Anyone would be forgiven for assuming that a vehicle with an increased level of specification over that offered as standard will be more desirable on the used market – and therefore command a higher price. Whilst this is largely true for passenger cars, when it comes to commercial vehicles the situation is far from black and white.

‘Customisation’ of a vehicle can severely restrict the size of the market when it comes to disposal. Something that is a requirement to the first user may be of no use to a second owner, and indeed its presence may be undesirable.  A good example of this is an external glass frail. Essential to a glazier at an initial cost of around £2000, leaving the equipment on means that the used van trader, unless he is buying to order has to find a customer who needs a vehicle equipped in this way (ie, another glazier!). The other alternative is to remove the rack but many are bolted to the side of the vehicle and unsightly, rusty holes and stress to the panels are left behind. Refrigerated vans can also perform very poorly on resale – again, although the conversion cost is considerable the size of the second-hand market is small and the trade are unlikely to buy on a speculative basis.

What is less clear is the effect of ‘uplifts’ in manufacturer’s specification on residual values. We are talking here typically of things like the combination of wheelbase and roof heights on panel vans. Careful study of research data over a lengthy period, together with trade sentiment has confirmed our suspicion that certain models are very sensitive to the wrong combination. Whilst a manufacturer will charge a premium for a medium or high roof on a short wheelbase panel van, for various reasons (eg, access for a roof rack, entry restrictions for car parks and garages etc) these are not proving to be as popular a choice on the second user market. When it comes to its long wheelbase brother however, the reverse is true – generally these are specified to carry volume in addition to weight and roof height is vital for maximising load capacity (as well as the facility for standing room for the driver when loading and unloading).  Another example is unorthodox door arrangements. Twin side loading doors and a tailgate on a panel van may well prove to be less desirable than a single left side loading door and traditional twin rear doors.

When setting future residual values, risk managers do need to take a step back and momentarily take any additional capital cost out of the equation. Just how many used van buyers will want a vehicle of that specification? How likely is it that a trader will be willing to stock it? Is there likely to be additional value due to the spec and the fact that demand for something ‘non standard’could be higher? Or do we need to take a reality check and assume that resale will be more challenging than a standard van and value with caution?

ends

By Tim Cattlin, Monitor Editor - Commercial Vehicles

Note: CAP blog entries represent the personal viewpoints of CAP staff. Business decisions should only be made on the basis of information published in CAP’s commercial products and not on the basis of information or opinion published on the CAP blog. For further information about CAP products call us on 0113 223 2111.