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REMARKETING: New breed of body styles set to fetch strong prices

Date: 13 July 2012

Until five years ago, the word crossover would have been met with blank faces within the fleet community.

Today it's arguably as well known a term as hatchback, saloon and estate, courtesy largely of the

Nissan Qashqai, which coined the segment when it went on sale in 2007 and achieved phenomenal success, spawning an ever-increasing breed of copycat models from mainstream manufacturers.

They may be the most obvious example, but crossovers aren't alone in blurring the traditional segment lines. Small and large 4x4s, large and compact people carriers and mini-MPVs plus others have all contributed to shifting the once obvious goalposts between hatchback, saloon and estate.

The view among the trade is that the newer breeds of cars, crossovers in particular, are still very much sought after by used buyers, so they are likely to fetch strong prices at auction.

"Professional buyers see cars from this sector [crossovers] as a good retail prospect and will bid accordingly for the best examples," says Simon Henstock, BCA's operations director. "These lifestyle vehicles have a good profile with motorists but can seem expensive compared to alternatives such as traditional hatchbacks, so the sector can be more price- and condition-sensitive than some others."

He points out that businesses still have to factor in a realistic level of depreciation for heavily used cars. Desirable though they may be, he claims they are not one-stop-shop solutions to ensure strong returns when defleeted, and that their status as popular retail sellers means buyers may turn their noses up at rough, high-mileage examples: "The fleet manager must start with a realistic evaluation on price - these are not typical fleet cars, so hard-worked, high-mileage examples will struggle unless they are competitively priced to sell. Good, clean models will find a ready audience if they are in an attractive retail colour and the specification is good. Attention to detail in the pre-sale preparation

will bring its own rewards, so repair any damaged alloys or scuffed bumpers and attend to any dings or chipped paint."

Bryan Stringer, operations director at Alphabet, claims that strong whole-life costs also contribute to the appeal of such models, as does the option of four-wheel drive, which has become more popular over the past couple of years: "Crossovers, SUVs and people carriers are very versatile, can represent good value for money, and suit a wide range of drivers, but of course, everything is down to personal choice."

On its way out

There is a school of thought that suggests that the non-premium upper medium segment is on its

way out, with buyers gravitating towards either lower medium hatchbacks to avoid the associated running costs of a larger car or do-it-all crossovers should they need the space. Consistently declining sales figures among non-premium upper

medium models are evidence enough, but these models are still popular with fleets.

Managing director of Shoreham Vehicle Auctions, Alex Wright, claims that smaller vehicles are no longer considered basic as they once were, hence their increasing status and popularity compared to upper medium models: "This phenomenon has seen sales of used small cars and mini-MPVs becoming more similar.. Small cars can no longer be put into the cheap, uncomfortable, less safe stereotype, just as mini-MPVs can no longer be stereotyped for being too expensive and too big."

Jon Mitchell, business development director at Autorola UK, agrees that downsizing is to blame for the shift, but claims that traditional upper medium models are seen as superb value on the second-hand market: "These vehicles are generally seen as a bargain. Pound-for-pound their residual values have been forced down as they are not as popular as they were five or six years ago due to the growth in the number of drivers downsizing their company cars."

Regardless of the body style, remarketing experts are unanimous about the fact that diesel vehicles are viewed as the most desirable among the buying public, obviously due to the perceived economy benefits, although that trend is expected to change in the medium term, as Wright points out: "Petrol power is slowly making a comeback, and in five years' time we believe it will be a higher percentage of total new car sales and will be more highly sought after in the used market. The petrol Qashqai looks a well-priced vehicle and is attracting a lot of attention."

Despite their popularity, Henstock claims that the fashionable segments such as crossovers and SUVs still account for the minority of the used market share, with hatchbacks taking the lion's share at almost half: "The used car market is huge - over six million cars sold annually - and it can be misleading to think that all buyers react in the same way. While crossovers and SUVs are fashionable and desirable, they make up a very small part of the overall mix. In fact, there is plenty of demand across the range of vehicle types, and traditional saloons and hatchbacks still account for nearly 70% of annual used car sales."

The jury seems to be out among the remarketing community as to which body style offers the best residual values when it is defleeted, as each organisation takes its own view. BCA says that knowing the marketplace is the most important factor for fleet managers when choosing body styles with a view to getting as much of a vehicle's value back as possible at the end of its term. Henstock says: "Knowing what motorists want - which includes the professional buyers who service their needs - can help the fleet manager not just at remarketing time, but also when making decisions on the front-end purchase. While in theory it seems common sense to populate the fleet with the most desirable models, the reality is a fleet is not just about the resale value at remarketing time. And as scarcity often plays a leading role in desirability, it could equally be self-defeating. [Buyers] walk away from cars they perceive to be overpriced, under-specified or in the wrong colour."

Wright agrees, suggesting the correct specification and bearing future buyers in mind when ticking the options list are the key to maximising resale values.

Conversely, Alphabet's Stringer believes that the more traditional company car choices, specifically upper and lower medium models, make better sense for businesses than more fashionable body styles because their values are more predictable and likely to remain stable further down the line: "Resale values for [cars such as] Mondeos don't tend to fluctuate, so from that point of view the resale value of the Mondeo is steady and predictable. The Qashqai, on the other hand, is less established in the market and will fluctuate more as demand rises and falls."

Autorola's Mitchell disagrees, claiming that the youth and popularity of crossovers such as the Nissan Qashqai renders them more desirable and more likely to reap stronger prices when they are sold on: "The Qashqai will always be a far better bet, as it is more modern, and is in high demand with the used motoring public looking for three-to-four-year old vehicles. Small details will influence this, like opting for the smaller 1.5 dCi engine instead of the larger 2.0-litre unit, as the former is more economical and so will be more highly sought after in the used market."