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REMARKETIING: Eco not so specials
Date: 04 September 2014 | Author: Jack Carfrae
The fleet market is considered a prime target for low-CO2, high-mpg cars bearing some sort of eco or green badge.
But as sound a bet as they might be from new, the story isn't always the same on the second-hand market. BCA's operations director, Simon Henstock, explains that used buyers don't flock to branded green cars as much as new customers do: "While any motorist would undoubtedly choose a modern, ultra-efficient, low-CO2 engine for their next used car if money was no object, the reality for most buyers is a lot more pragmatic.
"It often comes down to 'what's the best car I can buy with the budget I have available?' That decision-making process will encompass everything from make and model, through to condition, age, mileage and colour, as well as running costs and emissions."
He adds that used buyers won't usually seek out the lowest-emission cars they can find, but will simply go for the nearest thing that fits their budget: "If their budget does not stretch to acquiring one they will inevitably choose the car that closest meets their needs from the plentiful supplies of older cars available.
"Generally, this means smaller petrol engines or diesel power - which is still perceived as being the most economical choice by many motorists."
That said, the firm's research suggests fuel economy is the biggest factor for used buyers. Henstock continues: "Interest from motorists remains high in terms of fuel efficiency, and a recent BCA survey showed that fuel cost remains the biggest worry for 70% of people.
In the annual BCA Used Car Market Report, when motorists were asked what factors were important if they brought a car during the economic recovery, fuel consumption was top, with low-CO2 some way back in sixth position (see chart, right). Motorists like the idea of eco-motoring because of the perceived benefits when it comes to fuel usage, rather than any green credentials, but supplies reaching the remarketing arena remain limited and competition is often high for the best examples."
Henstock's point is essentially that efficiency and CO2 are a lot further down the agenda for second-hand car buyers than they are for anyone operating in the fleet arena, hence why branded low-CO2 models are not a priority. Ogilvie Fleet's operations director, Jim Hannah, goes one further though, and claims that green and low-CO2 models actually offer poorer returns than equivalent cars with slightly higher emissions.
"Branded low-emission models do not attract a price premium in the used car market; in fact, they are more difficult to sell. Used car buyers perceive such cars as budget models with a lower specification than a model with SE or Sport trim, for example. There is no real demand for branded low-emission models in the used car market."
He adds that such models are coming onto the market in bigger numbers simply because fleets like them, but this in turn creates its own implications for residual values.
"We are seeing an ever-increasing demand from customers for eco-badged models due to the low benefit-in-kind tax and excellent fuel economy offered. [But] the proliferation of models such as the BMW 3-series Efficient Dynamics will further reduce residual values, as there is not the used car demand for these models. The problem will only worsen as more models return to the market."
The next level beneath the lowest of the low internal combustion engine cars is the alternative-fuel crowd. Electric cars are still an absolute minority with new buyers and they're even scarcer on the used car market, as Henstock explains: "Electric vehicles are simply not around in enough volume to assess their potential in the wholesale marketplace. Anecdotally, trade buyers have expressed concerns at how the high initial purchase cost will translate into the used market price structure, and there are continued worries about battery life cycles.
"The majority of these cars are retail rather than fleet models, and tend not to surface in the wholesale auction environment anyway."
Hannah agrees that it's still too difficult to make a serious call on the performance of used electric vehicles, but he has seen a shift in the take up of plug-in hybrids.
"We have not sold any electric or plug-in vehicles so I'm not aware of any performance changes," he says. "However, we are starting to see demand for plug-in hybrids and they are finding a place on the fleet.
"We also have hybrid models on the fleet. As with hybrid models, second-hand demand for them is in areas, such as London, where there is a congestion charge. Therefore, I would anticipate that at defleet time we will look to sell such models in parts of the UK where buyers are impacted by a congestion charge."
