Changing conditions: Financial impact of outdated forecast models
Residual values shift quickly, sometimes by thousands of pounds over a typical contract. For fleet and leasing companies, the ability to manage that change is the difference between a profit and a loss on every vehicle.
New technologies, regulations and user requirements have made traditional forecasting patterns unreliable, making de-fleeting planning difficult. Decisions based on outdated assumptions now carry a far greater financial risk. The solution is daily data.
Volatility causes pricing headaches
Market volatility makes traditional value forecasting difficult, with the slightest market, economic or geopolitical event likely to trigger a change in demand, which could add, or wipe, significant value from a car.
Electric vehicle upgrades leaves old models exposed
EV technology moves fast, more than any other powertrain category and that directly impacts on residual values. New battery technologies, faster charging capabilities and increasing demand all affect values. Cars that fall behind the latest technology are increasingly exposed to dramatic residual changes.
Early-generation EVs with smaller batteries and slower charging capability are now competing against newer models offering significantly longer range and shorter charging times, often at increasingly competitive list prices. This has created the widening value gap between old and new technology. Even announcements of breakthrough battery range can impact buyer attitudes, regardless if this technology is a year or two away.
Reliable forecast tools are essential
Depreciation is the single largest cost when it comes to running a fleet. Buying vehicles is expensive, but some of this outlay can be recouped when selling those vehicles on.
Therefore, a trusted residual value forecast tool is essential. They allow fleet buyers to compare the total cost of ownership of different models and decide on the best value options for their business. Insights of when a vehicle is set to lose most of its value can help determine the replacement cycle, keeping models long enough to be useful, but not too long so they end up costing more.
How forecasting adapts to suit fleet buyers
Static forecasts no longer work. Fleet buyers need up-to-date information, with data based on real-world events, in real time to help them make informed decisions on purchase and de-fleeting opportunities.
Adaptive, data-rich forecasts provide much more information, considering the factors that are outside the market’s control. Expertise in creating these forecasts also needs to adapt, with analysts gathering more detailed data, more frequently so projections are well informed.
Providing buyers with the forecasts they need
In a market where values can move quickly and unpredictably, relying on static forecasts is no longer enough. Fleet and leasing companies need forward-looking data that reflects live market conditions, technology shifts and buyer sentiment, not just historic trends.
This is where adaptive forecasting becomes essential. cap hpi’s Future Vehicle Value Checker provides 60-month future value forecasts for new and used vehicles up to five years old, adjusted daily to reflect live market values.
All forecasts give detailed data on how much a vehicle will depreciate in a coming year, together with value patterns, helping fleet and leasing companies determine the best options for their business.
