What is the best way for a contract hire company to defleet its
cars? It’s a simple question but there seem to be an awful lot of
different answers.
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There are a handful of ways to sell a used car at the end of a
lease. It can be sold to the general public on a dealer’s or
lessor’s forecourt; sold to the general public through the
internet, perhaps using one of the large used vehicle sale
websites; if the lessor is manufacturer-owned it can be sold using
the manufacturer’s dealer internet site; it can be sold via an
advert in a newspaper; sold by trade sale, possibly using sealed
bids; or sold to the driver, with the sale possibly being financed
using a PCP offered by the lessor; or finally it can be sold via
auction. In real life, most lessors use a combination of these
methods.
Each of these routes to market has its advantages and
disadvantages. Clearly, a sale to an end-user retail customer
generates the highest headline price, but it can also attract the
highest costs of sale, including interest costs. An auction sale
will generate a lower price because the buyer is likely to be a
trader who needs to be able to add his profit and still come up
with a retail price that will make sense in the market; but at
least the sale will be swift. In recent years most lessors have
tried to increase the proportion of cars sold to the drivers, in
order to gain a reasonable sale price without any logistical or
auction costs, or delays in receiving payment, but only a minority
of cars can be sold in this way.
Few variables
There are very few variables at work here: The gross sale price,
costs of sale and interest costs are the only issues that need to
be considered. Leasing companies are chock-full of bright analysts
who should be able to tear through this analysis in short order and
come up with the optimal solution. As net disposal proceeds are one
of the most important determinants of lessor profitability we must
assume that every lessor has already done this analysis and come up
with the right answer. There can really be only one right answer;
if a particular solution is right for one lessor it should be right
for just about all of them. Which beings me to my key question:
When I speak to contract hire company managing directors, why do I
find such a wide variation in the methods of disposal they use, and
why do they all tell me that they are all happy with their
particular disposal method?
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By GlobalDataIs there a place here for someone to commission an undergraduate to
do an industry-wide analysis of the different disposal routes, look
at all the variables and come up with the right disposal solution
that will work for most lessors in most situations? I think so. The
potential gains for the industry as a whole will be immense.
