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Confidence booster
Page 52
Page 53
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The banks, keen to lend when times are great but not so eager when times are tough, hold in their hands the imminent future of AutoMarque, a new-start fleet sourcing and disposal company.
Paul Owens, its managing director, set up the company last October. "The potential to grow is massive; it's quicker than I thought. Having done some work for one manufacturer, it has given me some more, and there is even talk of other companies wanting to jump on board. I'm excited by it, but I'm being held back by the banks, "Like any small business, getting funding is difficult," he continues, "I am not asking for a huge loan, it's more an overdraft facility. Some days you might be out buying stock and you might be overdrawn by X, but by the very next day, by virtue that everybody pays by telegraphic transfer, you'll be in credit by Y."
An overdraft, he adds, would give him the facility to act when opportunities arise. "Having demonstrated to the banks that the model works, and been successfully trading since October 2008, there are healthy margins," Owens states.
Of course, you could question Owens' timing, given the current economic climate, for embarking on a new venture, but he believes there is a gap in the market.
He explains: "I have always worked for large companies; there are plenty of smaller companies who don't necessarily have a structured approach to disposing of their vehicles. I don't mean to say they don't have an idea of it, I think they get slightly nervous about doing it themselves. What I do is facilitate that process for them by taking their vehicles and disposing of them, either for a retainer or through communication with the company and telling them I can achieve this or that price, and it leaves them in control of whether or not they sell."
Auctions are ideal
Owens' background is car and light CV disposal —10 years at Enterprise Rent-A-Car looking after vehicle disposal, then a year at Accident Exchange as fleet director, before 30 months with Helphire as group fleet disposal manager.
Strong disposal structures at large companies include the auctions. "The best way to move CVs is through the auctions, because commercials and the life they have, it's better to sell them seen, rather than from a sheet of paper," he says. "It doesn't mean CVs are going to be in bad condition, it just means buyers can actually see the van."
Around 15% of AutoMarque's work comprises of disposing of vans, but is likely to change. "The commercial sector will grow because I am working and building relationships with fleet companies who have an inverse proportion of light CVs versus fleet cars," Owens says. "One client has 80% vans and 20% cars, and I am helping them to dispose of their cars; they are fast approaching the time to dispose of their vans."
Manufacturer pressure
Fleet companies that held onto stock created a minirevival in the used market and pushed up residuals. As a result, Owens has found securing stock more difficult, and some firms are still mindful of the prevailing conditions.
"I have found some companies, when buying stock in a wholesale aspect, have been very jittery and slow to pay me, or insistent that I deliver the vehicles before they pay," he reveals. "They constantly quote: 'We have had our fingers burnt and don't want that again.' These tend to be companies that I am establishing relationships with."
Plummeting sales and price drops in 2008 have given way to a renewed buying confidence in 2009, which has spilled over from the car market.A knock-on effect of this has seen some prices firming up. But fleet companies who held on to stock for six months to arrest spiralling depreciation will be exposed to aggressive marketing from manufacturers who are applying pressure through franchised dealers to convert targets. It will lead to some major defleeting and an increased supply.
"You will see a slightly accelerated depreciation of used vehicles in mid-2009," Owens reckons. "The margins I achieve are well above my expectations, bull don't think they'll last. But pre-Christmas trading was healthy in terms of volume, just with smaller margins. I'd be happy with that since my business model is built on smaller margins." •