REMARKETING: The little things that count
20 October 2016
Author: Jack Carfrae
Just for a second, forget all the things that dictate the price of a used vehicle. Now think of the most relevant one: condition is right up there, but with it should be speed.
A quick turnaround is vital for the best possible price because the longer a vehicle is sitting around, the more age and potentially deteriorating condition take chunks out of the value.
It's a no-brainer then: defleet with everything you need for a speedy sale. Even for vehicles in good condition, an absent service history is often a serious turn-off and may cause several repeat appearances at auction. Keys, satnav cards or discs and spare wheels all fall into the same category, so anything removable can hold up the sales process until it's either replaced or refunded. And that's before you get to the cost each missing item saps from the overall value.
"Time equates to money for dealers and the more the seller can do to shorten the time from purchase to forecourt, the more receptive buyers are likely to be," says BCA's chief operating officer Simon Henstock. "Holding costs may be 'out of sight, out of mind' but they can have a significant impact on the eventual real return to the company's bottom line. Vehicles deteriorate with age and generally drop in value and this only stops when they're sold.
"Bearing this in mind, the presence of the V5 means no delays in onward selling, while the service history is arguably the most valuable document that can go missing."
The exact amount a missing history can dock varies depending on the vehicle and the way the market is behaving, but there's a clear divide between the amount fleets stand to lose on conventional and prestige cars - and it's something on which remarketing specialists are close to unanimous.
Henstock continues: "For the typical, three-year old, 60,000-mile ex-fleet car, it could be £300 to £500 on an average value of around £7000. It could mean the car not reaching reserve the first time it is offered, introducing further, often hidden, holding costs for the seller.
"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, so the sums of money are significant."
"A lack of service history on a Ford Focus or a VW Golf could affect their value by £500," adds Leaseplan's head of remarketing David Rodriguez. "But as you move toward the premium end of the market, the impacts are much greater. For example, if a BMW M-series car does not have the first running-in service then the manufacturer warranty is invalid, and the value of the car can be as much as £3000 less."
Rodriguez believes that keeping accurate histories has actually become more difficult as records have digitised. "The world was easier when you just had the traditional service book and stamps, but it's changing, and with that comes digitally stored records, and fleet servicing agents that may omit to stamp the book."
Lock down the cost
Away from the documentation side of things, spare keys and satnav components are costly things to go missing, according to Jim McNally, chairman of the British Vehicle Rental and Leasing Association residual value and remarketing committee and head of asset risk at Alphabet.
"Spare keys and missing satnav SD cards can have a big affect on the residual value of a vehicle, and they are frequently omitted. Thankfully, satnavs that require SD cards are quite rare in new cars, but they are still seen in vehicles reaching the end of their contract in 2016. Where a vehicle is equipped with navigation and the software is missing, the cost to replace it can run to over a hundred pounds."
Like service histories, the price of a replacement key generally ratchets up with the cost and prestige of the vehicle. "Most modern keys require programming for security purposes," adds McNally. "The cost to reprogramme a replacement can run into hundreds of pounds, depending on the model.
"A missing key on a Range Rover or a Mercedes S-class could affect the resale value by up to £1000," says Rodriguez, who adds that LCVs and electric vehicles are subject to their own uniquely expensive losses.
"We have customers returning vehicles without the Truckman-style top or a whole row of seats missing in a minibus [and] as vehicles evolve, we are witnessing new challenges. The most recent example concerns electric vehicles and specifically where a vehicle is returned without its charging cable. A Tesla's value could be affected by up to £800 if the cable is missing."
You'll be running a seriously tight ship if you manage to eradicate such losses completely, but fleets can put certain measures in place to stop them before they start.
"Communication is key," says McNally. "Get in touch with the driver ideally weeks before the vehicle is defleeted. This will give them time to find the missing component, and if they can't, it gives them time to rectify the situation themselves."
"We have some customers that, when sending the Fair Wear and Tear guide to drivers a short period before end-of-contract, mail a checklist to be ticked and agreed as available for return. This allows time to replace anything that is lost," adds Rodriguez. "Data and reporting can offer valuable insights.
Some leasing companies can supply reports of common damages and missing items, offer workshops on the end-of-contract process and general advice on how best to prepare for return."
The residual value expert's view
Director of valuations at Glass's Rupert Pontin agrees with fellow remarketing specialists that missing documents are the biggest blight on a vehicle's worth and desirability.
"Buying a vehicle without documents is a bit of a waste of time and money because dealers will end up sitting on it for two, three, four weeks before the documentation comes through, so bids could be anything up to 20% less.
"Service history is really significant because when you put [a vehicle without it] through to the retail punter, they're uncomfortable about buying it and, of course, there are so many other vehicles around that do have a service history. We're in a market where more used cars are becoming available and it just isn't worth it to buy a car without a service history."
Conversely, Pontin thinks absent satnav discs aren't the end of the world because they're easy to replace. "Satnav discs are not so much of a problem these days because you can pick one up quite cheaply on eBay. It's usually lease vehicles that come back without a satnav disc and from a dealer's perspective, if you saw a car without one, you'd probably try and pay £50-£100 less for it, knowing you could buy one on eBay rather than having to buy an OEM one that would probably cost £300-400."
He adds that the sharper fleets are contacting drivers earlier to avoid a situation where vehicles stagnate at auction, a feat likely to continue as supply to the used car market increases.
"The switched-on companies are communicating further upstream, as much as eight weeks beforehand, asking 'have you got the spare key, the documents, is the service history there?'
"When it comes to the actual defleet day, that kind of discussion is already done and dealt with. Also, inspecting the car three or four weeks beforehand gives the opportunity for discussions around any repair work, which takes the negativity away from the time when you should be selling the vehicle.
"I think that as we slip further and further into a buyer's market, you'll find that it will become a more upstream activity because people want to put the car up for sale as soon as it comes back."