REMARKETING: Used LCVs - the only way is up

Date: 01 March 2013   |   Author: Jack Carfrae

This time last year the used van market was struggling for stock. Now in 2013, the bottleneck has tightened even further. According to those in the trade, decent stock is harder than ever to find, and it's reaching the stage where buyers are bending over backwards to find the right van, and even settling for older vehicles in less than perfect condition.

Duncan Ward, BCA's general manager for commercial vehicles, explains the spike in values and scarcity of LCVs: "In December average LCV values rose by more than 11% compared with November, establishing records across the board. Some of that was seasonal, some was due to the changing model mix, but you could not argue about the demand and the prices being paid.

However, the year-on-year price performance was even better.

"The overriding factor driving values is the general lack of stock in the marketplace. This stock shortage is a long-term issue that results from the collapse of the new van market in 2009. Three and four years on, the big corporate fleets that provide the bulk of the 'first time to market' used vans simply do not have the same volumes to sell."  

That's the opinion of anyone involved in selling used vans: the hole in the marketplace has simply pushed prices for LCVs - and cars - skywards.

According to Zenon Witkowski, head of vehicle sales at BT Fleet: "Prices are stronger now than they have been since the recession. Do those vehicles fit expectations? Probably not all of them. The market is coping very well but vendors - the people buying the vans - have what appear to be hungry mouths to feed. Financial problems have increased demand for used LCVs, so supply and demand is in the seller's favour."

To that end, it seems logical that vehicles in less than perfect condition might generate stronger values or at least more interest than they would have done previously, due to the limited options of buyers. In August 2012, auction firm Manheim told BusinessCar that "you can get away with extra damage with the market the way it is, but not if it changes. Average damage from fleet sector vehicles has gone up by around £100 [to fix] from this time last year."

None of the remarketing experts BusinessCar quizzed so candidly admitted that this was still the case, but the signs of an acceptance of slightly damaged used vans are there. Witkowski stresses that good, clean stock will always attract bids and decent prices, but he also admits: "It depends what you choose to leave off your shopping list. In today's market, each seller has had to change its method of operation in terms of how it acquires stock. If the ideal stock's not there then you can't sell an empty space."

GE Fleet's remarketing leader, Tim Maffey, makes the common argument that a van is a working tool and that a certain amount of damage in the "working" areas is acceptable and expected: "All the evidence we have supports the view that foreseeable wear and tear within the 'working' areas of a van - the load space - has a limited impact on value. Making any decision about whether to refurbish or sell a vehicle in its existing condition will always involve balancing the economics of the cost and time spent undertaking the repair against the ultimate price benefit."

Ward says buyers have now become more accepting of older vehicles with higher mileage, as well as price-adjusted rougher examples: "Many buyers are looking at older, higher-mileage vehicles if they are in good condition. while demand for the very few late-year, low-mileage LCVs remains intense. There is also interest in poorer-condition vans if they are valued sensibly."

He also reports a rise in activity from the rental companies, some of which have been defleeting their stock early to cash in on the rarity and associated lofty volumes of young, low-mileage used vans: "Some astute rental operators have been selling stock to take advantage of the demand in the sub-two-year old van market and reaped the rewards as a result."

Prepping LCVs pre-sale holds the strongest merits online, according to SMA Vehicle Remarketing's sales director, Eddie Thomson: "Where preparation is increasingly important, is in enhancing online auction sales conversions and value. Buyers will pay a premium for forecourt-ready stock they can buy and turnaround quickly, sometimes purchased to order."

Thomson says the most likely areas of investment from vendors prior to a sale are cab and interior valets, repairs to locks and security devices, and minor body-damage refurbishments.  

Beyond condition, decent running costs are an obvious draw for most used buyers. However, as big a consideration as fuel economy and cleaner engines appear to be on the face of it, they aren't as high up on the agenda as you might expect. That's not necessarily down to a lack of concern about running costs, though - it can be due to an absence of relevant information for older vehicles, as Maffey explains: "Vans that are known to be more economical to run will always tend to achieve better values. However, it is important to note that manufacturers' mpg and CO2 data for vans only became available in 2009. Consequently, there is a shortage of information easily available to potential buyers about running costs for older vehicles."

Witkowski reaffirms that the kinds of figures the new market and new and used car buyers deem important just aren't as crucial for the used van community. Their interests lie elsewhere.
"[Fuel economy] does have a relevance but there's probably more of a distinction in what [the van] can carry, where they can park it overnight and what the daily usage is going to be. If you've got a plumber doing 200 miles a week and short journeys, then he's not going to be too focussed on CO2. It's generally the first user that gets penalised on that front anyway.

"Clean vans with service history, 40-70,000 miles and a popular badge - Ford, Vauxhall, VW - will always do well. Something over average mileage that hasn't got the side door loading argument and is a bit beat up will struggle. But everything sells at a price."

Duncan Ward

The consensus is that most types of van are reaping good returns for their sellers on the second-hand market now. But there are some exceptions to the rule, namely specialist vehicles, which can be hard to find homes for. GE Fleet's Maffey reckons buyers should tread carefully from the outset: "Specialist vehicles always attract a limited market and operators should bear in mind the potential needs of the used market when specifying vehicles. The greater the degree of modification, the smaller the likely pool of buyers will tend to be."

Another element to bear in mind is the proper removal of decals and company liveries, which can make a big difference.

Ward claims the right treatment will always make a van more attractive and add value, but a shoddy job can just make things worse: "Trade name deletion should be done professionally so that the company's name and logo are removed without damage to body or paint. With proper treatment, potential buyers will be presented with a clean body panel, which the next owner can customise or re-logo.

"With the now-commonplace use of vinyl stickers to brand vehicles, trade-name deletion can be conducted to the very highest standards, but it's worth considering that if it is not done correctly then it can actually devalue the vehicle."

With a word of warning for the future, Thomson points out that fleets dispatching vans into the used market need to be aware of looming EU regulations that apply to safety or emissions and which could make a dent in RVs: "One recent area that has presented a review is the forthcoming European Community Whole Vehicle Type Approval regulation, which will mean that new vans up to 3.5 tonnes will require additional approval for any [major] modifications made to them. This could have a short-term impact upon values."

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