BCA, in conjunction with Nottingham Trent Business School, carried out a survey of fleets to assess their used car disposal strategies.
It found a lack of control and process, which resulted in cars under-performing on their residual values. Fleets are typically losing out to the tune of several hundred pounds per car.
“Dealers can and do use this to get a good price,” says Professor Peter Cooke of Nottingham Trent Business School. “The seller is giving away money, but this inefficient model works to dealers’ advantage.”
Cooke believes there is a disconnection between fleets and dealers because fleet operators generally look for the lowest price, rather than considering total cost over the lease/purchase period.
He calls for dealers to educate fleets so they focus on the total cost of the car, taking into account purchase price, strength of residual value, and service, repair and maintenance costs.
“There is more benefit to fleets in concentrating on improving residual values rather than trying to get a high discount on the price. It comes down to their disposal strategy,” Cooke says.
Manufacturers need to do more to “pull through” customers from new cars to used. They should put more focus on used cars, which is “the most important part of the business”, he adds.
One policy adopted by some dealers is to contact customers after two or three years to tell them that ‘they have a buyer for their car, would they like to bring it down for a quote’.
“This takes the fear out of it for customers because they believe they will get a good price,” says Cooke. “Dealers can capture more of the market and ensure customers come back to them for their next car.”