The present state of the used car sector is presenting a distinctive set of challenges for those involved in remarketing. On the one hand, there has been little reason to doubt the market’s exuberance, with latest figures showing that used car demand remains strong. On the other, used vehicle prices have declined over the past couple of years and the market appears to be seriously out of balance, over-stocked in some segments and short of supply in others. This imbalance could become more pronounced during the closing months of the year if the momentum of September carries forward and a new wave of used stock swamps the market.
The extent of the collapse in used values is illustrated by the car price index compiled by Alliance & Leicester/What Car? Figures released at the end of July indicated that the value of one-year-old vehicles had fallen by 11.4% during the past 12 months while their three-year-old counterparts had dropped by 13.5%. On a two-year view, the index points to a decline of over 20%. The magnitude of these numbers has been questioned by the retail trade, but there is no dispute that used car prices have registered a significant downward realignment.
This is hardly surprising given the general decline in new car prices - aided by a blizzard of special deals including 0% financing and other offers such asCitroën¹s VAT rebate - which have encouraged private buyers into the showrooms and had a corresponding impact down the vehicle chain. This in turn has affected the fleet sector, with many operators suffering severe financial damage because residual values have fallen short of expectations.
In this hostile business environment the remarketing process has never been more important, with the traditional emphasis on presenting vehicles as clean and blemish-free as possible having to be supported by a cheaper means of disposal.
When it comes to presentation, auction groups such as BCA and Manheim maintain that money spent on ‘sprucing up’ vehicles is well rewarded, and their respective Smart Prepared and Magic services are an established part of the remarketing business.
Continuing advances in IT capability, meanwhile, are playing a key role in the quest to improve procedural efficiency and reach a wider market for buyers.
Q.bit Systems, for example, has developed an internet-based remarketingpackage for Camden Corporate Fleet Services, one of the UK’s largest fleet remarketing operators, to boost efficiency in both wholesale and auction channels. The software provides an interface with Camden’s existing dealer management system and allows vehicles to be sorted and presented in a wide number of formats according to the needs of individual purchasers. Information can be accessed and updated in real time which means that the remarketing operation, along with trade customers, are able to view, sell and purchase vehicles on the basis of the latest possible data.
According to Jeff Peyton-Bruhl, Camden’s business development and marketing director, “we now have a remarketing operation that can handle significant volumes of nearly new vehicles for both daily rental companies and vehicle manufacturers looking to exploit alternative routes to market”.
Corporate restructuring has also been used as a means of streamlining theremarketing function. Inchcape recently launched the first of an eventual nationwide network of used vehicle wholesale centres. Located at Corby, close to its logistics centre, the aim is to offer a wider range of flexible sales channels to manufacturers, contract hire operators and leasing companies. Inchcape has a trade buyer database containing over 3,000 franchised and independent dealers, and the cars are also offered for sale through other channels including affinity partner schemes and the company’s own retail dealerships.
Entering the remarketing ring against long established heavyweights like BCA,Camden, Inchcape and Manheim are relatively new contenders. Examples include The Fleet Auction Group, IT Fleet Solutions and Vehicle Remarketing Solutions.
The Fleet Auction Group, established earlier this year, has a 12-acre site with three auction halls. Unlike conventional auctions, the general public is not admitted and there is a fixed cost buyer’s premium of £50 per car. Two of its founding directors, CEO Andrew Walker and operations director Kevin Clarke began their careers as student members of the IMI.Twice weekly car sales and fortnightly HGV and LCV sales have attracted nearly 3,000 dealer account holders and the company was recently chosen by Volvo for the launch of its XC90 into the used car market. IT Fleet Solutions was launched in July of this year as a partnership between several existing automotive service providers, including the Fleet Auction Group and refurbishing company Intertechnic, with “a mission to provide a complete vehicle de-fleet and remarketing service”. Sales channels include forecourts, telemarketing, the internet and auctions.
It goes almost without saying that on-line innovations are playing a fundamental part in remarketing development. BCA Direct - a pan-European on-line vehicle sales channel – is a notable example. Other services include Live-on-Line which enables buyers with the necessary web browsing technology to join in the bidding at a live auction from a remote location.
However, it’s not just websites dedicated to the motor trade that offer appeal. eBay, the auction site handling a host of products from jewellery to cameras, also features a motors section which, since April, has been making a determined push top promote its services to the trade. Stock can be placed in the system within 15 minutes for a fee of £6 per car, plus £18 on a sale. In addition to attracting independent and franchised car dealers, the facility is used by Renault Retail and it is understood that a major fleet is giving the operation a trial. Some indication of the potential is provided by the fact that the 2002 turnover of eBay Motors in the US amounted to $3bn and involved 200,000 vehicles.
Looking ahead, it is by no means certain that everyone currently involved in the UK remarketing sector will survive, let alone prosper. Fleet remarketing is a brutal business where fleets necessarily will try anything in the attempt to save themselves from the ravages of poor residual values. More than ever, success is likely to hinge on the ability to forecast market movements correctly, with regard both to the absolute level of demand and to the type and specification of the most popular models, and then deliver the vehicles through the various used car outlets in a manner which minimises costs and maximised values.
But even this may not be enough. A trawl through the evidence suggests thatthere are simply too many in the marketplace, and this is an arena whereideas can be copied quickly. Survivors may be large or small - many of theformer assisted by their financial strength and long term customer relationships and some of the latter by their entrepreneurial spirit and fleetness of foot.