Greenlight Remarketing - Inside Lane

GREENLIGHT
ISSUE 26
DRIVING GROWTH FOR THE REMARKETING PROFESSIONAL
SHORT
CIRCUIT
Electrics trickle into the
auction lanes – but
what are they worth?
P4
MOBILE AND
IMAGING TECH
REMAKE REPO P8
TOP TIPS FOR GETTING
THE BEST AUCTION
RETURNS P10
IT’S
GO
TIME
Certified off-lease Chrysler Group vehicles are
streaming through the auction lanes, which means it’s
the best possible time to build your inventory.
IN FRONT
LEADERSHIP
Annual Auction Awards
Partnership.
3
CONTENTS
8
It’s an important idea when your business is built
on it.
So it is with Santander Consumer USA Inc.
remarketing team and auction partners across
the country, and why we honor the best of those
relationships with our annual Auction Partner
Awards.
The fourth annual program, held at the 2015
Conference of Automotive Remarketing in Las
Vegas, celebrated last year’s achievements by two individual auction
representatives and seven auctions, with two auctions each winning a
pair of SCUSA partner awards.
This year’s Auction Manager of the Year award was shared by R.J.
Contich (East Region), who has been with SCUSA since 2010, and Jason
Keese (West Region), who has been with the company since 2011.
Two auctions, ADESA Phoenix and Manheim Louisville, each won
regional and overall awards, with the ADESA auction winning the top
award, Auction of the Year. Besides its regional award, Manheim
Louisville received the Auction Operations award from SCUSA.
Following is a complete listing of the SCUSA auction awards:
Auction of the Year: ADESA Phoenix, AZ. This is awarded to the best
overall auction using key performance indicators such as net retentions,
control of expenses, auction operations and more.
Distinguished Auction Partner: Manheim Arena, IL. This award goes
to the auction or auction group that best demonstrates or embraces
SCUSA’s fourth-quarter charity campaign, “Bidding to Make a
Difference,” by demonstrating acts of kindness and giving (not just
money) during the holiday season.
Best Auction Operations: Manheim Louisville
Best E-Commerce Auction: ADESA Cincinnati-Dayton, OH
Regional Auction Awards: ADESA Concord (MA), Northeast; ABC
Birmingham (AL), Southeast; ADESA Phoenix, West; Manheim
Louisville, Midwest, and Manheim San Antonio (TX), Central.
SCUSA is pleased to take this opportunity to spotlight these award
winners, who set the bar in 2014 and were the embodiment of our
annual Auction Partner Awards.
Brent Huisman
SVP, Asset Remarketing
Santander Consumer USA Inc.
REPO MAKEOVER:
Imaging technology and mobile devices
revolutionize the repo man’s universe
4
6
9
10
11
Sticker Shock
As electrics make their way to the auction lanes,
the industry puzzles over what they’re worth
Active Auctions
Buy Santander Consumer USA vehicles
at auctions nationwide
Hitting the Target
How do the ratings in a consumer magazine
compare to wholesale valuations?
Dealer Tips
Dealers dish on getting the most
from your auction experience
Staying Strong
Wholesale prices defy long-term weakening
in March, with trucks in the lead
GreenLight Remarketing is published by Royal Media on behalf of Santander
Consumer USA Inc. For more information about Santander Consumer USA or
RoadLoans™ call 888.540.5626 or visit www.santanderconsumerusa.com.
Royal Media can be found at www.royalmedia.com. Special photo credits:
AutoVu cameras (p3, p8): University of British Columbia, Ford (p3, p4), Nissan
(p1, p9) ©2015 Santander Consumer USA Inc.
4
ELECTRIC CARS
SHORT
CIRCUIT
Electric vehicles trickle
into the auction lanes –
but what are they worth?
BY LARISSA PADDEN
D
ESPITE A FUEL-EFFICIENT REPUTATION
and cool cachet, electric vehicles are an
uncertain proposition at auction.
But with Tesla moving into the certified pre-owned space and residual valuations increasingly being generated, electrics are a growing
presence in the wholesale market. Their numbers
may be small, but they cast a large shadow, and
the industry is paying close attention.
“It’s an area of growing interest,” Tom Kontos,
executive vice president and chief economist for
ADESA Analytical Services, says of the EV market,
noting that values have increased “a little bit” from
yearend 2014 to the first quarter of 2015. “Cumulatively, we’re starting to see kind of a ramp-up in
volume, but it’s still miniscule,” he says. “We’re
talking about hundreds of cars, when the auction
industry is 8-million-plus cars.”
