Mouse against the hammer
A revolution is taking place in vehicle remarketing as electronic sales take off after a lengthy gestation period. Supporters of internet selling say dealers are ‘cherry-picking’ the best vehicles from manufacturers, leasing companies and outright purchase fleets with, consequently, fewer high quality vehicles appearing in the traditional auction hall.
However, BCA and Manheim, who dominate Britain’s vehicle auction hall business but have also developed significant online sales operations, maintain that physical auctions are the ‘past, present and future’ and that the typical ex-company car with upwards of 60,000 miles on the clock will remain the preserve of the auction hall.
Nevertheless, both have expanded their electronic capabilities. BCA delivers a range of e-business opportunities embracing tender and fixed price vehicles available for purchase electronically, as well as Live Online, which enables remote buyers to purchase auction stock in competition with buyers in the hall.
Meanwhile, demand from vendors for selling more cars through online auction has seen Manheim expand its Simulcast technology into a second hall at its Leeds site. This enables buyers to bid electronically for two different cars going through two different auctions halls at the same time. Simulcast technology debuted this year - buyers bidding online in competition with auction hall buyers - and is being extended to the company’s sites in Coventry, Bristol and Colchester.
Around 15% of fleet stock offered in Simulcast sales is purchased online, with Manheim’s Rob Barr, group planning and marketing director, saying: ‘Simulcast gives access to buyers who may not have the time to attend the physical auction. We have over 3,000 buyers registered for online bidding sales.’
All agree that the emergence of electronic remarketing has brought a vast new army of buyers into the car-buying arena rather than reduce the number of people attending physical sales.
It is for that reason that eBay, which bills itself as ‘the world’s online marketplace’, launched eBay Motors in the UK more than a year ago. Last year it claims to have sold more than 70,000 vehicles electronically with an average eight bids for each vehicle listed and further claims that nine million people view its site each month in Britain.
A spokesman said: ‘The site is now being used by a huge number of car dealers and those disposing of ex-company cars. The aim of eBay is to grow the number of vehicle buyers and sellers per se. e-Bay’s revenue comes from the volume not the expensive upfront charges.’
Although virtually impossible to identify which vehicles may be ex-fleet cars - there were almost 9,000 cars on the site when I looked, covering 40 manufacturers ranging from Alfa Romeo to Volvo and embracing BMW, Lexus and Porsche.
On the eBay site AK Vehicle Services has established its own ‘shop’ specialising in the supply of ‘low mileage ex-short term lease vehicles, chiefly to main franchise dealers and contract hire companies’.
Another newcomer to vehicle remarketing is epyx, best-known for its 1link e-commerce platform which has been adopted by 14 of the UK’s top 20 motor manufacturers, 25 of the top 50 vehicle leasing companies and more than 8,300 dealers. It recently acquired web-based Smart Remarkit, which will be relaunched as 1link Vehicle Disposal. Customers include Nissan Finance, Mazda UK, LeasePlan, Alphabet and Hertz and it allows dealers to search, locate and purchase stock 24//7.
Ken Trinder, head of business development at epyx, says technology is increasingly being used by manufacturers and leasing companies to pre-sell the best cars to dealers - and that stock in short supply will be spoken for months in advance of disposal.
He added: ‘Vehicles can be displayed on the site three months prior to the contract terminating. For models in clean condition, almost all available disposal stock is pre-sold at good prices. Leasing companies like the idea of pre-selling because it removes the uncertainty of auction disposal.
‘Any auction has a high degree of unpredictability and, while vehicles sometimes perform better than the owner expected, they sometimes also fall below the market. Equally, the dealer likes knowing what will be in stock in the near future and the fact that they can reduce the cost of acquisition substantially. Pre-selling provides a high-degree of certainty.
‘Leasing companies know what their final profit or loss on a vehicle will be months before the end of its life on their fleet. The dealer also has an extended period in which to sell a vehicle. It is not losing money by sitting on a forecourt but often goes almost straight to its new owner when it is defleeted.’
Trinder says: ‘It is easy to envisage a situation where the best stock is snapped up in this way and only poorer quality and some specialist vehicles find their way to auctions.’
But with the popularity of the company car as a staff recruitment and retention benefit undiminished, according to half-year sales figures, that is not a viewed shared by the major auction houses.
Online business currently accounts for just 4% of Manheim’s sales (compared with 2% in the summer of last year), while Tom Madden, BCA’s customer affairs director, said: ‘Newer hi-tech methods will always come along to complement physical auctions, but they are not going to replace.
‘Whatever route you choose to market - physical auction, electronic or online auction, tender, fixed price sale - you have to weigh-up and balance the benefits of speed, cost and return along with other elements such as security of payment, your company profile and objectives, or the type of vehicles being remarketed.’
Online exponents claim a cost of sale advantage with, for example, eBay Motors saying it will cost from £6 to a maximum £36 to sell a vehicle on its site.
However, speed of disposal is perhaps the biggest single issue because cars are depreciating assets and more speed generally means a reduction in holding costs which will reflect positively in residual values. This, says electronic supporters, is the most significant advantage of online auctions apart from access to more buyers.
