Car Purchase is Cheaper – But Look at Lifetime Costs

If you are looking to buy a secondhand car for your business, you might find some bargains on the market at the moment. If you are looking to sell one, you may find that its price has depreciated faster than you anticipated.

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There has been an over-supply of used cars to the car trade in recent months, according to research by CAP Automotive’s Black Book Live.

As the UK new car market has picked up (slightly), it has brought more part-exchange vehicles back into franchise dealers. That has reduced franchise dealers’ need to turn to the open market for used cars to sell on their forecourts. At the same time, they continue to send their unwanted older part-exchanges out to trade auctions.

Independent used car dealers and car supermarkets are beneficiaries of the increased supply to car auctions at a time when franchise dealers are concentrating on selling their part-exchanges, rather than competing to buy cars in.

At the same time, the increase in the size and performance of online secondhand car platforms is taking costs out of car sales and giving customers on sites such as Autotrader and motors.co.uk an overview of availability and prices that was never possible before. In fact, Autotrader will publish its last paper-based prices guide at the end of June 2013, as it moves completely online.

According to Derren Martin, Black Book Live senior editor, motorists are enjoying the best new car deals since CAP began researching the market in 1979 and the growth in specialist used car supermarkets especially means greater choice than ever before.

The purchase price should only be the starting point of your assessment, particularly if you intend to make heavy use of the vehicle. Back in February, Fleetworld, a magazine for managers of car fleets, asked some of the leading companies in the sector to make some predictions on the likely cost of motoring during 2013. They were asked to score cost trends by 1 to 5, where 1 meant that costs are likely to drop considerably below those in 2012 and 5 where costs are likely to rise significantly higher.

The likelihood that taxation would increase in 2013 scored an average 3.8. Purchasing a more environmentally efficient vehicle may not save you. Chancellor George Osborne is threatening to remove much of the tax advantage that more environmentally efficient vehicles are given over their fuel-guzzling competitors.

The chances that fuel prices would increase was scored by the industry professionals at 4.1. ‘The decision to postpone the introduction of the 3p fuel surcharge is likely to be a temporary reprieve and in the medium to long-term fuel prices will rise, according to Chris Chandler, principal consultant at Lex Autolease.

“Understanding the costs of fuel and how it should impact on vehicle choice is still often missed completely. We simply cannot understand why every organisation hasn’t moved to a wholelife cost model to determine their optimum fleet car schemes. I’m also still baffled by the number of companies that offer a carte blanche free fuel policy,” says Nick Hardy, sales and marketing director, Ogilvie Fleet

Perhaps you should not assume that buying is the only practical option for you – particularly if your business is located in a city centre.

Short-term vehicle rental companies could be at the vanguard of a radical change in vehicle mobility, according to Roddy Graham, the Commercial Director at Leasedrive Group. “In urban areas, constrained by lack of adequate parking, regular traffic jams and the high cost of vehicle ownership, town dwellers could turn to vehicle rental in droves as more rental companies offer rental by the hour and their technologies enable optimal vehicle utilisation by real-time vehicle positioning.”

Mark Thompson, head of operations at Alliance Asset Management, agrees. Innovations may well see the development of car club style rental by the hour products and hybrid or electric vehicles becoming more widely available.

“One thing’s for sure though,” says Roddy Graham, “rental rates will rise.”

 

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