Auto Auctions Viable Solutions for Quickly Turning Repossessed Vehicles, Minimizing Losses

“The profit is in the turn.” This statement is at the core of the automotive remarketing business. It speaks directly to getting a used vehicle ready for sale quickly and not waiting around for a sale event. Those who embrace this notion are likely very successful and profitable movers of used vehicles. The best way to turn a repossessed vehicle quickly while maximizing value is by working with the auto auction. Nowhere is this more relevant than in minimizing loan losses. Loan losses on repossessions are a challenging dilemma for all credit unions. Often when a vehicle loan is funded it is not based on the vehicle’s market value when it is remarketed, but rather on the creditworthiness of the consumer. When the vehicle is repossessed, the outstanding loan balance is rarely in line with the actual value of the vehicle. Therefore, the time it takes to sell (or “turn”) the vehicle becomes an important factor in maximizing the return on this depreciating asset. This is where the auto auction industry, with its expansive range of remarketing services, can be of the greatest assistance. Obviously the time and cost of repossession are the first stages in a rapid and cost-effective approach to achieving the best results. Credit unions can limit costs if they work with repossession companies that provide flat-rate pricing with no hidden charges for items like excess mileage and storage. It is also important that credit unions make sure the company they choose for repossessions is able to provide the proper insurance and liability protection necessary to protect the credit union from unexpected legal costs. Once the repossessed vehicle has been secured, the clock begins to tick with every day the vehicle sits preparing for sale. Every day it sits, more money is potentially lost, so credit unions must be prepared to sell the vehicle as quickly as possible. During the cure period required for the borrower, credit unions should begin putting in place the remarketing initiatives that will spring to action when the vehicle moves to sale. Auto auctions provide the foundation and the marketplace for the vehicle remarketing. There are numerous areas in which auctions can work with credit unions prior to a vehicle actually moving through the auction lane. The first step is making sure the vehicle is ready for sale. Auctions can provide total reconditioning and repair work on a vehicle, which allows for the greatest possible dollar return on the vehicle. Since repossessed vehicles are often collected from people who don’t take great care of their cars, they often need some paint work, dent repair, or to replace a headlight. Oftentimes a simple wash and wax are all that is needed. The point is to make the vehicle ready for the front row of a dealer’s lot, or “frontline ready,” so the dealer avoids the downtime of doing the repair work himself. (Dealers also want to get vehicles up for sale as quickly as possible.) A remarketing expert at an auction or a third-party remarketing company can provide the credit union with “smart decision” reconditioning. Reconditioning usually provides a return of $1.50 for every $1 spent. Once the car is sale-ready there are several different paths that a credit union can follow. Even while reconditioning work is being done, the vehicle can be offered for sale directly to a credit union’s membership through Web-based platforms offered by many auction companies. This allows credit unions to continue offering the vehicles to their members and possibly achieve a higher-than-wholesale return. While this process is used by some, it has limitations and is a difficult way to sell a large volume of vehicles. More common and readily available is the 24/7 technology most auctions provide that offers vehicles for sale online to dealers prior to sale. Auctions have Web sites dedicated to dealers that offer vehicles for sale by classifications in easily sortable formats. This is commonly referred to as upstream selling. Vehicles are mostly sold upstream on a bid basis, and this service is viewed by many dealers as an extension of their inventories and helps them find the specific vehicles that they regularly need. Technology provides these and other opportunities to expose vehicles to a large number of potential buyers prior to the actual auction of the vehicle. Once the vehicle has moved through upstream channels it is set for the auction lane. Auctions bring the highest volume of legitimate buyers together – not only physically in the auction lane, but also through Simulcast sales on the Web. The convergence of the physical and online environments creates a unique selling atmosphere, where vehicle demand is clear and market value is set. The auction, simply put, is the stock exchange for used vehicles. There are many factors that generate successful selling at auction, and working with a remarketing expert to price a vehicle correctly, based on the true market value, is certainly part of that. It is also important to work with auction staff to pool credit union vehicles together – larger sales attract more buyers and demand premium position in the auction lanes. Whether it comes in the form of vehicle storage and transportation, upstream and online selling, reconditioning a vehicle or running it through the auction lanes, it is critical for credit unions to review and take advantage of all possible remarketing opportunities. Auctions are the only place in the remarketing business that can not only handle every step of the process, but also streamline costs and analyze the best ways to sell. So find a one-stop-shop auction company that can take the work off of your shoulders and turn your vehicles quickly for more money. Auctions are proven entities in the remarketing business and can help you save money before you even have to think about issues like loan loss. In all, there are more than 300 member auctions of the National Auto Auction Association. That’s thousands of trained professionals who are available to make the remarketing process easier for you. Take advantage of them.