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Non-franchise service savings can offset residual value penalties - CAP

Residua value penalties imposed by used car trade buyers on independently serviced fleet cars can still be outweighed by the savings from avoiding main agent costs, according to CAP Black Book.

The crucial role of full service history in delivering the best disposal values is well understood throughout the industry but many still argue that fleets taking up independent service contracts – rather than sticking with the manufacturer's own dealer network – suffer residual value penalties.

But research by CAP reveals that while this is true, the penalty can be outweighed by the savings already achieved.

Black Book Senior Editor, Tony Styles, says: “Research confirms that there is indeed a difference in the used value of a car that has been serviced in the independent sector compared with one maintained by the original franchise dealer. On a typical three-year-old 'bread & butter' family car the presence of an independent service specialist history can reduce its value by up to £300.

“But with labour rates often less than half those in the franchise sector, and parts prices significantly lower, it is possible to enjoy substantially reduced costs up-front that outweigh the reduction in used value on disposal.

“One example we have investigated is a major service cost of £90 per unit, compared with £270 from the main agent. This reduces the operating expenditure for a fleet of 5,000 cars by nearly seven figures annually.

“Detractors argue that such savings do not pan out long term because of the used market's unquestioned desire for main agent paperwork. However, this entirely depends on how favourable the servicing costs are to the fleet customer.

“In the example cited, the cars would have to suffer a residual value penalty of more than £500 on disposal for the service savings to be wiped out and research indicates that the true hit is significantly less.

“Under revised Block Exemption manufacturers have a duty to supply the equipment and information necessary for the independent service sector to do the job. Clearly it is possible - though not guaranteed - to buy quality service packages which do the job of properly maintaining cars with savings that carry all the way through their operating cycle.”

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