Why your SUVs need a tow bar
A car's Residual Value is determined by more than just bumps and scratches. Its options and extras can also push its RV up (or down). Here's why that's important – and how to make it work for your fleet.
Few fleet cars are acquired 'naked'. Drivers use the margin on their vehicle budget to customise them with favourite options and extras: for more comfort, better entertainment or increased functionality – or just because it looks nice. But fleets, beware! Those specifications can have a significant impact on your vehicles' RVs. And that ultimately translates to your Total Cost of Ownership.
The matrix of variables determining the RV outcome is quite complex. Vehicle segment and age, RV amount, country preference, changing fashions and type of equipment all play a role. One typical risk is under-specifying, says Maarten Baljet, Director of Business Development at RV specialists Baehr & Fess.
“Say, you're trying to sell a three-year-old BMW 7 Series, without a sliding roof. Because this car has a high RV in absolute terms, potential buyers are very picky; and the sliding roof is a very attractive option. Your 7 Series without sliding roof will sell at a lot less than another one which does have one.”
Another example? Tow bars. Perhaps they don't make sense on a Smart – where a tow bar could actually lower RV - but on an SUV from a certain size, they're pretty much expected. So a used SUV without one will be a harder sell. “Some equipment can be installed after the vehicle's first life, to increase RV. Tow bars are a good example. Sliding roofs in a high-end vehicle aren't,” says Baljet.
But there are other ways to maximise the return on options and extras. “For example, Xenon or LED headlights are clearly more popular in some countries, whereas in others, the used-car price premium will be limited. The same goes for cars with heated seats.”
Many RV projections are based on just the vehicle. In order to get a complete picture, the equipment needs to be included into the calculation. The difference can be significant. But determining that value requires expert insight in the relevance of certain details: “Some equipment is brand-specific, which could increase its value. A general rule is to shy away from exotic colours, as they will harm RVs – but a Jaguar in racing green can be very attractive.”
Some options and extras are no-brainers, however: “Airconditioning is always a good idea, as are elements that enhance a car's comfort level or its optics, like high-quality wheel rims. It's also a good idea to look at your vehicle segment – tow bars for SUVs, etcetera. And some country-specific preferences are easy too: seat heating will be popular in Sweden, less so in Cyprus.”
Options and extras: basic rules
While a company like Baehr & Fess takes a microscopic view on the impact of options and extras on RVs, most fleets can suffice with following basic rules:
- Make sure the cars you acquire are attractive for resale; tailor the list of allows options and extras accordingly.
- Don't allow over-specification. Costly options or extras are hard to earn back when reselling the car.
- Don't enforce under-specification either. Saving money on desirable options and extras will harm RVs.