Contract hire companies and fleets have sophisticated processes in place when it comes to acquiring vehicles, but they are one-dimensional when it comes to defleet and remarketing, which is costing them money, according to the boss of GRS.

Theo Kortland, quoting from a new research report published by the company, says too many leasing companies focus on one channel to market – the auction companies.

“There is a real opportunity for them to save a lot of money if they consider different routes to market,” he says.

Kortland, of course, has a vested interested. GRS has strong relationships with manufacturers thanks to its franchised dealer group parentage but it is keen to grow its business with leasing companies and fleets.

He puts across a compelling case.

“Some of the controllable remarketing costs are not being transparently reported and are, therefore, being left out of the wholelife cost calculation,” he says.

He cites refurbishment costs and fulfilment personnel but also points to an over-emphasis on achieving CAP residual values.

Just as important, he believes, is assessing how long it takes to sell the vehicle.

“You should measure the time from defleet to actual sale, and that can be substantial. We reckon that companies average around 45 days,”

Kortland says. “But if you manage your remarketing process more tightly by employing stricter controls, you can reduce this by 20 days – that’s achievable.”

He adds: “In some cases it will be better to achieve a lower resale value if you sell the car more quickly.

"But if you do measure against CAP, you should measure against the value at defleet. If it takes 45 days to sell, there will have been a book change.

"That’s the only way to see how time is costing you money due to depreciation.”

Traditional auction houses would argue that they are managing routes to market by moving into online auctions with a great deal of success (Fleet News, December 3) and Kortland doesn’t refute this.

But he insists: “Fleets have to look at their profile and make decisions in terms of which vehicles, and which volume of vehicles, go down which channel.

"It’s not about pitching one route against another; it’s about choosing the best for each vehicle.”

At the start of the year, contract hire business accounted for less than 10% of GRS’s volumes. It’s still below 20%, but growth is apparent.

“Within the next 18 months we want it to be 25%,” says Kortland.

His target is a mix of big and small fleets, although the FN50 is an obvious target. GRS receives regular business from four of the top 10 but is looking at another couple over the next six months.

“Ultimately we want strong relationships with 10-15 of the FN50,” Kortland says.

Once a solid foothold has been gained in this sector, his attention will begin to switch to outright purchase fleets.

“We have to better understand how they run their businesses and put together a proposal for them,” he says.

“That’s probably into mid-2010.”

This year GRS will sell just over 50,000 cars and vans across its remarketing activities – GRS, logistics and an outsourced operation for one large manufacturer.

It has seen a rise in demand for vans as businesses, particularly small fleets, shift from new to used vans up to two years old. It has been one of
the year’s success stories.

Next year will at best see slight growth on 2009. Kortland predicts the next surge in volumes will come in 2011 as the economy returns to a more stable footing.

He’s planning a number of new initiatives next year looking at routes to market, including expanding the affinity sales programme which is currently in use with one company.

But volumes will continue to be the biggest challenge over the next 12 months.

“Prices have come back and are now where we would expect them to be if you looked at the normal curve over a three-year window,” he says.

“It’s created some confidence in the marketplace but supply will continue to be under pressure.”

"We can adapt to changing market conditions"

GRS was formed 15 years ago as Greenhous Remarketing Services, the remarketing division of Shrewsbury-based Vauxhall retailer Greenhous Group.

In 2001, it rebranded as GRS and began offering its services to all
manufacturers.

Those services consist of remarketing vehicles online to a network of 6,300 franchised and independent retailers.

It offers a ’no quibble’ money-back guarantee and promises that vehicles will arrive within 48 hours of placing the order.

“GRS can touch all of the areas of remarketing, from defleet to selling the vehicle, in a menu-based offer. We aren’t reliant on any one sector,” says Kortland.

“We have a flexible model that we can adapt to changing market conditions.

“If your business model is dependent entirely on volume and you can’t adapt and diversify, you will be in a precarious position.”