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Avis Fleet Services today launched a new retail division to offer the public quality used vehicles coming off fleets under Avis management. The vehicles will trade at an average 25% lower than their market value.
The new operation, called the Avis Trade and Auction Centre, will complement Avis’s existing used car operation Car Mall by providing a low-cost value proposition tailored to the currently depressed vehicle market. As its name implies, it will, from time to time, hold public auctions.
Avis Fleet Service chief executive Laurence Savage says the new operation will retail a wide range of very affordable transport options from light and medium commercial vehicles to passenger cars. “We have a complete track record of all the vehicles and who owned them as well as full maintenance records, so our customers can be confident that they are buying a well-looked after car,” says Savage. All vehicles undergo a comprehensive AA check and the report is pinned to the vehicle for the customer to inspect, ensuring a completely honest and transparent transaction. Finance facilities as well as a number of warranty options are also available.
Whereas Car Mall is positioned at the upper end of the used car market, the Avis Trade and Auction Centre is focused on customers whose primary concern is affordability. Savage says the new operation was established as a result of the current economic climate in which high inflation and interest rates were taking their toll on the vehicle market.
The latest figures from the National Association of Automobile Manufacturers of South Africa (NAAMSA) show that new passenger car sales declined by 25% in the third quarter of 2008, compared to 2007. In addition, repossessions are running at 6 000 a month, according to Wesbank.
“Fleet management, our core business, is doing exceptionally well with companies looking to relieve pressure on their balance sheets by outsourcing this part of their operations,” says Savage. “This has increased the number of vehicles under our management and we therefore needed to expand our resale network. We saw a gap in the market for reasonable quality second-hand vehicles at wholesale prices,” he says.
The proportion of new vehicles sold to that of used vehicles has always been a good indicator of the economic climate. At the peak of a cycle, new cars outsell second hand ones by two to one, but during a trough that ratio is reversed. “Currently, the ratio stands at 42% new vehicles to 58% for used vehicles. That ratio, judging by historic trends, means that there is still a long way to go before we reach the peak in used car sales, which also means we have yet to reach the bottom of the economic decline,” he says.
The last cycle took five years from 2002 to 2007. However, Savage predicts that this cycle will take a lot longer, given the unprecedented global liquidity crisis, the volatility of the rand, the 12-15% predicted new vehicle inflation next year and the large number of repossessed vehicle in the market. “We expect new vehicle sales to start recovering again only in the first quarter of 2010,” he says.
Business News Sector Tags: Motoring|