REMARKETING: Why options can give your fleet a little extra help at remarketing
01 April 2011
It's only wise that fleets pick cars based partly on strong residual values. With this in mind, Rachel Burgess reports on how optioning a car can affect RVs at auction
The better the specification at the front end, the more desirable the car will be when the time comes to remarket it three or four years down the line. That's the general rule of thumb for adding options to a car, according to BCA operations director Simon Henstock.
While mileage and condition are the prime factors affecting price, specification can be the 'deal maker' when all things are equal.
"However, it is important not to go overboard when choosing options, and never lose sight of the fact that the company car is a working tool and should be specified for the job it has to do," warns Henstock. "Certain options work better on particular car sectors, so spend the money wisely to get the best value."
Top leasing company Alphabet is well aware of the need for options to enhance remarketing value. Paul Hollick, general manager sales development, says: "Whilst Alphabet doesn't restrict customers from ordering specific cars, the RVs we set will influence model/specification choice. We apply residual value relativity to achieve the best remarketing value - for example, uplifting the RV for metallic paint to encourage metallic paint selection.
"We highlight such RV uplifts to our customers as they can benefit from no-cost/very low-cost options. This all contributes towards a much better range of vehicles, and therefore performance, when they come to be remarketed.
He continues: "To ensure customers always get the best value through a strong RV, Alphabet will intervene when a customer or driver has ordered a standard vehicle with no additional options to advise them of options such as metallic paint, which could equate to, in effect, no additional leasing cost thanks to our RV uplifts."
Naturally, the higher you move up the company car hierarchy then the better the specification is expected to be. Henstock says that prestige and upper executive cars should be lavishly appointed with every possible option, simply because that is what is expected by used buyers at remarketing time: "So specify climate control, not just air-conditioning, full not half-leather and the best possible in-car entertainment system with full MP3 and Bluetooth compatibility. Integral satnav is expected these days, and on certain models a heads-up display is available and could add to the desirability."
Meanwhile, safety and driving features are expected, although they do not add a great deal of value. Traction, stabilisation and 'smart' steering and braking are a must where available, according to Henstock. "This grows in importance for four-wheel drive models where sure-footedness is one of the primary reasons for purchase. Generally, automatic gearboxes are preferred on executive level cars, although most premium manufacturers now offer flexible gearing systems that can be adjusted by the driver to reflect the driving conditions."
Henstock says the trick is to avoid base models at all costs, but warns that this can get tricky if you run a user chooser policy, "because badge snobbery can come into play - some drivers will use every penny of their allowance to get that prestige name on the bonnet, but by doing so end up with an entry or low-spec model".
He adds: "This can be avoided if a suitable minimum specification is enshrined in the company car policy."
Alphabet's Hollick adds that different cars require different types of specification to ensure the best remarketing value. He highlights cars with the following specifications as always achieving higher trade values, even in tough market conditions:
? Transmission is important in more expensive vehicles (£25k-plus) as manual derivatives will tend to perform poorly especially in the much bigger sectors e.g. 4x4.
? Air-conditioning is pretty much standard these days, but if it isn't it should be added as no air-conditioning will have a negative effect on the residual value in three years' time.
? Business-based satellite navigation systems have really developed and are now being seen as a business tool, especially in typical fleet cars like Vauxhall's Astra and Insignia, and Ford's Focus and Mondeo. When it comes to remarketing, these systems would achieve around 75% of its cost at new.
? Leather seats, satellite navigation and Bluetooth are essential on more prestige models and will achieve 50% of their value after three years.
? Larger wheels, leather seats, satellite navigation and Bluetooth are advisable on 4x4s as these will achieve around 50% of their new value after three years.
Henstock adds: "It may sound over-simplified but the specification should match the car. If your fleet mainly consists of small city cars working in urban conditions - a city estate agent for example - then air-conditioning and electric windows would be good, as well as a satnav to locate those out-of-the-way residences. But a cloth interior would be more than adequate and will not harm its saleability in three years time."
However, he says that if you have a centrally located fleet serving a national marketplace with upper-medium models doing lots of motorway miles then you want to keep your drivers comfortable and alert on long journeys and make an impression when they arrive: "You should think about climate control, automatic gearbox, good in-car entertainment with Bluetooth, driving aids, leather interior and a good metallic paint finish with alloy wheels. And, incidentally, all these options will help at remarketing time."
The importance of colour shouldn't be ignored either. Most motorists appear fairly conservative when it comes to colour with silver, blue, grey and black proving the most popular - by volume - at BCA. Even when looking at nearly new models, the same four colours dominate proceedings, with black (29.4%) actually proving the biggest seller ahead of silver (28.1%). The same applies to ex-fleet and lease cars, with black again being the biggest seller and representing 30% of all cars sold from those sources. "Colour is one thing, finish is another - always choose a metallic paint finish, simply because they wear and age better," says Henstock.
He concluded: "Another area where there is growing interest is in the eco-performance of cars. Low CO2 emissions, high-efficiency engines, stop/start technology, energy 'banking' when braking, and other 'eco' options seem to be growing in desirability and could be a significant factor for fleets to consider going forwards."