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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