All the above of course requires Motability to individually manage (micro-manage) each returned vehicle and the realisation each individual vehicle makes – which they don’t. Nor could they really be expected to do it for circa 3000 vehicles per week (based on their stated buying of 200,000 vehicles per annum on a reasonably static customer base). They are all aggregated. Rather than individually managing Fred Blog’s returned Ford Focus (very low mileage VGC etc), it is sent to auction as part of a batch (if the dealers don’t want first dibs via the mfl Direct scheme). This auction batch will have an overall expected price. So, whilst Fred Blogg’s returned Focus may exceed the expected price at auction, Joe Smith’s 60.000 mile Focus may not etc etc. However, to add in a further illustration, what if it is a quiet auction day (lots of stock but few buyers) when Fred’s Focus is sold and only sells for a minimum price. Yet, Joe’s crap Focus is sold the following day with loads of buyers and less stock present and exceeds its expected price? This is why returns are aggregated. It is the way big businesses do it to even out variables (thus cash flow) and keep costs down by not micro-managing each individual vehicle. In Motability’s evolutionary circle, it also equates to the GCB also being aggregated (provided the vehicle meets the minimum condition based on the dealership’s ‘ticky box’ report). It doesn’t matter if Fred’s vehicle way exceeds the minimum condition necessary to generate the GCB and Joe’s simply meets the minimum condition. All get paid the same GCB. For Motability to individually micro-manage each returned vehicle at such volumes would cost Motability (and ultimately the customer) a fortune.
Thank you BG for your perfectly simplified comment
Really Kezo, is that your definition of a simplified comment. Firstly Motability assesses each car (micro manage as Big Dave say’s) of course they do they have to put a price on each car initially for their website, and generally the best examples with the lowest milage, best condition and especially the ones loaded with expensive optional extras are swept up by dealers, I know my last two were provisionally sold to dealers before I had even handed them back. They do not put out the rest in auctions as job lots, they are there as individual sales and it is not relevant to my suggestion as to whether the auction had a good day or a bad day, The only relevant thing is that the car’s AP was worked out on projected residual values and if Motability get back in excess of that figure (which they mostly do, hence the yearly £1 million+ profit) which is referred to as lease equity, because the car made more based on whatever. Then surely a small part of that excess profit should be returned to the customer. As I said with Motability getting the book price + 20%, plus 75% of the rest and the customer getting a 25% of the excess after the book price and the untouched 20% profit. Motability Operations were set up to trade in cars and are well capable of coping with my proposed set up. Why can’t Motability do what some leasing companies do and let the customer know from the start what the car is going to be worth at the end of the lease, simply because they know it is likely to be more than the projected residual forecast that they built into the AP. Motability Operations were never set up to make over a Million profit a year and to have over a Billion profit in the bank, whilst their customers are struggling to meet high APs, to meet their disability needs.
The main dealer that the vehicle was returned to usually gets the first option to buy it. Motabilty in the majority of cases command a price above what most main dealers are willing to pay. As you have said yourself Motability want book price +20%. The reality is what they want and what a dealer wants to pay are two different things. I mean what dealer will pay 20% above book price!
Should the main dealer not want to buy the vehicle for whatever reason, the car will be collected by Motability, refurbished, photographed, and then added to an online database, that is open to other Motability dealers. The vehicle is then open to select non franchised dealers, who specialise in the sale of used Motabilty vhicles. A larger percentage are sold to this type of dealer than a Motability maindealer.
The majority of vehicles are sent by Motability to a regional or online auction, mainly BCA. BCA have exclusive Motability sales which are held almost every week, where vehicles can be bid on and bought by independent traders along with members of the public, who hold a minimum of a MyBCA Silver card.
I can assure you, as I have attended one of these auctions, that Motability cars are there as job lots of many and not indvidualy!
As I said in a previous comment. Not all optional extra’s command an higher price when and return a fraction of their initial cost, when the vehicle is traded into a dealer. The dealer may depending on the options inflate the forcourt asking price slighly above an equivulent standard spec car. Even then the value would be peanuts to what the initial owner payed for them in the first place.
We all complain to some degree about the money Motability make and send to charity. However, try leasing a vehicle, even with 5,000 mileage limit, with same inclusive package as Motability gives, for anywhere near of what it costs to have a vehicle on Motability. OK you might get a Dacia Sandero or something similar.
“Why can’t Motability do what other leasing companies do and let the customer know what the car is going to be worth at the end of the lease”. Name me a leasing company that actually does that or even lets you buy the vehicle at the end. Unless you are talking about PCP deals, where you pay a balloon payment at the end of the the term or trade in for new car using the guaranteed future value as a payment towards the deposit or walk away. This is a different type of leasing, than leasing a vehicle through Motability or any other company that leasing vehicles.