There are many factors that shape the used motor vehicle market. Recently, Hertz Global Holdings reported third-quarter profits that badly trailed analysts' estimates and cut its annual earnings forecast. Some expected this be explained by the effect of Uber, Lyft and similar ride-sharing services on overall demand. While they did see minimal decreases in rental rates and utilisation rates, their US investor relations report primarily cited the impact of declining residual values for compact and mid-sized vehicles.

At Pickles we remarket over 100,000 vehicles in a given year, including for rental vehicle outlets. This puts us in a unique position to understand influences on residual value, advise on fleet purchases that should result in maximum residuals based on market trends, and ultimately deliver a higher return when fleets are sold.

Depreciation is the largest cost in the rental industry and there are multiple ways to minimize it. On the buying side, it's important to consider residuals during fleet acquisition. As consumer preferences change, residual values are often negatively impacted. This might be at the range, make or model level. For example, we've seen a swing in local markets away from compact vehicles and towards mid-size SUVs, resulting in increasing residual values for the latter group and declining residual values for the former. In addition to ranges, there are often discernible market trends in makes and models where we see data that can assist our clients in buying within those ranges.

And when selling, there are additional factors that can impact return beyond the immediate vehicle sale price. These can include:

* Size of market: At Pickles we attract public buyers and offer both fixed price and auction resale options. This increases demand by broadening the pool of potential buyers versus marketing only to a fixed set of dealers, allowing for more liquidity in the remarketing process and higher return.

* Speed to market: When a vehicle is removed from service, any lag time between its removal and its disposition can result in increased costs -- storage, maintenance, impacts to free cash flow. With AutoCheck we can catalogue and market cars before they are removed from the fleet, offer cars to a larger market and reduce this lag time, reducing the window between removal from service and disposition of the asset to 48 hours.

* Operating expenses from remarketing processes: Leveraging a professional management team like Pickles for fleet disposition ensures the expertise that delivers a maximum return while eliminating the overhead required for an in-house remarketing team. We can reduce the costs of fleet operations to a simple, easy-to-forecast operational cost.

In conclusion, headlines like these from global holdings companies should be not cause for panic but rather for evaluation of all processes in the vehicle lifecycle that can affect return, with an eye to delivering the maximum return on investment through strategic buying and efficient liquidation. 

For further enquiries, contact customer.service@pickles.com.au

15 Nov