Auctions are the most popular way to remarket vehicles, but other options may be quicker and cheaper for your fleet. Sarah Tooze examines the choices available.

Option 1: Auctions

For leasing companies and fleet operators that outright purchase their vehicles, auctions organised by remarketing companies such as BCA and Manheim, are the most popular means of disposal and often the most effective.

Steve Shaw, head of remarketing at Alphabet, says: “It is the most effective way of managing days in stock to ensure the cash is back in the business as quickly as possible.

“For dealers, the ex-fleet stock which comes through the auctions tends to be desirable, commanding strong values and providing a steady stream of vehicles for the forecourt.”

Leasing companies usually make use of both physical and online auctions.

Bryan Stringer, corporate and manufacturer sales director at Manheim Auctions, says: “A mixed approach, which embraces a combination of both online and offline auctions, will undoubtedly deliver the best results.”

Police Scotland, the newly-unified Scottish police force, sends all of its vehicles to BCA, under a national police framework (essentially a pre-tendered contract) set up by the National Association of Police Fleet Managers.

Tony Chalk, transport manager at Police Scotland, explains that this is due to the number of vehicles (Police Scotland has a fleet of just under 4,000 vehicles) and the security of police vehicles when they are sold.

He says: “The framework means strict procedures have to be followed around debranding, keeping vehicles in a secure location, etc.”

However, for smaller fleet operators, cost and logistics (such as the fee for each vehicle handled, plus commission on the value achieved, and transportation) can mean auctions aren’t an attractive option.

Option 2: Profit sharing arrangements

Fleet operators that lease their vehicles could consider negotiating a profit-sharing arrangement with their provider on the sale proceeds of their vehicles.

Last year’s FN50 research found that at least 15 companies will profit-share on residual values, although 19 companies declined to comment.

The arrangements that customers can agree with their leasing companies vary.

“There is no hard and fast rule,” says Debbie Floyde, group fleet manager at Bauer Media. “Leasing companies can make a bespoke agreement.”

For example, it might be possible to negotiate a 50% split of the profits.

Floyde describes profit-sharing as “hugely beneficial”, but warns that it may not be right for every fleet.

“If you have high-mileage vehicles in poor condition, is it worth entering into a profit-sharing agreement on the residual value?,” she asks. For those that do have an agreement “it’s important to have visibility”.

“The customer needs to have access to the residual value written on the car at the outset and the sale proceeds.”

Alphabet’s Steve Shaw adds: “Profit-sharing arrangements between a fleet operator and leasing provider can provide a healthy income in some situations. However, the fleet operator needs to have full confidence in the leasing company’s remarketing department and a detailed understanding of the difference between book values and current market conditions.
“The profit values may not be as initially predicted and so both parties can potentially lose as well as gain.”

Fleet managers may have damage charges factored into the overall profit, but NHS Blood and Transplant (NHSBT) uses profit-sharing as an alternative to damage charges.

Its agreement with its leasing provider is based on CAP prices for the month of auction, plus a 5% uplift (which acts as a ‘cushion’ for the leasing company).

Anything that the leasing company achieves above that figure is split 50/50 between it and NHSBT. Anything below, NHSBT pays in full because it is generally down to excessive wear and tear.

The organisation still gets an independent assessor’s report and is able to compare what the profit-sharing arrangement costs versus what would have been paid in damage charges.

While individual vehicles may make a loss, NHSBT has always been in profit overall. Larry Bannon, national fleet service manager at NHSBT, points out that there is also an administration saving.

“I used to spend an inordinate amount of time going through every single invoice for damage that came through, looking at the photographs, looking at the costs, phoning them up, disputing and then coming to an agreement,” he says.

“The scheme is still working very well, the quarterly outcomes do vary, but we are still better off on an annual basis, than if we were paying end-of-contract charges.”

Option 3: Selling to the driver/general public

Selling the vehicle to the driver can work well for leasing companies and fleet operators that outright purchase as it can be a quick sale and saves on auction fees and transportation.

It can be the most profitable and efficient option for fleet operators.

“The driver will know that they are, in most cases, purchasing a well looked-after and fully-maintained vehicle,” says Steve Shaw. “Generally, the buyer will pay less through this route than by purchasing from a retailer.”

