The National Association of Motor Auctions (NAMA) launched its vehicle grading scheme for used vans in July – an equivalent to used car grading, which has existed since 2012, and the industry-standard method for recognising used vehicle condition.
The initiative has been adapted for LCVs but uses the same methodology as the car scheme, which ranks vehicles from one (best) to five (worst). A lower grade ‘U’ also exists for heavily damaged vehicles.
Grading is highly influential for trade buyers, who use it as a key metric when shopping for used vehicles. Dealers may, for example, search only for vehicles in upper categories, often referred to as ‘ready to retail’, because they require little or no preparation for the forecourt. They may also buy vehicles in mid-level categories with the intention of conducting nominal repairs, to upgrade a vehicle from, say, a grade three to a grade two, rendering it more saleable – a process known as tactical refurbishment. Some remarketing companies conduct tactical refurbishment on behalf of vendors at a wholesale level before they are sold at auction.
Grading is conducted by trained inspectors who examine the vehicle and make a note of its condition. They then input their findings into the auction company’s software, which generates a grade based on NAMA’s data and algorithms.
Van grading debuted at Manheim’s Shepshed commercial vehicle sale on 1 July and was rolled out across the company’s other commercial vehicle auction centres the same week. At the time of writing, Manheim was the only auction firm using the scheme, but NAMA said it expected others to adopt it before the end of the year.
Inspection criteria
The parameters for determining grades are different for vans. While grade one cars have minor cosmetic damage, such as, “dents up to 30mm, scratches up to 25mm,” according to NAMA’s website, the equivalent categories are more sympathetic to LCVs because they are working vehicles and more likely to be damaged.
The organisation’s criteria for a grade one used van says: “Vehicle panels may have minor defects including dents up to one third of a panel or scratches on two panels, may require a replacement windscreen, bumpers may have scratches, wheels can be affected with scratches or corrosion, interior and load area may have minor scuffing due to wear and tear and replacement of minor trim items may also be required.”
NAMA advisor Paul Hill told What Van? how and why the organisation differentiated grading for used LCVs.
“We wanted to ensure that [auction] inspectors could inspect vehicles, whether they’re cars or commercials, and not have to switch anything in terms of their thinking. But, of course, the biggest difference between a car and an LCV is that it’s a working tool.”
A panel van’s loading area – or yellow zone, as it is sometimes known in the trade – was a key focus for the organisation, as Hill explained.
“If it’s been used as a parcel delivery vehicle, some paint has been removed from the loading area because parcels have been thrown in and out of it every day and there are some scrapes, but there’s no difference in the shape of the internal panels from when it was originally manufactured – there are no dents or dings – that does not affect the grade.
“But if a panel has deviated from its original pressing – it’s bent out of its original shape – that will affect the grade.”
Conversion distinction
Grading generally applies only to the core vehicle and not to specialist aftermarket equipment, which had been a point of contention during the scheme’s development.
Hill explained: “If we take a cherry picker as an example, the lifting unit on the cherry picker is excluded from any sort of assessment for the grade. Anything we would deem as non-standard – it wasn’t built and put on at the factory – in effect sits outside of the grading scheme.
“There are exceptions to the rule, because if it’s a Luton body, you are going to say, ‘OK, is the side of that body damaged?’ And that side panel, we’ll class as one panel.”
Hill said some trade buyers familiar with car grading were confused by the variances in the van scheme in early sales, but claimed they understood the differences following an explanation.
“What’s interesting is when buyers come up to you and say, ‘well, that’s not a grade one…I’d expect a grade one vehicle to be ready to go on a forecourt’, they’re basing it on their expectation.
“When I said, ‘This is what a grade one vehicle means in the wholesale [van] auction market… can you agree that, from this description, it’s a grade one?’ they said, ‘oh, yeah, I can agree it’s a grade one’.”
According to Hill, applying the same criteria as car grading would have left less than 1% of used vans in grade one, while shifting the boundaries to accommodate typical second-hand LCV conditions made them echo car grading more closely in terms of the split of vehicles between categories.
“There were one or two concerns that we might end up in a position where we had too many vehicles in grade four and grade five,” he said. “You’re never going to get a bell curve that’s absolutely the way you want it, but what we wanted to do was ensure that we got one that was aligned to the car market.”
Furthermore, setting categories based on what Hill described as “a normal year” prevented the grade boundaries from being skewed by the volatility of the post-pandemic used LCV market.
“Because of the impact of older and higher mileage vehicles entering the marketplace, we wanted to make sure there was some alignment with car grading in terms of that distribution of grades, because we knew the car market had been affected in the same way as LCV,” said Hill.
Preparing the ground
As part of the scheme’s development, NAMA analysed around 50,000 pre-sale van inspection reports from June 2023 to February 2024 from multiple auction companies to establish which categories they would fall into. The results showed 7% of vehicles in grade one, 15% in grade two, 25% in grade three, 30% in grade four, 15% in grade five, and 8% in grade U. An identical analysis of used cars over the same period showed 7% in grade one, 18% in grade two, 25% in grade three, 31% in grade four, 16% in grade five, and 3% in grade U.
The car grading scheme has attracted controversy since its inception, as some in the remarketing industry believe its interpretation is not sufficiently consistent. Speaking to What Van?’s sister publication Business Car on condition of anonymity in 2019, a senior auction company manager said: “We still get feedback that a grade
A (one) in one site can be a grade B (two) somewhere else – and it could even be
a grade C (three). So, the application of it is still a problem, but the need to have it is becoming more prevalent.”
However, the scheme has been refined and is widely acknowledged as the go-to method for appraising used vehicles. NAMA claims the scheme is applied to more than 90% of cars sold at auction, which is said to have equated to more than 10 million units since 2012.
“There’s probably more subjectivity in terms of a commercial vehicle then there will be with a car,” said Philip Nothard, insight director at Manheim’s parent company, Cox Automotive.
“The big question is, in time – and in terms of commercial return – will you get more for a grade one [van] than a grade two? If somebody can say, ‘I get more for my grade two than I do for my grade three’ – like you do with cars – or ‘I want to take my van from a grade three to a grade two, because I know that that £500 [repair] will get me an extra £1,200’, then that will be the true test of the grading.”
