REMARKETING: Demand for ultra low-CO2 cars filtering through to used market
08 July 2011
The sub-100g/km car market is growing - but has it started to impact the remarketing arena yet? Rachel Burgess investigates
Reducing emissions is the name of the game for car manufacturers these days. While they have European CO2 targets to meet, consumers and businesses are also wising up to the benefits of reduced-emission cars.
"Businesses are always on the lookout for ways to reduce operating costs without compromising service levels, and adding low-emission vehicles to a fleet represents a perfect way to achieve this," says Steve Archer, director of fleet services at Inchcape Fleet Solutions.
"Prior to the market downturn, there was already clear evidence that customers were seeking more fuel-efficient vehicles, but external factors - natural disasters, war, civil unrest and oil prices - have acted as a catalyst, speeding up the process."
Archer adds: "With the focus now firmly placed on whole-life cost and value for money, the industry has never been so attuned to the benefits of sub-100g/km vehicles."
But it's early days for sub-100g/km in the used car sector, with demand difficult to judge. BCA's operations director Simon Henstock says: "It will come as no surprise to anyone involved in used cars that with continuing high fuel prices and other economic pressures, motorists are looking very carefully at the running costs of their vehicles.
"General demand for low-emission, high-mpg cars is correspondingly high, but because we just don't see high numbers of hybrid and sub-100 vehicles reaching the used market, it is difficult to gauge demand in this sector."
While sub-100g/km volume has grown in the past year in fleets - increasing by almost 3.5 times at IFS - the majority of these cars are retail, according to 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. Model choice remains limited with the majority having a similar body shape, which means if you need something larger than a city car or compact hatchback your choice is limited."
He continues: "In addition, the majority of these cars are retail rather than fleet models, and tend not to surface in the wholesale auction environment."
But fleet numbers will grow: "Gradually Inchcape customers are realising just how many benefits are held in sub-100g/km vehicles: they are far cheaper to tax and fuel, resulting in a more attractive whole-life cost," says Archer. "It is not only running costs where carbon-efficient vehicles stand head and shoulders above their competition. They are also subject to considerable Government allowances (e.g. London congestion charge exemption) that are likely to become more commonplace in the future."
Due to sub-100g/km models' low volumes, auction prices are currently strong. BCA's Henstock comments: "Used cars in this sector tend to be priced pretty keenly because of the scarcity factor, and this will often outweigh the obvious benefits accruing from reduced motoring costs. In reality the usual rules apply when it comes to valuation - make and model, desirability, condition, mileage and presentation are the critical issues."
Archer adds: "Lower CO2 cars are performing relatively better than their higher CO2 equivalents in today's market, but the question is, will this still be the case in the future?
"Much of the premium today is led by limited supply - when the vehicles themselves are more prevalent in the future, the value of the lower CO2 derivatives will become the norm and premiums will not be so apparent."
According to Henstock, it is impossible to gauge, on current evidence, whether it is worth fleets taking on sub-100g/km for their remarketing value. "Common sense suggests it is likely to remain a niche-interest sector in the short term, but if motoring costs continue to rise and the sub-100g/km cars remain tax-friendly then demand could climb.
"What is a far more likely outcome is that fleets will be driven towards these cars by tax changes rather than their remarketing value. Uptake by the fleet and leasing industry will be critical to 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."
When trying to sell a low-emission car at auction, Henstock advises that buyers don't like high-mileage examples when choosing small cars and this can have a disproportionate effect on value. Similar issues affect hybrid-electric cars, although concerns here are focused on the durability of fuel cells."
Presentation rules are similar to every car put into the used market: don't scrimp on pre-sale preparation and consider getting any knocks and dings rectified using smart repair techniques.
"Poorly presented examples give the impression they have had a hard working life and send totally the wrong message to potential buyers. A full service history will also help with buyer confidence," he says.
"If you are going to dress your fleet of small cars in corporate colours, consider using vinyl graphics over a good base colour. At remarketing time, the vinyl can be professionally removed to leave your cars in ready to retail condition."
Having an economical car doesn't mean having few gadgets according to Henstock. "When it comes to specification, aircon is a must and the more toys the better. Buyers expectations continue to rise and just because the car is otherwise economical doesn't mean a base spec will do," he says.