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Auctioneers are fond of saying that auctions are the best barometer of the real value of a vehicle,. The truth of this adage was recently borne out when CMA received a number of part-exchange vehicles for auctioning. They actually sold for up to .£3,000 more than the price at which the motor distributor had valued them.
On this occasion, he profited from his ignorance, but he could just as easily have made a hefty loss.
Part-exchanges
We know of plenty of examples where partexchange vehicles have been sold on from one dealer to another, who has promptly capitalised on the first dealer's ignorance at the forecourt or at auction. This is why it is important for a trader or fleet operator to correctly value the vehicles he has for sale.
To take the distributor or dealer first: if he is offered a truck in part-exchange for a new or nearly new model which he is selling, then an incorrect valuation can drastically reduce his profit, lose him the sale, or even ensure that he makes a loss on the deal.
In the first instance, an over-valuation means that the loss he makes on the partexchange eats into the profit he makes on his own goods. Sometimes his over-valuation is so fantastic that it wipes out his profit entirely, particularly if he cannot sell the partexchange for anything but scrap.
We've come across a number of examples recently of part-exchanges which have been in stock for more than two years, not only losing value all the time, but also costing the distributors for storage, advertising, maintenance and, of course, the lost opportunity of selling other vehicles in their place.
In these instances the distributors would be better off cutting their losses, selling their vehicles at auction and ploughing the money back into the business.
An under-valuation, on the other hand, often leads a dealer's customer to try elsewhere. A correct valuation from another distributor will then lead to a quick deal and a profitable exercise—for a competitor.
7 by Peter Harrison
Peter Harrison is commercial manager of CMA Group, which holds auctions of LGVs, plant and MoD equipment at Leeds, Gloucester and Middlesbrough.