REMARKETING: Missing documents could lose fleets thousands
04 November 2015
Absent V5s, service histories and even parcel shelves can cost you dear when defleeted cars go under the hammer.
Keeping track of service histories, media system codes and registration documents may be a hassle - especially if you manage a large fleet - but looking after these along with ancillaries including spare keys and locking wheel nuts should ensure you get much better returns when it comes time to defleet your vehicles.
It should also ensure fast, headache-free sales, meaning that you can focus on looking after newly acquired vehicles, rather than wasting time chasing a decreasing return on tatty end-of-cycle machines.
Though a missing spare key, patchy service record or absent radio code might seem like a minor irritation, a combination of these ailments could soon see the value of a car slashed by hundreds, if not thousands, of pounds, says Derren Martin, Cap Black Book editor.
"If a vehicle lacks ancillaries such as a V5, service book or spare keys, it will make a difference between Cap Clean and Cap below [values]," he says. "On an average £10,000 vehicle, the difference between Cap Clean and Cap below could be as much as £1000."
Supporting the place of service history as the most important aspect when coming to sell on fleet vehicles, BCA's UK operations director Simon Henstock states: "The service history can have a real, tangible effect on the potential prices vehicles might achieve.
"Building buyer confidence is hugely important, and even hardened trade buyers value the comfort of knowing their judgement is supported by a comprehensive history file."
Backing this up, Lex Autolease senior manager in vehicle marketing, Simon Rossiter comments: "Understanding the provenance of a vehicle is key to the value a buyer would be prepared to spend on it, and also indicates what might need to be spent on maintenance at the point of purchase and beyond."
While the value lost by having an incomplete service history varies by vehicle, Henstock estimates that the average three-year old, 60,000-mile model valued at around £7000 could instantly be worth £300 to £500 less without proof of past services. More than this, fleets may also face extra hidden charges should they be unable to offload a vehicle first time around, with buyers shunning it for others that have a full complement of documents and ancillaries.
And the story gets worse with pricier models, such as luxury cars or 4x4s, says Henstock: "You will fail in attracting bids on luxury cars if they lack a service history, and even a part-history is better than nothing. For cars in the £20,000 to £25,000 bracket, a missing service history might cost the seller as much as £2500."
While Henstock claims it's harder to sell pricier models without paperwork - along with James Hopkins, head of remarketing at Leaseplan - Rossiter from Lex Autolease states that it can be more challenging to pass on cheaper models without some paperwork, due to the buying demographic.
"At the more expensive end of the market we are most likely selling to franchised dealers and car supermarkets with the time and resource to obtain the V5 whilst the vehicle is undergoing prep work, and a lack of V5 will not prevent them from advertising the vehicle," he says.
On the other hand, those buying more affordable models are likely to be traders or private buyers for whom sourcing the V5 may be more of a hindrance, with them unable to use or sell on a vehicle without it. Hopkins counters this, however, stating that a large number of franchised dealers will be "looking for the complete package" and not willing to have to spend time and effort chasing extraneous elements such as V5s or service history.
What makes missing service history such an issue according to Kia's head of fleet and remarketing, John Hargreaves, is the fact that it is irreplaceable: "You're looking at not just the cost but the inconvenience factor. Dealers don't want cars without service history. You can't replace those."
Even for ancillaries that can be replaced for a relatively low price, buyers will often lower the amount they're willing to pay substantially, Hargreaves adds: "You can get a replacement V5 for around £25, but not having it might slash £100 off, if a dealer buys it at all. If one car doesn't have it [a V5], 99 others might have it. It's like an unofficial admin fee."
Summing up just how serious these missing ancillaries can be to buyers, Hargreaves stresses: "We're really pernickety on these sorts of things because we think it does make a difference."
This sentiment continues to smaller elements, such as lost manuals, states Simon Henstock: "Missing radio/audio codes, spare wheels, tyre repair kits or locking wheel nuts are an irritation for buyers. While these and other items like spare keys and satnav discs can be replaced, it means a delay in retailing that vehicle and a cost, and both will be factored into any bidding."
How easy it is to offload end-of-lease vehicles also varies depending on the state of the market, Hopkins points out. When the amount of ex-lease vehicles up for grabs is high, buyers have no need to settle for vehicles that don't include a whole set of documents, being more likely to steer clear than in lean months. Consequently, putting problem cars up for sale in busy months is much more likely to see them fail to sell at all, or raise a meagre amount when the hammer falls.
Emphasising the importance of getting a quick sale, Henstock continues: "From the seller's perspective it is equally important to get vehicles sold quickly for the best possible price, and having the service history and ancillary items can be critical to this.
"Time equates to money for retail dealers, and the more the seller can do to shorten the time from purchase to forecourt the more receptive buyers are likely to be."
Fleet managers can make their lives easier by keeping tabs on documents and ancillaries, but even then problems can arise, says Gary Curran, remarketing and strategic supply manager for Venson: "Missing V5s are not a regular occurrence (we keep our own on site) and radio/audio codes are also on record. Missing service history is a bit more prevalent, but we can usually provide some kind of record from our systems."
It's a different story with missing keys, sim cards and locking wheel nuts, though, which is a "very regular occurrence" states Curran. Whether keys end up hidden in the user's kitchen drawer, the employee moves company or keys are held centrally but not properly labelled, bringing together cars and the correct ancillaries come sale time can be a logistical nightmare that can see fleets hit in the pocket at auction or users being stung with hefty charges to cover the cost of sourcing replacements.
Regardless of the logistical headaches involved in keeping track of documents and easy-to-lose ancillaries, fleet managers will have bigger headaches come resale time if they send a line of cars to auction without their associated extras, claims Jason King, director of valuation services at KeeResources.
"A missing V5 can simply stop a sale stone dead," he says. "There is currently plenty of good-quality used stock available for sale, so to present models with anything but a complete set of documentation and ancillaries is going to look less attractive, take longer to sell and may result in a lower sale value."
So if you want to look after your bottom line, make sure you have rock-solid policies in place to help you keep track of paperwork and other objects, from the time cars are delivered all the way to when the hammer falls when reselling.
The residual value expert's view
Missing ancillaries not only mean that you get less back when defleeted models go up for sale, but consistently fielding cars with incomplete documents could give you a bad name with trade buyers, says Rupert Pontin, head of valuations at Glass's.
"It is worth saying that trade buyers do remember vendors who sell cars lacking these pieces, and as the market gets tougher for vendors as stock volume increases they will look to purchase from vendors that they trust." This is especially important as the used car industry is shifting towards being a buyers' market, stresses Pontin.
Similarly, trade buyers are savvy to the whole purchase process and will pay careful attention to auction details specifying which documents come with a car at the sale and what will follow at a later date. "Trade buyers rely on this declaration," adds Pontin, and should any extras promised fail to materialise these savvy buyers will be quick to seek compensation afterwards, which can mean a convoluted sales process.
Missing V5s can be a big issue, says Pontin, with most vendors not selling cars without one, due to the losses incurred and the fact that leasing firms can acquire these more easily than other vendors, but the Glass's valuation expert expects larger losses than other industry figures for missing service history.
An average model could see a 10-15% drop in value without a service history, while performance-focused models could be worth as much as 30% less than an equivalent model with full documentation, claims Pontin.
Figures from Glass's state that trade buyers are likely to dock £150 from the price to source a spare key, £100 for a missing parcel shelf and £50 for missing handbooks. While they won't adjust their offers for missing wheel nuts or radio codes both could cost buyers £50 to address, plus an hour's labour to break off old wheel nuts.