NAFA I&E: Using Vehicle Remarketing Trends to Forecast the Future

Online Remarketing

Fleet managers packed the workshop room at the NAFA I&E on the first morning of panel presentations to hear experts talk about vehicle remarketing trends and forecasts. It’s clearly up there with fleet cost reduction, data metrics analysis, sustainability, and driver safety as an important management topic. Tom Kontos, Chief Economist at ADESA Analytical Services, Ricky Beggs, Managing Editor of Black Book, and Paul Seger, Vice President Remarketing, at GE Capital Fleet Services, each gave presentations. Here are some highlights of what they said…

Tom Kontos:

  • Overall economic conditions are improving but are not yet strong for new and used vehicle purchases by consumers. Two big indicators – unemployment and home sale transaction – are not great, but are steadily improving.
  • Franchised dealers sold more used vehicles last year than new, though this should go back to new making more of the total than used this year.
  • Used vehicle prices are softening as the supply continues to increase. An indicator Kontos closely tracks is used-to-new vehicle price ratio. Used vehicle prices were close to 60% of new vehicle prices in the recent past, and they’re going back to about 50%, which is the norm.
  • Fleets are holding their vehicles for about three-to-five years and 60,000 to 75,000 miles lately.
  • He expects more off-rental units to come back to the wholesale market in the near future.
  • There should be about 400,000 to 500,000 more vehicles at auctions this year, and prices appear to be softening – down about 1% to 1.3% compared to 2012.

Ricky Beggs:

  • There’s a good deal of excitement in the market this year, both in retail and fleet. While there was a slow start in January, there are signs of strength in the used car market.
  • Lending is now being much more aggressive about setting consumers up with loans – by reducing FICO scores needed for loan approval and making more financing funds available. Loan periods are being extended to reduce monthly payments.
  • While 12 segments were up in value a year ago, 10 segments were up as of April 1, 2013 – four car segments and six trucks. It wasn’t as strong as a year ago, but it was still a positive sign.
  • The Chevrolet Impala has been the highest volume fleet vehicle on the used car market. The question will be – will the refreshed 2014 model still have a fleet-oriented version?
  • There’s a lot of enthusiasm in the market for mid-size cars – they’re fuel efficient and a lot more interesting than they used to be, especially the Ford Fusion, Chevrolet Malibu, Toyota Prius, Chrysler 200, Dodge Charger, Toyota Camry, and Nissan Altima.
  • Cargo vans have also done well.
  • Certified pre-owned vehicles are doing well and helping to strengthen residuals. It’s helping automakers strengthen their brands.

Paul Seger:

  • Seger defined what GE Capital Fleet Services describes as the top five keys to success for fleet managers in remarketing vehicles.
  • 1. Marketing:  aligning vehicles to geographic markets, seasons, and buyer base.
  • It’s about building community with dealers through methods like transportation assistance, discounts on fees, and creating a market dealers want to come back to.
  • 2. Domain expertise: You have to carefully analyze consignment decisions. Conditions change during the year – what supply will do to price.
  • On-site representation is critical – dealers want to know that when bidding stops, someone is there to sell the car. And they want to see “smart repair” – the car is prepared to go right away.
  • 3. Reconditioning:  Find the right ratio – you spend $1 per car to gain $3 on sale day.
  • Make sure the car is clean, de-identified and logo free, and drivable.
  • Auction certifications are adding to value and are typically coming from auctions and fleet management companies.
  • Make sure the vehicle is consumer ready, “defleeted,” and low cost in reconditioning – the returns will be much better.
  • 4. Measure results – Look at key performance metrics.
  • These will include days to sale, value retention, and cost of reconditioning.
  • 5. Technology – AutoIMS is a commonly used system these days. It’s an inventory management tool, and there are other, similar products on the market that streamline the remarketing process.
  • These systems provide digital photos of the vehicles, cost of reconditioning, online condition reports, de-identification of the vehicle, and can expand the geographical areas for buyers.
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