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REMARKETING: Turn green into gold as low-CO2 vehicles increase in desirability

Date: 22 June 2010

Second-hand interest in small, economical cars is beginning to build in the auction halls, and it's a trend that's going to continue, reports Rachel Burgess

Fleet operators with a good supply of small economical cars to bring to the remarketing arena have "struck gold" in the current marketplace.

Simon Henstock, BCA operations director, says it is unsurprising "that the continued threat of rising fuel prices has dampened motorists' enthusiasm for bigger, thirstier cars, let alone the ravages of the economy over the past two years".

General demand for low-emission cars is correspondingly high, but because there are not large numbers of hybrid and sub-100g/km vehicles reaching the used market, it is difficult to gauge demand and almost impossible to suggest the rate growth in this sector, adds Henstock.

"The sub-100g/km sector is largely populated by petrol-electric hybrids, superminis and the latest generation of fuel-efficient small hatchbacks. If there are any issues at all, it surrounds availability and price. With limited numbers of models available, the majority of similar body shape, there are small numbers and restricted choice among the sub-100g/km cars reaching the market. Secondly, the majority of these cars are retail rather than fleet models and tend not to surface in the wholesale environment."

Residual value expert Cap thinks sub-100g/km cars are currently most attractive in the new market where the low tax benefits are more significant. "In the used market there is little, if any, premium in values at present," said a spokesman. "But this is likely to change, especially in London, if proposals to change the basis of congestion charging are adopted. These could widen the advantage of hybrids to include ultra-low carbon conventional engines.

"Of the 67 sub-100g/km cars currently available it seems likely that they will all become more desirable in the capital and other cities where carbon-based charging is introduced."

Lombard Vehicle Management MD Stuart Houlston says as the choice of sub-100g/km iterations grows, they become an increasingly desirable option for business and fleet drivers.

However, he adds:?"The challenge for manufacturers is to produce a vehicle that still meets the driver's expectation with regards to performance."

Houlston says Lombard does see a premium for eco derivatives over standard cars in the used marketplace.

"However, the subtleties of CO2 bands are still new to the used vehicle market and fuel economy will remain the influencing factor that drives demand. With the escalating price of fuel, this is a key decision factor for used car buyers."

Henstock adds it is difficult to gauge awareness among motorists of the benefits of low-CO2 motoring, "but be assured it will be motivated by cost".

Survey findings

Last year's BCA used car market survey showed a third of car buyers will be looking for better consumption and a fifth for lower road tax. This move to save money is underlined by a wish list of lower CO2, lower maintenance costs and a smaller car, rounded off by driving a harder bargain on the part-exchange value.

"When asked what type of fuel their next car would run on, just 4% said they would buy an electric-hybrid, which is actually a point lower than the year before. Compare that to the 49% who will buy a used petrol and the 28% who suggested a used diesel will be their next car," says Henstock.

Whether buyers start running more sub-100g/km cars is a "real chicken and egg dilemma for the market as whole".

"Motorists certainly are keen to moderate their motoring costs, but current availability of low-CO2 models is restricted in the used market and the costs of suitable vehicles are generally high."

Henstock concludes that uptake by the fleet and leasing industry is critical for generating greater volumes of low-CO2 models into the used market, with vehicles at a variety of price points depending on their age and mileage.

Online sales firm Autoquake co-founder Frederik Skantze said the savings for drivers who opt for low-emissions vehicles are too hard for fleet drivers to ignore. As a result, he expects "good numbers of quality low-CO2 models to filter through to the used car arena in the next few years".

As the move towards more sub-100g/km vehicles speeds up and there is more availability, the price premium will reduce on these cars in the used market.

"Of course, a price premium advantage will only be maintained as long as such cars are relatively rare," says Cap's spokesman. "We can see this happening already in the case of hybrids where premiums are being eroded as availability widens."

Houlston echoes this: "The 'eco' models of today will become the norm tomorrow. As more become available, the premium will reduce - the trend of lower CO2 vehicles is here to stay." Average new vehicles' CO2 has gone from 181g/km in 2000 to 149.5g/km in 2009, with 27% of that fall in 2009, thanks partly to the scrappage scheme.

There are certainly stand-out benefits for fleets using these cars: Houlston gives the example of a Corsa Ecoflex S that will have £20 improvement per year for road tax, £100 less on fuel based on 10,000 miles and a £250 improvement over a three-year period on residual values. But benefit-in-kind tax would be £25 more a year due to increased list price.

"There is a benefit to keeping a sub-100g/km car over a higher one. However, this may be considered marginal if the compromise in vehicle performance is taken into account. It is also difficult to quantify the feel good factor of being green."

New sub-100g/km models that could replace your old eco-friendly fleet

Toyota Auris hybrid RV: 32.1%
Average RV in Auris range: 29.4%

On sale next month, this 1.8-litre petrol engine plus electric motor emits as little as 89g/km and does 74.3mpg. Priced from £18,950, Toyota predicts it will be more popular to fleet buyers than its conventional-engined lower-medium Auris, and has dropped the 2.0-litre diesel from the range.

Seat Leon Ecomotive RV: 34.9%
Average RV in Leon range: 35.3%

The Spanish brand's newest-generation Leon has dropped emissions from 109g/km to just 99g/km, which also means better fuel economy - official figures are 74.3mpg, thanks to developments including stop-start technology. (See test drive on p21.)

Ford Focus Econ. stop/st. RV: 25.0%
Average RV in Focus range: 24.4%

Ford's Focus has beaten the 100g/km barrier by introducing stop-start on to its green Econetic model, which without the technology is over the 100g/km boundary. Priced at £20,445, with official figures of 74.2mpg and 99g/km CO2, this 1.6-litre diesel will incur 13% benefit-in-kind tax.

Toyota Prius average RV: 36.6%
Average RV in model range: n/a
(range contains no 'standard' cars)

As the original hybrid, the Prius still competes with newer models, offering 70.6mpg and only 92g/km CO2. Costing £21,205, this trailblazing car falls into the lowest BIK band (10%), as it's a petrol model, rather than diesel's 13%.

Renault Clio Eco2 RV: 30.4%
Average RV in Clio range: 29.9%

The French carmaker's greenest car to date, a 98g/km CO2 Clio is priced from a reasonable £12,690. The 1.5-litre dCi 86 Eco2 version has official figures of 76.3mpg. The car costs the same as the existing dCi 86 engine which emits 115g/km.

Nissan Leaf (too early for RVs)

Nissan's first foray into all-electric, due early next year, will cost £23,350, which is a groundbreaking price for a useable EV. The car has performance to rival a 1.6-litre diesel plus zero VED and is exempt from company car tax until 2015, as well as the Government's £5000 grant.