While there is interest among tech-savvy buyers and dealers looking to cater to eco-conscious
shoppers, the low auction volume makes it difficult to analyze certain data, such as average prices, Kontos says. Choices at auction are so limited,
in fact, that it is difficult to gauge which models, if
any, are more popular than others when they hit
the lanes, he adds.
“There’s not so many that the dealers could
go, ‘I only look at [Chevrolet] Volts’ or ‘I only look
at [Nissan] Leafs,’” Kontos says. “So I don’t think
there’s really much distinction between the indi-
vidual models at this point, because the interest
level is high for any electric vehicles that happen to
make their way into the auctions.”
TAX REBATES KEEP PRICES SOFT
However, while the demand for used EVs is
high and the supply is low, pricing and residual
values remain soft, according to Alec Gutierrez,
senior market analyst of automotive insights for
Kelley Blue Book.
“As we look at setting residuals for electric cars,
there are some different considerations that we
have to take in mind,” Gutierrez says. “Because,
ultimately, when you look at the auction values, or
how these vehicles perform from a wholesale per-
ELECTRIC CARS
FALLING GAS PRICES
ERODE DEMAND
With gasoline prices roughly $1 less a gallon
than they were last year, it’s harder for consumers
to justify the purchase of an electric vehicle from
an economic standpoint.
“Lower gas prices combined with ongoing
gains in gas-powered vehicle efficiency make EVs
an even harder sell,” Paris says.
Gutierrez agrees that what little demand there
was for EV has been “hit hard” because of the decline in gas prices, while interest in full-size trucks
and sport-utility vehicles has increased.
“Even in between, when you look at the sig-
nificant improvement of fuel efficiency of compact
cars, subcompact cars, and even midsized cars,
with gas prices as low as they are, it makes them
that much more difficult to stand out as an electric
vehicle,” he says.
ADESA’s Kontos counters that while falling gas
prices may hurt “a little,” there is still a corner of
the market that wants to remain green.
“Anecdotally, I would say that the dealer who
wants to sort of project an image of, ‘I’ve got fuelefficient vehicles on my used car lot,’” will be interested in EVs, Kontos says. “And even in times
when gasoline prices are low, there are still people
who are buying for the long haul, and they’re also
buying green if they can.”
So, to the extent that an electric vehicle is seen
as a “more responsible purchase,” as Kontos puts
it, there are dealers that would stock their usedcar lot with these types of vehicles without purely
looking at it from a profit motive.
Photo: Art Kanovalov
spective, they typically — and by a pretty significant margin — underperform your typical hybrid
or even just typical compact, which would be in
the competitive set.”
The reason, Gutierrez says, is relatively intuitive, because although these cars might sticker
for $30,000, federal and state tax rebates get
“chopped off right way” in terms of retained value.
“They immediately take a significant hit because
everyone is making use of the tax rebate,” Gutierrez says. “If you’re going to pay $35,000 for a Volt
and get $10,000 in federal tax rebates, there’s no
way, from a used-car perspective, you’re going to
pay any more than $18,000 to $20,000, in the bestcase scenario, for a used Volt.”
Similar to incentivized gasoline-powered vehicles, “cash on the hood often has the most corrosive effect on used-value retention,” says David
Paris, NADA Used Car Guide’s senior automotive
analyst. However, unlike manufacturer incentives,
there is a cap placed on federal rebates for new
EVs.
The federal credit begins to phase out at the beginning of the second quarter after a manufacturer
has produced 200,000 vehicles, Paris says. Vehicles produced before Jan. 1, 2010, do not count
toward that total.
Georgia announced recently that the current
tax credit will no longer be offered effective July 1,
while Illinois announced in March that consumers who purchased a new plug-in vehicle in 2014
or later will not receive a $4,000 rebate from the
state.
“It will be interesting to see, as those tax rebates begin to run out, if that’s going to impact
the appeal of those cars,” Gutierrez says. “It‘s a bit
early to speculate now how it will affect the price
down the road, but it’s definitely something we
have to keep an eye on.”
LUXURY MODELS
RETAIN MORE VALUE
It’s a tough environment to really make headway
for EVs, Gutierrez says, but there is an expectation
that certain luxury brands retain their value well.
“I’ll point to Tesla as one great example,” he says.
