Fleet managers are responsible for controlling all expenses associated with operating a fleet of vehicles in their lifetime, including initial purchase costs, ongoing maintenance and repairs, fuel costs, taxes, and insurance. This is where the resale value of vehicles at trade-in comes into play because it is the monetary worth a car holds after a period of ownership.
If a vehicle retains a higher percentage of its original value, it means less of the upfront purchase price is lost to depreciation. The higher resale price partially recovers the initial investment, thereby lowering the net depreciation expense and reducing the total cost of ownership that must be covered through operational budgets.
Read on to understand the several factors that influence a vehicle's resale value.
Buyers tend to have more confidence in brands that have established a reputation for reliability and quality over many years. This increased consumer confidence creates a higher demand for used vehicles bearing these trusted brands.
When demand is high, such vehicles command a price premium in the used marketplace compared to car models lacking the same level of name recognition or positive perception. Fleet managers should, therefore, give preference to nameplates known to retain substantial resale worth down the road to maximize the future resale value expected at trade-in or sale.
Potential buyers closely inspect the appearance and condition when considering used vehicles. Visible signs of wear, like cracks, dents or rust, negatively impact the price buyers are willing to offer. Proper maintenance of fleet vehicles will keep these issues to a minimum.
Regular washing also keeps exteriors looking their best. Maintain detailed service records, as it further demonstrates to potential buyers that a car has been well-cared for. This instills confidence and supports a higher resale value.
The higher the mileage, the less desirable the vehicle will be to potential buyers and the lower the resale price it can command. A car with over 100,000 miles on it, for example, will generally sell for significantly less than the same model with only 50,000 miles. This is because more miles mean the vehicle is closer to needing substantial repairs or component replacements.
A transmission, for instance, may only last 150,000–200,000 miles on average. Therefore, a vehicle with 100,000 miles is nearing the point where it will likely need a new transmission, which is a costly repair. Most potential buyers know this and are unwilling to pay as much for a vehicle that will soon need such a major service.
The impact of high mileage on value also depends on the type of car. Micro fleet vehicles that are operated more for commuting purposes, like sedans, tend to lose value with high mileage since they're driven many miles yearly. Fleet managers must track and control accumulated miles to avoid undue vehicle wear. Strategies like reassigning vehicles to tasks requiring fewer driving miles effectively preserve a vehicle's resale worth with time.
Fleet vehicles need regularly scheduled maintenance to run safely and efficiently in the long-term. Neglecting routine care leads to premature component failure and costly repairs down the road. When you maintain detailed service records, you reassure buyers that issues have been properly addressed, should they arise. Consider identifying and fixing potential problems early on to avoid depreciating resale value later at trade-in.
Unnecessary acceleration, excessive idling, and aggressive braking strain a vehicle's engine/systems enough to shorten its lifespan—drivers should avoid these practices whenever possible. Make prompt repairs of fluid leaks or strange noises to prevent minor problems from becoming expensive replacements. In addition, address warranty and recall work quickly to protect the resale value at trade-in.
Wilmar Inc. offers full-service fleet management solutions such as tracking vehicle usage, scheduling maintenance, handling repairs, and record-keeping, hence optimizing car resale value. Contact us today to discuss how our comprehensive fleet management services can help lower your total cost of ownership.