Some cars depreciate much faster than others, so getting the choice right at purchase could save employers a fortune, says Curtis Hutchinson
There is little on an organisation’s books that will depreciate more than poorly-selected company cars. While all new cars depreciate immediately, some lose their values much faster and at a heavier rate than others, so getting the choice right in the first place will save money.
The golden rule of car acquisition is to consider the vehicle’s resale value before purchase. Many factors come into play ranging from the badge on the bonnet and the correct shade of metallic paint, to the seat fabrics and the right selection of electronic bells and whistles. Colin Tourick, an independent fleet consultant, says: “The best time to think about the disposal value of a car is when you buy it.”
A key starting point is choosing the right colour and Tourick advises considering the more expensive metallic option. “Don’t choose unpopular paint colours such as white, green, yellow and brown. They will not sell easily. Also, avoid this year’s fashion colours. They will look their age and will not fetch the best price. Go for silver, black, grey, blue or red,” he says.
This is particularly relevant when sourcing cars for senior management in the prestige sector, which is dominated by the likes of the BMW 5 Series and Mercedes E-class. The message here is simple: paint it black.
Glass’s Motoring Guide, the motor trade used car value guide, has found the premium currently paid for metallic or solid black painted cars is £500 more than for any other colour on selected used vehicles after one year and 12,000 miles.
Richard Crosthwaite, prestige car editor at EurotaxGlass’s, explains: “Forecourt asking prices for prestige models in black are typically several hundred pounds higher and exceptional retail demand means customers are much less able to negotiate a discount. We are consequently seeing a significant difference in transaction prices for black prestige cars compared with those finished in the next most popular colours.”
So colour and specification are important matters for all company car purchases. Malcolm Fryer, commercial director at First Fleet, says: “Fleets can limit their exposure to the residual value vagaries of the used car market by ensuring they make the right new car buying decision based on: model, colour and trim.
“A hatchback model is far more desirable in the used car market than a saloon equivalent unless it is an executive car. Making the wrong choice will cost money upon disposal.”
Having chosen the most financially-viable colour/model/trim combination, ensuring company cars are fitted with the right equipment to reap residual value dividends is the next issue.
“Broadly speaking, factory-fit options that are visible, such as alloy wheels, satellite navigation systems, spoilers and air conditioning are all must-haves. These will help a company maximise a vehicle’s residual value at disposal,” says Fryer.
He adds it is equally important that executive cars are always equipped with automatic gearboxes. Audio system upgrades are only likely to see a nominal financial return at disposal so best practice advice is to keep the standard fitted system.
When it comes to other creature comforts, Tourick advises employers to standardise on air conditioning but adds that the returns on satellite navigation systems are minimal. While second-hand buyers like them, they are often not prepared to pay a premium to have them.
Employers should also avoid customising interiors to accommodate gadgets. “Don’t allow holes to be drilled into the dashboard for a mobile phone cradle. They cost money to fill [and] will encourage a buyer to pay less for the car. The kits that attach to air vents work just as well,” he explains.
One final consideration is the importance of leather trim across a growing number of cars. Ken Trinder, business development manager of automotive technology provider Epyx, explains: “Leather is increasingly important in management cars. I know of a BMW 530d company car which recently lost £6,000 on its resale value simply because it didn’t have leather trim.”
Getting the right choice of company cars is easy if you question the appeal to the second-hand market. Getting it wrong is avoidable and unnecessarily expensive.
If you read nothing else read this…
- Consider the vehicle’s resale value before purchase.
- Resale values are dependent on factors ranging from the cars’ brand, paint colour, and trim level to the condition and mileage of the vehicle. Satellite navigation systems, however, have little resale value.
- Basic must-haves include desirable metallic paint colours, such as silver, grey, blue, or solid black; air conditioning; a CD player and alloy wheels.
- In executive and prestige models, leather seats and automatic gearboxes can repay handsome dividends.
- Ensure mobile phone or hands-free systems are fitted professionally, make sure the wiring is neatly concealed, and avoid holes being drilled in the dashboard.