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Managers must not bow to drivers' demands

Date: 03 February 2009   |   Author: Tristan Young

Business car managers who control their fleet's disposals are in a strong financial position going into the recession, but they have also been slack in the control of their fleets. That's the message from Professor Peter Cooke in a new report on the recession and residual values.

In the new report titled Recession, Residuals And Used Vehicle Operations, Cooke, who is Professor for Automotive Management at the University of Buckingham, sets out how he sees the used car market in the next few years.

Cooke recommends fleet managers take greater control of the car list - even dictating colour - to maximise values come disposal time.

"Some fleet operators have forgotten how to specify a car for the used car market," said Cooke.

"However, that skill is coming back now, but in the past few years its fallen off. Lease companies are okay, but it's the fleet managers who are buying outright who have been bowing to driver demands."

While Cooke doesn't recommend moving to a solus badge deal or only allowing one trim level and one colour, he does recommend regaining control over the choice list and exercising that control to stop drivers picking low-RV colours or options that don't add to a car's value.

However, it's not all criticism for fleets. Cooke believes those businesses using outright purchase in the current climate could reap the rewards in terms of good RVs in 3-4 years because many fewer new cars are being bought. This supply decrease should mean demand and prices increase in future.

Sounding a cautious note of optimism he said: "If the number of new cars going into the market is lower, then in theory RVs will pick up in 3-4 years. That's fine but consumer confidence and finance availability are over-riding factors."

The early signs of this have already being to surface.

"BCA's figures [used in the report] show a £1500 drop in the average car value in 2008, which is interesting for lease companies. However, the drop was in the first half of the year, in the second half values were level," Cooke added.

"Lease companies have been holding back and looking to extend contracts, this means there's less supply in the market, so prices rise.

"The question is how long do they extend for, to take advantage of the rise?

A BCA spokesman said that while he'd not noticed a change in the age of cars from contract hire firms he had noticed "a shortage of stock from fleet and lease companies at the moment".