“Because Tesla has maintained strict control over the
way these vehicles hit the secondary market, they’re
very, very hard to find, and not many consumers have
traded them in yet or tried to sell them.”
As a result, when dealers see a used Tesla for
sale, they typically have to shell out new-car prices,
according to Gutierrez.
“So that’s one example on the extreme of
where electric cars have done phenomenally well”
he says. “It’s a cool car, it’s fast, it’s a lot of fun,
it’s at the forefront of technology, and that’s why
people buy Teslas. These are early adopters that
want to be on the cutting edge when it comes to
5
vehicle tech.”
Strong EV performers like Tesla stand out more
than weaker ones, since the majority is underperforming at the moment, according to Paris. But in
terms of prices, used values for Tesla’s Model S
appear to have held up very well so far.
“Used-value retention for the 2012 Model S with
the 85-kwh battery stands at roughly 57%, which is
on par with the 2012 Porsche Panamera’s retention of 61%,” Paris says. “By comparison, retention
for 2012 versions of the Chevy Volt and Nissan Leaf
is around 35% and 27%, respectively.”
‘WHY NOT BUY NEW?’
Sales of new electric vehicles haven’t suffered a
significant decline, Gutierrez says, but neither has
the market grown.
“Sales have been relatively flat, but I would say
that’s in spite of a decline in gas prices,” he says.
“Only because they’ve rolled out such aggressive
lease programs, and because they’ve been discounting the MSRPs, manufacturers have been
working hard to ensure that these vehicles remain
price competitive.”
Sales of new EVs have fallen so far in 2015,
which has prompted automakers to implement
price cuts to increase interest in plug-ins.
“Cadillac just cut the price of the ELR down
$10,000,” Paris says. “And Chevy dropped the
price of the Spark EV, which brings its cost to
around $15,000, best case, once incentives are
factored in.”
And lower prices for new EVs translate into
even softer used EV prices, he says.
“In order for a buyer to consider a used EV it
has to make sense,” Paris says. “If they are not
receiving a federal, state, [or] manufacturer credit
or rebate, the sales price has to be adjusted accordingly. Otherwise, why not buy new?”
EMERGENCE OF THE LUXURY EV
For decades, it seemed that the only people interested in
electric cars were environmentalists - and EVs still get alot of
their cachet from their green reputation. But electric cars can
deliver enormous (and smooth) power from a standstill – no
revving required – and more mature electric vehicle technology
has produced a class of high-performance, high-end EVs.
The Tesla S has come to dominate this class of vehicle - and will
likely be remembered as the first modern EV to sell primarily
on its pure automotive merits - it drives, looks, and runs like a proper luxury car, and it has a high-tech
personality all its own. Though thus far the most successful, Tesla is not alone in this segment. BMW sells
two premium EVs, the small i3, aimed at families, and the i8 supercar. Cadillac also offers the slow-selling
but recently updated ELR, a coupe based on the Chevy Volt. More entries are coming to this segment,
primarily in the form of plug-in hybrids and electric adaptations of gas-powered vehicles.
6
AUCTIONS
ACTIVE AUCTIONS
Manheim Seattle
Wednesdays
Brasher’s
Northwest
Brasher’s Idaho
Thursdays
A Dodge Charger gets the once-over from prospective bidders as it rolls through the Chrysler
Capital-Santander Consumer USA auction lane
recently at Manheim North Carolina in Kenly, NC.
(near Raleigh).
Brasher’s
Sacramento
Brasher’s
Salt Lake City
Tuesdays
Brasher’s Reno
Wednesdays
ADESA Golden Gate
Tuesdays
ADESA Las Vegas
Manheim Southern California
Thursdays
ADESA Los Angeles
Fridays
ADESA Phoenix
Wednesday
Manheim Tucson
Manheim Hawaii
Wednesdays*
Ring man Luis Pedroza ushers a late-model
Dodge Grand Caravan through the Chrysler
Capital-Santander Consumer USA auction lane
recently at ADESA Los Angeles in Mira Loma, CA.
