Direct sale plan threatens to shake-up lease disposal
30 June 2015
Author: Jack Carfrae
Residual value specialist Glass's has hinted at the possibility of a shake-up to the used vehicle market driven by the changing disposal activities of leasing and rental companies.
Speaking to BusinessCar, Steve Jackson, chief car editor at Glass's, said leasing companies were conscious of the rising numbers of used vehicles coming back into the market as second-hand sales caught up with the burgeoning new market, and were considering different methods of selling stock.
"Post recession, businesses have begun buying more vehicles and the used vehicle market is growing. There's been something like 39 months of new car growth and some of those vehicles are now coming back to the marketplacem" said Jackson.
"In the last 18 months to two years, leasing vendors have been thinking ahead as to what's coming. They've been making reasonable money on wholesale and they know they've got vehicles coming back, so they're looking to the future, trying to prep for what's going to happen and looking for new ways of doing things.
"They've started to look at some different avenues, maybe direct contact with buyers and cutting out the middle man - the middle man being the auction centre. Arval has a wholesale channel where it sells direct to dealers and Lex has opened a retail/wholesale centre in Coventry."
He continued: "They have influence because they've got a lot of stock, but it's important to them that they sell, and another vehicle follows that very quickly. The second side of that is if they cut out the middle man, they make a little bit more of money - money that would have been made by the auction house."
Jackson added that the behaviour of rental companies also has the potential to affect the used vehicle market. He said the current practice of rental firms disposing of vehicles at separate times was effective, but values could be dented if that were to fall out of sync.
"In terms of rental disposals, the rental companies all have similar strategies. They work on six to eight-month cycles and something like 6000 to 8000-mile limits.
"However, they all come out with different exit strategies, so the vehicles come back to the market at quite staggered times - one company might dispose at six months, another at a nine months, another at a year, for example.
"That works quite well at the moment, but where it starts to go wrong is if they all decide to do the same thing - then you've got huge amounts of stock dropping into the market at six months old, and that's not good."