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CAP reveals residual value impact of ex-lease cars without MoTs

27th June 2007 Print
A policy of routinely obtaining an MoT for three-year-old ex-lease cars could increase disposal values typically by £200 - £300, according to CAP Black Book, the industry’s benchmark guide to used car values.

According to used car dealers, that is the figure they will most commonly knock off the Black Book clean market value when acquiring a three-year-old car for stock, that does not have a current MoT, from auction or via part-exchange.

The absence of an MoT does not deter the vast majority of dealers from acquiring a three year old car, but they will use it as an opportunity to ‘chip’ the price by anything up to £500.

Almost half of dealers researched say they routinely reduce the price they are prepared to pay by £200 - £300, in comparison with a car that does have a current MoT.

Despite contract clauses that often stipulate that it is the driver’s responsibility to put their car through the MoT before handing the vehicle over at the end of a three-year term, such conditions are frequently not enforced - to the cost of the lessor.

According to Black Book Valuation Relationship Manager Robert Hester, disposers are likely to get back more than they invest in the clean presentation of three-year-old ex-lease cars, including a current MoT.

Hester said: “The used car dealer’s job is to acquire the car for as little as possible and the absence of an MoT is an ideal excuse to chip the price as hard as they can.

“But the majority of three-year-old cars pass the MoT with little or no work required, at much less cost than the £200 - £300 most commonly knocked off the value by dealers looking for the cheapest possible high quality retail stock.

“This means that failure to enforce contract terms making the driver responsible for handing the car back with a full MoT, or for the lessor to arrange the MoT themselves, leads to significantly lower disposal values than necessary.”

The Black Book research also delivered a stark reminder of the need to keep all paperwork intact on disposal, revealing that almost one in three dealers will not consider purchasing an ex-lease car at all if the V5 document is missing.

Almost a quarter of dealers who are prepared to take on the responsibility of acquiring a replacement V5 ensure that they are adequately compensated for the inconvenience by paying £500 less for the vehicle than its current market value with all documentation intact.

Hester added: “It is time consuming for dealers to obtain replacement V5s and many operate a strict 60 day or shorter stocking policy so they need to turn cars around for sale as quickly as possible.

“The market is also well supplied at the moment, so they see no need to be buying that kind of inconvenience unless they are guaranteed a larger than usual profit at the end. But it should be remembered that such additional profit ultimately comes from the lessor’s pocket.”