11:59 pm, February 28, 2011
DERIVATIVE uplifts are a more cost-effective way of enjoying higher specs than loading a car with options.
That’s the view of CAP, who says that optional extras typically retain no more than around 20 per cent of their cost new, while a derivative uplift can retain around 90 per cent of the original additional expenditure.
As an example, CAP cites says three years ago the combined cost of adding cruise control, rear parking sensors, electro-chromic rear view mirror, automatic air conditioning, multi-function steering wheel, interior lights pack and different style alloy wheels to a BMW 318d ES was £1,520.
In today’s market, at 60,000 miles, the combined residual value of those features is £300, or 20 per cent of the original cost new.
In contrast the cost of upgrading to the SE variant, which has the same list of features as standard, was £1,030, of which £925 – or 90 per cent – has been retained today, at 60,000 miles.
According to CAP’s Mark Norman, a better understanding of the true value of options helps fleets make more cost-effective vehicle purchase choices and they can also benefit by placing more emphasis on the options present on their stock at remarketing time.
Addressing the British Vehicle Rental & Leasing Association, Mark Norman offered fleets four golden rules to ensure they make the most cost effective choices around the specification levels of their vehicles.
They were: if possible choose derivative uplifts rather than options, actively market options at disposal, assume most options will have zero value in the open used market, and there’s no such thing as an ‘essential option’.
Norman said: ‘Options are now too complicated to expect future buyers to understand the difference between standard an optional features.
‘Expecting future buyers to be aware of what came as standard and what may have been an expensive extra is clearly unrealistic and you can be certain that if they don’t know the origin of a feature, they certainly won’t pay any more for it.
‘That is why it is wise to specifically market the optional features on every vehicle when it is remarketed.’
According to Black Book, the benchmark guide to current used values, many options retain so little of their cost new that it is wise to assume zero value in the used market. Factory-fitted satellite navigation, for example, can retain as little as 11 per cent of its original cost after three years.
Mark Norman added: ‘The trade is also fond of saying some options are ‘essential’ but this tends to be true only in cases where you want to sell back into the franchise dealer network.
‘Values in the used market, as reported in Black Book, show that in many cases the residual value penalty for the absence of a feature is actually less than the cost of originally purchasing it new.’