Auto Auction
RV Auction (please contact auction for dates)
Boat Auction (please contact auction for dates)
Dealers AA
of Alaska
Wednesdays
AUCTIONS
Manheim NorthStar
Minnesota
Thursdays
Manheim
Minneapolis
Manheim Detroit
Thursdays
ADESA Colorado Springs
Manheim
Kansas City
Wednesdays
ABC Bowling
Green
Fridays
Capital City AA
Fridays
Manheim Balt-Wash
Tuesday
Manheim North Carolina
Mondays
ADESA Charlotte
Thursdays
Carolina Auto Auction
Wednesdays
Manheim Nashville
Tuesdays
DAA
Oklahoma City
Thursdays
ADESA Dallas
Thursdays
Manheim
Louisville
Thursdays
Manheim New York
Wednesdays
ADESA New Jersey
Thursdays
Manheim New Jersey
Wednesdays
Bel Air Auto Auction
Tuesday specialty; Thursday Auto
ADESA Cincinnati
Tuesdays
ABC St. Louis
Thursdays
Manheim Denver
ABC Lancaster
Wednesdays
Americas Auto
Auction - Chicago Manheim Ohio
Wednesdays
Tuesdays
Manheim
Arena
Tuesdays
ADESA Concord
Wednesdays
ABC Birmingham
Wednesday specialty
Manheim Dallas
Wednesdays
Manheim
Mississippi
Manheim DFW Thursdays
ADESA
Birmingham
Wednesdays
ADESA Atlanta
Wednesdays
Manheim Georgia
Tuesdays
Americas AA - Greenville
Americas Auto Auction
Tuesdays
Manheim
San Antonio
Wednesdays
ADESA Houston
Wednesdays
Manheim Lakeland
ABC Baton
Rouge
Thursdays
Manheim Central Florida
Wednesdays
Manheim Tampa
Thursdays
ADESA Tampa
Mondays
Weekly weekend online events are available through OVE and ADESA Dealer Block. Contact your favorite auction or go online to ADESA.com, Manheim.
com or OVE.com for listings. Copart and IAAI auction sites are available across the country. Please visit www.copart.com and www.iaai.com for details.
*Contact auction for exact sale date
7
8
COLLECTIONS
REPO REMIX
The power of the smartphone camera
catapults repossession into the 21st century
BY PHIL RYAN
All signs point to an economic recovery — new
housing starts, millennials moving out of their
parents’ basements, real estate prices inching
upward. New-vehicle sales in April are the strongest they have been in a decade, according to J.D.
Power. But in auto finance, executives are seeing
signs of trouble ahead for those borrowing money to make vehicle purchases.
“Credit performance is gradually worsening in
the industry,” Capital One CEO Richard Fairbank
said in April. “We see slightly higher losses on
newer originations.” No matter what the economic climate, every lender needs to maintain a
robust asset-recovery or loss-mitigation department in order to recover collateral on loans.
Enter the repo man.
An industry that was once defiantly old-school
— find the car, get the car — has been transformed by the proliferation of mobile technology,
particularly the ease of taking photographs with
a smartphone.
“Tech has spread out all across the process,”
says Matthew Pitman, owner of Certified Asset
Recovery Services, in Orem, Utah. “Back in the
day, it was paperwork and fax machines. Now
smartphones, apps on devices, more real-time
communication with lenders, it opens up options. We can work 24/7 and take a payment on
the spot.”
Pitman gained some notoriety after an ABC
News profile focused on his use of drones to locate hard-to-reach vehicles, and his software that
These license plate recognition cameras can record
up to 1,800 license plates per minute, helping to
build enormous databases of target vehicles.
can track cellphones that have opened a special
text message he sends. But it is with digital imaging, Pitman says, that the real transformation of
the repo man’s day has taken place.
The ubiquity of digital cameras, coupled with
inexpensive computing power and data storage
on the back end, have made possible massive
databases that can be accessed by recovery specialists in search of vehicles. These databases,
maintained by companies such as MVTRAC in
Palatine, Ill., can be the repo man’s best friend.
“Basically, there are camera systems in tens of
thousands of places today,” Pitman says. “Guys
have cameras mounted on trucks that read license plates and log that data. If it is a car being
sought for repossession, someone gets the notification, ‘Someone has found one of your repos.’”
If the car has been found in Miami but is being
sought in Seattle, for example, it may be necessary to subcontract to a local agent, Pitman says.
But the cameras can mean easy money for repo
men when a car is logged in their vicinity. “It’s
funny,” Pitman says, “when a competitor pays
me to locate their vehicle.”
NO MORE POLAROIDS
“The price has come down dramatically on
video technology,” Pitman says, noting that it is
also easier to share that video. “Back in the days
of Polaroids — man that film was expensive! —
you’d try and take the bare minimum and attach
that to the report. Now we’ll take every angle, 20
pictures, 30 pictures.”
