A new web site from Tesco selling second-hand cars could provide leasing companies with a cheaper alternative to auctions when selling old models, an expert has claimed.
Vehicle leasing companies have been hit hard by the recession after a slump in residual values impacted on companies’ profitability.
Tesco’s new site, tescocars.com, offers thousands of used vehicles that can be collected or delivered to customers’ homes. Sellers can choose three different charges for using the site – commission, profit share or sell and return. Each vehicle sold on the site must pass an RAC inspection.
Andy Higginson, Tesco’s chief executive of retailing services, said that the site had been designed as an alternative to second-hand car forecourts.
“By supplying directly to customers, there is no middle man, no expensive showroom and no salespeople on commission,” he said. “Buyers can be sure they are getting the best value out there.”
Graham Hill, CEO of GHA Finance, a broker for vehicle leasing, who was an advisor to the Tesco car site, said second-hand car sites can provide a better return than auctions because sales are direct to consumers.
“Traders and dealers are removed from the equation leaving buyers with cheaper than forecourt prices while still returning more to the lessor,” he said.
One early customer for the Tesco services is Motability Operations, the not-for-profit company which provides contract hire lease vehicles to over 570,000 disabled people through the Motability Scheme.
But despite the ubiquity of online retailing, used-car web sites have so far failed to get out of first gear. Last month, Autoquake, the UK’s best-known online used car retailer, went into administration.
One challenge faced by online car retailers is having the capacity to store thousands of used cars. Each year, around one million used vehicles from the fleet leasing sector come into the UK market, according to fleet and vehicle registration data.
Tony Gannon, communications director of British Car Auctions, said: “The current business models of consumers buying [cars] through dealerships and leasing and fleet operators remarketing through auctions and other channels is tried and tested and successful.”