Leverage 2018 Remarketing and Wholesale Trends

Automotive remarketing and wholesale auction volume were very strong in 2018. In early August, the market was seeing wholesale prices that were “unusually strong” for the time of year and depreciation rates were trending lower, according to Auto Remarketing. While some of the trends appeared to depend on the regional area of the country, overall conversions on consignment were good, and in places where physical auction participation numbers were lower, online auction attendance participation was also good.

Cox Automotive (Manheim Index) reported that wholesale used vehicle prices (on a mix-, mileage- and seasonally-adjusted basis) increased 2.01% month-over-month in August. That jump pushed the Manheim Index reading to 139.7, which was 6.4% higher than the previous year and the highest level for the series over its more than 20-year history, Auto Remarketing reported.

Traditionally wholesale prices drop toward the end of the year, but JD Powers reported in its December 2018 Used Car and Light Truck Guidelines: “Year to date, prices are up by an average of 2.8% through November relative to the same period in 2017.”

Another interesting trend came from the Automotive Intelligence Summit, where Maryann Keller, principal of Maryann Keller & Associates, described remarketing as becoming “increasingly sophisticated.” The top three areas in terms of sophistication include data analysis, cost management and new sales avenues that are introducing a “more scientific wholesale strategy,” she said.

As with almost every other industry, the digitization of the remarketing business is creating new opportunity and change for the industry. It’s something everyone in the supply chain needs to consider. According to Keller, it’s not just a physical process anymore: “It’s no longer just about trying to get the highest price, but rather, the smallest cost too.”

How Outsourcing Vehicle Remarketing Fits the Changing Landscape

When financial institutions such as credit unions or regional banks have vehicle repossessions, they need to figure out how to liquidate the asset quickly to avoid depreciation but still receive a good return on asset to reduce charge-offs. Many financial institutions do not have this function or core competency in house, and don’t have the time or resources to optimize their remarketing process.

Unfortunately, they often don’t consider the wholesale route because they either don’t have access given their low volume, or they don’t think they can maximize the return on the asset unless they sell at retail. Yet, as shown earlier, the wholesale channel has been very strong in the past year and can provide a healthy return. Financial institutions should consider the advantage of outsourcing the process to a turnkey provider to take advantage of this channel.

A turnkey remarketing service provider should manage all aspects of the auction with an eye to, first, the speed of the sale and title processing, and second, maximizing the value and return on the asset. There must be a sense of urgency considering that on average a wholesale used vehicle can lose value of approximately 2% per month due to depreciation, in addition to the cost to the credit union of carrying an outstanding balance. It adds up fast, making the goal to liquidate the asset in under 30 days.

A turnkey remarketing service should be responsible for managing vehicle transportation, title processing, condition report and photos, recondition process and approval limits, bid management and sales proceeds – all in the most cost and time efficient manner possible. To maximize the value of the asset, a remarketing service should ideally be independent to work with the most appropriate auction for each vehicle type. From a data management perspective, a good remarketing service would provide real-time, customizable analytics through an online portal.

Leveraging a Healthy Wholesale Landscape with the Right Partner

With the wholesale auto remarketing landscape looking healthy in late 2018 and beyond, it is a key time to re-evaluate your strategy and partners for auto remarketing. Ultimately, seek partners with experience, independence, urgency and an airtight process that ensures maximum value for the asset. If you would like to assess whether you are working with the right partner, you can design a champion/challenger program. Assign 50% of your assets to your current vendor and the other half to a challenger for approximately three months and compare the results. With that data in hand, you can make a more informed decision.

Four Things to Consider When Evaluating a Turnkey Remarketing Service

Turnkey remarketing services should act as an extension of your team when remarketing is not the institution’s core competency. Institutions can select the right service provider if they look for these top factors:

1. An efficient, streamlined process that leverages analytics and provides easy access to data.
2. A focus on maximizing ROI through favorable pre-negotiated rates and access to a wide network of auctions.
3. Compliance with federal and state regulations, which vary widely.
4. An experienced team with a background working in the auction environment.

Paul Marquez is Director of Remarketing & Client Relations for Auto Financial Group. He can be reached at 713-358-3938.