Whilst outright purchase price, fuel consumption and maintenance costs are high on the agenda for anyone calculating the total cost of ownership of a vehicle, the factor that is the most important and influential on the final fiscal outcome is the residual value that the van achieves on resale.
Therefore, a carefully considered strategy from the initial vehicle specification through to it appearing in the auction hall can achieve a faster sale and enhance the return made.
Initially specifying a van with some consideration for its eventual resale can reap big benefits. Andy Picton, chief commercial vehicle editor at Glass’s, the used vehicle revaluation experts, explains: “The used market is currently very much driven by ‘car-like’ specification, to the detriment of the more basic low-horsepower, low-specification ‘fleet’ model. So, a well-maintained, higher-specification model will always catch the eye. The increased initial cost will be offset by the higher RV worth of the vehicle, so should prove cost-effective in the long run.”
James Davis, director of commercial vehicles at Manheim, agrees, saying that “any feature that adds desirability to subsequent retail buyers of used vans is key, mirroring cars in many respects”.
Meanwhile, Steve Botfield, senior editor of commercial vehicles and motorcycles at automotive data firm Cap-HPI, adds that the decision when considering specification at the front end will have an impact at the disposal period, with the second and subsequent purchasers deciding the value and desirability of a vehicle’s specification.
Sounding a note of caution though, Gareth Kaye, group van franchise director at dealer group Imperial Commercials, says: “[Specification] will always have an influence, but if it’s £1,200 for metallic paint and air-conditioning and in three years they only improve the value by £500, you have to ask, what the point was for the operator?”
A headache for fleet managers is how to achieve the best return when disposing of a large number of identical vehicles within a short time frame. Traditionally, a strategy of distributing vehicles to various auction centres across the country would reap benefits, but, with the advent of online bidding together with accurate vehicle condition reports, this is less likely to work today.
Duncan Ward, UK commercial vehicles operations director for BCA, says: “Ten years ago geographical differences were more pronounced, and while some still exist, digital channels such as BCA’s Live Online mean vehicles can be sourced nationally.”
Dylan Thomas, auction manager at Hitachi Capital Vehicle Solutions, explains how his business is adapting to change: “We now sell vehicles 24/7 with our remarketing partner and, with options such as special premium events, there are more shop windows to sell in.”
Kaye of Imperial thinks that a strategy should be adapted dependant on the vehicle type being disposed of: “White panel vans need splitting. For others, not so much – we put 25 tippers into one sale and the result was excellent as people focused in on the fact there was an opportunity to acquire at least one or two.”
All the industry experts we spoke to agree that presentation was probably the single most important key to achieving the best sale price.
Manheim’s Davis says that for the typical wholesale van that’s five to six years of age, replacing broken or missing trim is preferable to body repairs and painting. “This is because dealers typically like to see the severity and type of damage and have no doubt in their mind over the quality of repair,” he explains.
However, he adds: “‘Body mopping’ creates a great first impression – providing the van’s condition and age warrants it. A £50 investment could see a van make £100-£150 more and, of course, it could make the difference between getting a bid or not.”
Botfield of Cap-HPI advises that sellers need to ensure that any repairs carried out to vehicles prior to sale are cost-effective. “Any investment in reconditioning must provide a return both in the cost of refurbishment but also the time in which it takes to complete the process from the date of defleet to the date of disposal,” he says. “There are, of course, exceptions to this rule, when the most desirable and sought-after vehicle is offered for sale and where the general condition plays second part to the vehicle – within reason.”
Time is of the essence, warns Kaye. “The time to refurbish damage beyond a Smart repair might mean that the increase in price is offset by holding the unit for an extra 30 days,” he explains.
Meanwhile, Andy Brown, managing director at CD Auction Group, thinks vendors take an individual view on pre-sale repairs: “Many are realistic and prefer to sell without getting poorly conditioned vans refurbished, even though it may not achieve the best price.”
Looking to the future, industry sources are expecting the volume of vehicles appearing at auction to increase due to the high level of new van registrations in recent years.
The question has to be asked – will sellers who do not do everything possible to enhance their return be left further behind? BCA’s Ward thinks that proactivity is vital: “Choosing a remarketing firm that can offer a wide range of support services and deliver a nationwide audience will help maximise returns.”
Once again, condition and preparation are stressed, this time by Picton.
“There are some big defleets due in the first half of 2018 and inevitably this will lead to downward pressure on values on all but the best examples,” he says.
“Condition, preparation, documentation, full service history and targeting the right auction with the right vehicles will have a bearing on how that vendor performs.
“Anything that can set them apart from the mundane will catch the eye and allow them to perform better.”
“It reminds me of an old motor trade saying,” concludes Kaye, “that there’s a bum for every seat…at the right price.
“There is more room in the used market for these extra vehicles as a declining new market will see some of that business move to used, so demand is likely to be more than enough to soak them up. The issue will be the price they make – clean, ready-to-retail, low-miles, good-spec vehicles will always be ‘book busters’.”
What auction firms can do for you?
Auction companies have developed their operations beyond recognition in recent years. Pre-sale marketing, via social media and other forms of advertising, are used to draw attention to a sale in general or, specifically, a vendor’s presence.
Andy Brown, managing director at CD Auction Group, says that his business has bought into this strategy to the benefit of his sellers: “We implement very organised and bespoke pre-marketing campaigns that target specific vehicles to buyers we know will be interested in the stock on sale. This helps both vendors and buyers as well as avoids bombarding buyers with unnecessary communications. This extra effort on our part does reap rewards as we tend to see a better rate of vans sold first time at auction.”
Andy Picton, chief commercial vehicle editor at Glass’s, thinks marketing activity could become more vital in one specific sector. “The auctions currently do a good job – however, as more alternative-fuelled vehicles (AFVs) become available in the future, I believe that auction companies will need to market and offer these vehicles within dedicated AFV sales to attract the right customers and to maximise the strongest values,” he says.
Condition, condition, condition
“Condition remains the most important factor. Retailers are always looking for the cleanest, best-condition vehicles that are ready for sale. Whenever the vehicle is being sold, proper preparation, documentation and service history are vital if your LCVs are going to achieve the best possible price at remarketing time.”
Duncan Ward, UK commercial vehicles operations director, BCA
“Condition is everything when a vehicle is offered at auction. Vendors want to sell their stock just as much as traders want to buy them, so it’s in everyone’s best interest that the vehicles are prepared to a good standard ready for sale.
“With plenty of similar vehicles on offer at auction, those with a full service history will stand out and encourage the buyer to spend a little more, safe in the knowledge that the vehicle has been well maintained.”
Andy Picton, chief commercial vehicle editor, Glass’s