Marshall Leasing offers a facility enabling drivers, or their families, to purchase the vehicle at the end of the contract at a trade price.

Peter Cakebread, managing director of Marshall Leasing, says: “Currently, about 8-10% of vehicle disposals follow this route, and I would be happy to see this level increased substantially. I really struggle to see any disadvantage, and there really isn’t any issue for the driver’s employer, who can surely only benefit from offering the option to drivers but has no liability regarding the sale.

“After all, the driver will be interested in the purchase of the vehicle only if they feel confident in its quality.”

However,  not many drivers take up this option. Bryan Stringer says: “The majority of drivers are looking to move on to their next company car so take-up remains low at around 6-8%.”

Fleet operators could consider selling vehicles to the general public through car supermarkets or sites like Ebay although this could become time and resource consuming.

Gratte Brothers, which has a fleet of 120 cars and 80 vans, sell its vehicles to drivers or private buyers. “The driver gets first choice,” says Danny Alborough, deputy group facilities manager at Gratte Brothers. “If they don’t want it, we usually put the vehicle on display at our Stevenage office. We get a better price selling it privately than we do going through an auction house when you take transport costs and admin fees into account.

“As we’re not disposing of a huge number of vehicles, it’s easy to manage.”

Option 4: Selling to dealers

Dealer-owned leasing companies naturally de-fleet vehicles to their own group dealers but outright purchase fleets could also consider selling to them.

For SMEs, selling vehicles to a local dealer can prove more effective than paying to send vehicles to auction.

Cordek, which has a fleet of nine cars and six 7.5-tonne trucks, disposes of three or four vehicles a year, usually to a local independent dealer.

Grant Naris, finance director at Cordek, who is also responsible for the fleet, says: “Sometimes I think we should go down the auction route but I’m put off by the time and cost involved.

“I have to balance that against the ease of disposing of the vehicle to a dealer. I could hold on to the vehicle longer and possibly achieve a greater price at auction, but I have to consider the additional time to get it to that point.”

When Naris has a vehicle available for sale he produces a disposal schedule with full details on the car, such as when it was first registered, make and model, mileage, service history and specification, including any extras. He also includes a statement about the interior and exterior condition of the vehicle based on a detailed walk round.

He sends this information to his broker who gives him a rough estimate of the value.

Naris considers his broker’s estimate against the book value he is holding for the vehicle and determines what price he is prepared to sell the vehicle for.

The broker than contacts two or three dealers on Naris’s behalf to see who is offering the best price. The dealer that offers the best price will then inspect the vehicle.

“Nine times out of 10 he’ll pay for it and take it away that day,” says Naris.

Option 5: The combined approach

Fleets do not have to tie themselves to one remarketing route. Arguably, the best approach is to use a combination of methods.

As Steve Shaw points out: “Values are constantly fluctuating and what works one month might not be the best option the next.”

A remarketing strategy needs to be flexible, allowing for a quick reaction to market conditions and utilising dynamic channel management to get the right product to the best audience at the most lucrative time, according to Manheim.  
Many leasing companies use a multi-channel approach. For example, ALD uses its own online sales platform, ALD AutoSelect. Through Auto-Select, an approved network of franchise dealers and independent car retailers can view stock and decide whether to bid online or ‘buy it now’.

ALD also sells a large proportion of its stock via auctions, both physical and online.

Some fleets that outright purchase are also open to using more that one disposal method.

Selwood, which has a fleet of 100 cars, 108 vans and 56 LGVs, sells its vehicles at auction, to staff and to traders. Auctions work well because the vehicles are usually more than four years old and/or with high mileage.

Paul Green, group transport manager, says the only disadvantages with selling to staff is that they expect a discount and he has to make to sure they genuinely need it for their own private use and are not looking to sell the vehicle on at a profit.

He is open to the idea of selling his vehicles to the wider public although he hasn’t got the time “to deal with all the tyre kickers”.

“I am considering trying to sell a couple of vehicles through eBay or Auto Trader to reach a wider audience,” he says.

“I’m always being told by prospective purchasers ‘oh I can buy a better one on eBay for cheaper than that’ but when I go and look they’re always more expensive than ours.”