With company car sales booming - fleet registrations increased 3.1% in the first six months of 2004 year-on-year to 566,719, while business car (sub-25 fleet sector) sales jumped 13.1% over the same period to take half-year figures to 150,127 - secondhand values are coming under more pressure.
The 2004 Used Car Market report from BCA and Sewells International reveals that the UK used car market increased in both volume and value last year with 7.2 million used cars sold worth £32 billion - the highest value ever recorded.
Sales in the sub-two-year-old market, fed by strong sales in the new car market, recovered significantly after two years of falls, with an additional 152,000 units taking volumes to 960,000 last year.
But significantly, for the second year running, much of the growth was seen in the three to five-year-old year old sector - where sales of ex-fleet and company cars are strongly represented. Volumes increased by 180,000 units year on year to 2.08 million and accounted for 29% of the marketplace.
The report says that average forecourt values continued to rise last year, up by £262 to £6,132. Splitting this figure by age group highlights the revitalised nearly new market - which rose on average by nearly £1,000 - and some of the volume pressures affecting values in the ex-fleet sector, which fell by nearly £400.
Despite the upsurge in online remarketing, in the overall analysis, says Tom Madden, perhaps the biggest challenge facing customers is to pick the service that suits them most from the extensive range of available routes to market. He concluded: ‘Overwhelmingly physical auction remains the channel of choice for the majority of BCA customers.’
**Smart way to prep
Company cars that have been Smart repaired before going under the hammer attract significantly stronger bidding and make roughly three times the amount of money that the vendor spends on condition improvement.
Reconditioning can range from full valets to Smart (small medium automotive repair techniques) repairs being carried out. The most common repairs are: scruffs and scratches to corner bumpers, car park dents, stone chips and scratches to paintwork, alloy wheel refurbishment and interior trim panels.
Manheim Auction says that with an average cost of £125 to prepare each vehicle for one contract hire customer it recently saw an auction hall gain of £300 per vehicle. Meanwhile, South Coast-based dealers Hendy Group has seen an average uplift of £140 or 6% per vehicle after embarking on a Smart repair programme.
BCA customer affairs director Tom Madden said: ‘There is a noticeable and appreciable movement in sales performance when vehicles are presented in ‘oven ready’ condition, for the professional to take away and retail without delay. While specification remains the strongest price indicator, presentation is the next most important factor.’
Type of reconditioning Approx increase in residual value
Valeters mop (shines paintwork) £100Removing dents from door panels £100Full mop to remove fine scratches and give paintwork depth £200Touching up chips/scratches to front of car £150Repair windscreen chips £50Repair dashboard (telephone holes up to four) £75Repair cigarette burns (small/large) £75/£100Alloy wheels acid cleaned £50Alloy wheel repair £200Repairing scuffed colour-coded door mirror £100
Source: Manheim Auctions
Service you can bank on
Contract hire and leasing companies and other major fleets are set to undergo a radical change in disposal operations as they increasingly outsource activities to boost business efficiency and maximise vehicle residual values.
That is the view of business-to-business vehicle management services provider Inchcape Automotive, which provides a one-stop shop of vehicle disposal services embracing the inspection and collection of end-of-contract vehicles, vehicle refurbishment, web-enabled vehicle inventory management and fleet remarketing through a variety of channels.
A three-year contract with Bank of Scotland Vehicle Finance, one of the UK’s largest leasing and fleet management companies, marks the first move in the expected shake-up in industry defleeting operations, it is claimed.
Under the terms of the contract Bank of Scotland Vehicle Finance is using Inchcape Automotive’s inventory management software programme to control activities and manage vehicle remarketing through areas as diverse as electronic auctions, Inchcape’s trade buyer database of in excess of 3,000 franchised and independent dealers and its established premium affinity partner schemes such as the Civil Service Motoring Association, AABuyACar and BarclayCard.
In addition Inchcape Automotive is responsible for the inspection and collection of end-of-lease vehicles through its logistics operation and their refurbishment to agreed standards at its own sites.
Inchcape Automotive sales and marketing director Gerry Lynch said: ‘The Bank of Scotland Vehicle Finance contract marks a significant watershed in vehicle disposal. For the first time a company is looking to one partner to supply all defleet-related services.
‘Historically such services would have been supplied by a number of providers and, in many cases, would have been further sub-contracted. Bank of Scotland Vehicle Finance is utilising our internet-based software and services to manage vehicles through the whole end-of-lease process from collection to ultimate sale.’
It is expected that Inchcape Automotive will process around 20,000 Bank of Scotland Vehicle Management cars and light commercial vehicles in the current year, a figure expected to rise to about 30,000 vehicles by 2006. Inchcape will also process vehicle from other areas of the Bank, such as ex-management cars and those from Freeway, its retail PCP brand.
Lynch said: ‘The contract is the biggest acknowledgement yet that contract hire and leasing companies need to become more efficient at vehicle refurbishment and remarketing. Maximising residual values is crucial to their financial well-being.’