How Fleet Managers Can Tackle the Challenge of Managing Residual Values

In a recent poll, we asked automotive leaders about their biggest challenges in scaling flexible fleet services like car subscriptions and flexible leasing. While half of them pointed to operational costs, the other 50% identified managing fleet residual values as their top roadblock.

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This comes as no surprise—managing residual values is one of the trickiest aspects of running a fleet. Fleet managers need to strike the perfect balance between purchase price, usage, and resale value to maintain profitability. When depreciation becomes unpredictable, it impacts everything from pricing strategy to margins, making it harder to scale profitably.

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But it doesn’t have to be so complex. In this article, we’ll break down the factors that influence residual value and share how Casi’s platform helps fleet managers stay ahead of depreciation while scaling their services efficiently.

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Understanding Residual Value in Fleet Management

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Simply put, residual value is the estimated worth of a vehicle at the end of its lease or subscription period. It’s a critical factor because it directly determines the depreciation cost—the difference between the vehicle’s purchase price and its residual value when it’s sold or returned to the market.

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For fleet managers, the goal is to minimize depreciation. The higher the residual value of the vehicle at the end of its use, the lower the overall cost of ownership. Depreciation is one of the largest expenses in fleet management, so controlling it is key to running a profitable car subscription service.

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As Bas Bisschop, Casi’s mobility expert, points out: “The biggest cost is the depreciation of the car, which is the cost of goods sold. You have to know your purchase price and your sale price because that determines the monthly cost of the vehicle during its time in your fleet.”

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The Factors Influencing Residual Value

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Residual value isn’t a fixed number; it fluctuates based on several factors that fleet managers need to constantly monitor. Here are the key factors that impact vehicle depreciation:

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• Purchase Price and Terms: Getting the right purchase terms when acquiring a vehicle is crucial. A lower purchase price or a favorable discount from the OEM directly reduces depreciation costs.

• Vehicle Sale Price: After the subscription or lease period, the resale value of the vehicle is just as important. Understanding market conditions and predicting future demand helps fleet managers maximize resale prices.

• Mileage and Usage: Higher mileage and rough usage can significantly reduce a vehicle’s residual value. Managing and tracking vehicle usage helps preserve value.

• Maintenance and Condition: Proper maintenance and timely servicing are essential to keeping a vehicle in optimal condition, preserving its value over time.

• Market Trends and External Factors: External influences like fluctuating demand, new technology, and changes in the economy can also affect resale values. Staying informed of market trends helps fleet managers forecast more accurately.

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Balancing Residual Value with Profitability

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Bas Bisschop shared a key insight: “Before you scale a service, you have to get it right at the unit level. Otherwise, you’re scaling a problem.” This holds especially true when managing residual values. If you don’t control the cost of depreciation at the car level, scaling a fleet service only amplifies the problem.

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By understanding and optimizing these variables—purchase price, resale value, usage, and maintenance—fleet managers can reduce depreciation costs, maximize gross profit per vehicle, and ensure that scaling the service remains profitable.

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How Casi Helps Fleet Managers Master Residual Value

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Managing residual value is complex, but Casi’s platform simplifies the process by offering fleet managers real-time data, insights, and automation tools to control depreciation. Here’s how:

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1. Real-Time Fleet Data: Casi provides a centralized overview of your entire fleet, from the moment a vehicle is added to the time it’s resold. You can track everything from mileage and service history to market trends, helping you anticipate and optimize residual value.
2. Automated Task Management: By automating operational tasks like maintenance, vehicle inspections, and usage tracking, Casi ensures that vehicles remain in top condition throughout their lifecycle, protecting their residual value.
3. Market Insights Integration: Casi integrates with market data to give you up-to-date insights on vehicle resale values. This allows you to time the sale of your vehicles more effectively, ensuring you get the best possible price when it’s time to resell.
4. Optimized Usage and Utilization Tracking: The platform tracks vehicle utilization, helping you balance mileage and usage across your fleet to minimize wear and tear and maximize value retention.
5. Seamless Partner Collaboration: Casi integrates with your operational partners—such as dealerships and logistics teams—to ensure the vehicle’s entire lifecycle is managed efficiently. By involving partners directly in the platform, you reduce errors and ensure vehicles are well-maintained, further preserving residual value.

Maximizing Profitability While Scaling

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Managing residual values isn’t just about understanding depreciation—it’s about actively managing and optimizing it to drive profitability. With Casi, fleet managers can automate the most complex processes, make informed decisions, and protect their assets over the long term.

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As Bas said, “If you’re not managing these costs at the unit level, you’re scaling a problem, not a profitable service.” Casi’s platform helps you scale without the headaches of unpredictable residual values, so you can focus on delivering the best customer experience and growing your fleet profitably.

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Ready to take control of residual values and scale your fleet profitably? Talk to us today to see how Casi’s platform can help you master residual value management and drive growth. Get in touch with us here.