to their drivers. This certainly makes a real difference, not only to defleeting charges but also business bills for general wear and tear while cars are still on fleet.
But when it comes to carrying out repairs before disposal, Sinclair says there are "no hard and fast rules".
"We auction the majority of our end-of-contract cars to trade buyers. Many of them have their own refurbishment facilities and they will factor into their bid price what they think it will cost them to bring the vehicle up to standard. Depending on what's wrong with the car, it can be more cost-effective for us to put it through 'as is' and accept some loss of value than to carry out pre-sale repairs that the buyers won't necessarily pay for under the hammer.
"Again, it's impossible to generalise because the market changes all the time. Right now, cars that are even slightly scruffy won't sell but at other times you can confidently put them into the market with minimal preparation.
He adds: "The best rule for leasing customers is not to leave everything to the last minute. Check your vehicles a good few weeks before the end of the contract and, if in any doubt, talk to the leasing company.
"For example, the most common type of damage is kerbed alloy wheels. If a customer talks to us, we will help them to decide whether or not to repair the wheels and point them in the direction of a good repairer if necessary. That's important because poor quality wheel repairs are just a waste of money, especially on higher-end cars."
According to CAP Black Book market research editor Mark Bulmer, it is front and rear bumpers that are the most common impact areas, closely followed by stone chips to the front end of the car and alloy wheel damage. Whether it is worth investing in rectifying the damage depends on individual cases and market conditions at the time. "For example, in the explosion of demand that marked the start of 2009, there was little need to bother, but during this year's market dip, damaged vehicles were heavily penalised," says Bulmer.
"Vendors will have their own arrangements for smart repair and refurbishment, which means there are set rules around whether they absolutely should invest or not. But as a general guide to the cost of bringing a typical fleet car up to CAP Clean (see What is 'Cap Clean', left) condition the following figures provide an illustration. For a Passat we might be looking at £100 for the front bumper, £65 for each kerbed alloy and £200 for a stone-chipped bonnet. Given that a savvy purchaser will typically penalise the car by those costs, plus £500, the value of having the repairs done can only be determined by the vendor."
BCA's Gannon agrees that alloy wheel refurbishment is the most frequently conducted repair, followed by scuffs and scratches to corner bumpers. "Interior trim repairs represent a surprisingly small percentage," he adds. In total, 47% of vehicles inspected by BCA fall within smart repair criteria, says the auction firm.
Manheim Remarketing managing director Mike Pilkington says: "It is important for vendors to understand the negative impact of remarketing cars with damage and the positive benefit of appropriate smart repair.
"For example, a damaged windscreen can devalue a car by between £100 to £300, cracked headlights by £75 to £150 and damage to alloy wheels could mean as much as £50 to £150 per wheel knocked off the value. Minor accident damage is also a real turn-off, affecting the value by up to £250 per panel. Interior appearance is also important, with poor-condition carpets and front-seat upholstery both affecting values by between £100 and £350.
Pilkington concludes: "Vehicles in poor condition are much harder to sell at auction and there is not the buyer appetite to take them into stock, unless the price reflects it. As buyers have an increasing choice of vehicles at auction only the best and cleanest cars will attract the highest bids."