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Make the correct choice of company car

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All those attractive options look so inviting, so necessary (and soexpensive) when you start buying business cars.

But you could be throwing away money the moment you pay for your new business car and those delightful extra options – if you haven't chosen the correct model.

Apparently, choosing a car and then loading it up with options is not always the best course of action if you want to retain value in the business car when it is time to remarket it.

Paying more for a model upgrade that includes the specification you want is more cost effective in the long run.

According to CAP, the used car pricing guide, optional extras typically retain no more than around 20% of their cost new while a derivative uplift can retain around 90% of the original additional expenditure.

CAP gives this example. 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% 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% – has been retained today, at 60,000 miles.

According to CAP, a better understanding of the true value of options can help businesses make more cost-effective company car purchase choices.

In addition, SMEs can also benefit by placing more emphasis on the options present on their business cars when it's time to sell them on.

CAP's Mark Norman believes there are four golden rules SMEs who buy business cars should follow to ensure they make the most cost effective choices around the specification levels of their vehicles.

  • If possible choose derivative uplifts rather than options
  • When you come to sell the car, actively market the options
  • Assume most options will have zero value in the open used market
  • There’s no such thing as an 'essential option'

"Options are now too complicated to expect future buyers to understand the difference between standard an optional features," Mark Norman adds.

"For example, on a BMW 318d ES there are 74 cost options, four no-cost options, 12 colours, 11 interior trim options and five option packs available.

“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."

It's useful advice – so the next business car you buy, have a look at what you are buying and if it's the correct model. It could be saving you pounds in the long run.

Author Ralph Morton is editor & publisher of Business Car Manager magazine (www.businesscarmanager.co.uk). He was named Business Writer of the Year in the Guild of Motoring Writers Awards and can be contacted at editor@businesscarmanager.co.uk

 

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