REMARKETING: Up-and-coming manufacturers exploit the power of the brand
27 September 2011
In recent years, emerging brands have used a mixture of smart marketing and better product to gain recognition and trust in the second-hand arena, which has resulted in rising values, reports Rachel Burgess
The power of branding is undeniable, but how does the badge on a car affect it come remarketing time?
Marketing specialists will wax lyrical about the power of brands and their ability to sell product, says BCA operations director Simon Henstock, who feels that emerging brands have been particularly successful in raising awareness for their product.
"It is testament to many of the up-and-coming brands that their product offerings make very desirable used cars when they enter the wholesale market," he says.
Henstock adds that fast-growing brands such as Kia, Hyundai, Seat and Skoda have been very successful in infiltrating some of the smaller niche sectors with innovative, attractive and well-engineered and designed vehicles that motorists want to drive:?"Think of small hatchbacks, performance coupes, SUVs, urban crossovers and Mini-4x4s. They have supported these models with effective advertising and marketing, promoting lifestyle choices and targeting specific demographics."
He adds: "When these vehicles reach the wholesale sector they are a very attractive prospect for auction buyers. They are typically retail-quality models, with a great specification and in a good colour and, because volumes are low, buyers will compete strongly for the best-presented examples."
Henstock says niche models now represent a sizeable chunk of the used car sector. Data from BCA's last Used Car Market Report (see chart, right) reflects how the wider choice of models is changing the make-up of the second-hand market. "Twenty years ago, specialist/niche models represented just 7% of annual used sales. Ten years ago it was 14%. This year, non-mainstream models [everything from 'other' through to 'off-road' on the chart] represent 23% - nearly a quarter - of all used car sales."
Richard Pay, boss of online remarketing firm Autorola, says that over the past two years, all four brands mentioned above have gained better recognition and trust in the used market, and so prices are gradually improving. The company has recently compiled evidence for one of those manufacturers that shows prices achieved are higher than that of the guides in the majority of models over a consistent time period. "More dealers know more about the pedigree of each brand and relevant quality and reliability so aren't phased about taking one in as a part-exchange or buying a car online to put on their own forecourt. In particular, the Kia and Hyundai warranties are helping improve residuals both in the trade and with the consumer," adds Pay.
In terms of what different brands need to best appeal at remarketing time, he says: "Exec brands such as BMW and Mercedes must have essential kit on them such as leather, alloy wheels, full electric pack and be finished in the right colour - silver, black etc. - no bright colours, and small wheels and poor equipment will ruin residuals sometimes by as much 20-25%". Pays adds that automatic transmission is vital on larger cars such as the BMW 5-series and Mercedes E-class.
Up-and-coming brands such as Skoda and Hyundai need to be finished in a sensible colour: "They already have a high level of specification but even at this level a nice pair of alloys is important.
And although leather upholstery isn't essential, aircon is to ensure strong residuals."
Pay says that proof that the car has been serviced in line with the manufacturer's guidelines and that the car is being sold with the remaining warranty still valid is another important consideration on Kias and Hyundais.
According to Henstock, branding has a particular resonance in the user-chooser fleet market.
"A fleet driver will often gravitate towards the premium brands, often resulting in a 'low-spec/high-brand' model going on the fleet. These can often be very difficult to remarket three or four years down the line, because used car buyers expect premium brands to have a high specification."
"Arguably a better choice for the fleet operator would be a volume or niche brand with a stellar selection of options, because this will be much more saleable as a used vehicle down the line."
He continues: "Bearing in mind that motorists perennially choose 'make and model' as the most important factor when buying a used car, then purchase the best example they can with the Budget they have available, it is obvious that brand will always have an important role to play."
Pay agrees that brand is hugely relevant: "Don't forget a used car buyer is ultimately aiming to buy a car and brand they aspire to and that is why cars like the previous model BMW 3-series has done so well in the used market. Despite the car selling tens of thousands new and the used market becoming quite crowded, there have been no shortage of buyers and so prices have remained at a premium - a three-year-old 60k-mile 320d SE can still fetch £10k with the right spec and colour."
He says that it is still early days for brands such as Kia, Hyundai, Seat and Skoda in the fleet marketplace, but one certainty is that the low-emission models all four brands are launching will generate interest with both the company car fleet manager and the cash-for-car customer. Pay adds that cars such as the Skoda Octavia and Seat Leon in particular offer good value alternatives to more fashionable and more expensive brands both inside and outside of the VW Group: "But for fleets it is about servicing infrastructure and whole-life costs as much as initial purchase price, while for contract hire companies the car with the keenest monthly rentals are those that ultimately will be worth more in the used market in three years' time."
Whatever the market conditions, the best presented and specified cars will always be the most attractive to auction buyers, thinks Henstock. "Fleet sellers have to accept that their cars will be at a certain age and mileage, and they cannot go back in time and change the specification or colour. However, they can affect the presentation and the cosmetic condition and should work with their remarketing partner to ensure their vehicles look their best when they are sold - and this is applicable whatever brand is being sold."
Pay concludes: "Car choice lists and fleet policies are being opened up all the time and as long as the car fits the purpose of the employee's job, plus boasts the right level of environmental and safety features to meet employer's duty of care requirements then more and more brands will become acceptable for use as company cars and in turn will improve their pedigree in the used market."