26 Jan 15

Tips for the de-fleeting exercise

Is there a formula for de-fleeting success? Well, you could use a "continuous-time geometric Brownian motion" for calculating "the residual value process of a used vehicle." That's what Chuan-Hsiang Han, Jingren Shi and Suzhou Huang proposed a decade ago when they wrote an a paper titled "Inferring the Economic Preference of a Rental Vehicle Company by Modeling its De-fleeting Process." It can be found on the website of the National Tsing Hua University in Taiwan.

The less theoretical approach is to talk to those involved in the industry. We spoke to Jean Thomas of Macadam, Ian Hucker of Opel and Wolfgang E. Reinhold of LeasePlan to get the respective Remarketing specialist, OEM and Lessor views on de-fleeting best practises. Here's what they had to say.

The Lessor: Wolfgang E. Reinhold, Senior Vice-President Car Remarketing, Operations & Procurement, LeasePlan
: "The re-marketing business is booming. There are simply not enough used cars in Europe and 2015 looks like it's going to be a very good year. The ruble is not a problem as the Russian market was closed due to high import duties and the rise of the Swiss franc is hurting only Switzerland."

Best practice:
Have the car assessed by a reputable company and sell it for the best price you can get
- Tell the buyer the real story and don't waste time trying to make an ugly-looking car look nice
- My rule is: You get it, you have it and you have to sell it, even if the car has yellow dots with purple stripes
- The only exception to this rule involves relatively new cars with low mileage. Then it makes sense to use SMART Repair
- Wipe the navigation system to remove the last destination the driver entered

The Specialist: Jean Thomas, CEO Macadam Europe
Overview: "We specialize in End-of-Contract inspections so we check the vehicle at the de-fleet and evaluate it in terms of what is acceptable and not acceptable regarding damages. Because we inspect around 350,000 cars a year, we have quite a good sense of how the market is doing at any given time."

Best practice: 
- Get an independent inspection so that you understand the condition of the vehicle
- Know the value of the car and know the price at which you should be able to sell it
- List the vehicle on specialized sales channels such as CarsOnTheWeb and Autorola
- Don't limit yourself to one channel or to one offer
- Compare prices and remember: It's often better to take a small loss now than wait to take a bigger loss later and pay for all the holding costs

The OEM: Ian Hucker, Director European Fleet, Opel
: "It's very easy to in-fleet a lot of cars, anyone can do that. The trick is, though, when they all come back, to try and get the best residual value for the products on their return. We're very careful to manage this as a proportion of our overall business to make sure we've got the right amount of vehicles coming through to meet the demand without over-cooking the market. It's all about residual value management at the end of the day."

Best practice: Vehicles for de-fleeting at Opel, regardless of their source, follow one route to market: They are entered into the company system, prepared to a certain standard and listed on a common European platform so that the dealer network can see them and purchase them.



National Tsing Hua University: /