The report Pitman refers to is the condition report, which is being transformed, if not outright
replaced, by high-resolution digital images. “This
levels the playing field,” Pitman says, when there
is disagreement about when damage may have
occurred to a vehicle. “There it is in full HD, with
a time stamp,” he said.
From 1978 to 1991, condition reports were just
checkboxes on a piece of paper: “Scratch, dent,
rust, do we have keys, flat tire, broken glass,” Pitman says. But in 1991, a diagram of the vehicle
was added, so damaged areas could be indicated
and explained. It also became common to staple
photos to the reports. Nowadays, with the digital delivery of files via email or directly from a
server, condition reports can be little more than
collections of images with some basic information about “the story,” as Pitman calls it, which
includes where and when the vehicle was recovered, and by whom.
Another major innovation in recovery is GPS
tracking. It is becoming common for lenders
working with high-risk borrowers to install multiple devices in vehicles to lessen risk. Some may
alert the title holder to the vehicle’s location,
while others can prevent the car from being started if a payment is missed. Pitman explains the
experience from the driver’s point of view.
“A couple of days before payment is due, the
green light turns to yellow,” he says. Once the
payment date passes, it turns red, and the driver
must pay to have the starter-interrupt device shut
down. Today’s repo men can take a payment on
the spot. “There’s a fee to turn off the device once
it’s on,” Pitman said, “but it’s much less than recovering a car that has been repossessed.”
Confrontations, the rare times they occur, are bad
for all sides. Personal cameras, such as the GoPro,
which Pitman and other agents wear strapped to
their heads, “make it safer for both us and drivers,”
Pitman says. Interactions can be recorded and documented for the lender, or in extreme cases, for the
authorities. “Overall, the technology makes this
job easier and definitely safer,” Pitman says. “You
just have more information.”
But not all agents feel the same way. “Technology is a blessing and a curse — a blessing for some,
curse for others,” Pitman says. “One guy can do
what five used to do in a day, remotely monitor a
system, talk to lenders via the internet. Some positions may be obsolete, like an office manager. You
can do it all with a glance at the screen.”
And then there are those who are technologyaverse and prefer the old-fashioned way of doing things. “A lot of guys don’t mesh well with
the technology,” he says. “They hate it, and they
have to work harder for not using the technology.
I think there’s a new market of consulting where
people who understand repo and tech and can
bridge the gap, they can help those who are overwhelmed.”
But even with time-saving technology, repossession is still about “stealing cars legally,” Pitman says. “We still have to go out and do what
we do on a regular basis.”
VALUATIONS
9
ON THE MARK
How closely do a consumer magazine’s rankings
reflect valuations in the wholesale world?
BY BRIDGET MCCREA
Every year, Consumer Reports ranks used cars
in its annual auto issue, which hits the stands
in April — a peak car-buying season — and is
read by four million people. The magazine says
that it bases the rankings on performance and
reliability. But do the rankings in this influential
publication reflect the way used vehicles sell in
the real world?
The magazine ranks vehicles by popularity
in four price categories: less than $10,000; between $10,000 and $15,000; $15,000 to $20,000;
and $20,000 to $25,000.
Within each of these four categories, the
magazine ranges small cars, sedans and SUVs
from “best” to “worst.” The 2008 Mazda3 S,
for example, ranks as the best value in the
sub-$10,000 small car category, according to
Consumer Reports, while the 2006-07 Lexus GX
claims the top spot among SUVs priced in the
$20,000 to $25,000 range.
The magazine also includes a ranking of
“reliable used cars for every budget” — a list
that focuses on 2005-to-2014 models across the
four price categories, and further divided into
subcompact and compact cars; midsize and
large cars; luxury cars; sports cars/convertibles;
wagons and minivans; small SUVs; midsize to
large SUVs, and pickup trucks.
In the small car category (priced $10,000 to
$15,000), Consumer Reports put the Subaru Impreza (2010) and the Kia Soul (2010-12) at the
top of the list. Alec Gutierrez, senior market
analyst of automotive insights for Kelley Blue
Book, says the Impreza also ranks high on his
“On average, these vehicles
hold 65% to 75% of original
MSRP, which, after three
years, is pretty tremendous.”
– Alec Gutierrez, senior market analyst, Kelley Blue
Book, on the values of higher-end SUVs
firm’s resale auto list (for the fact that it sells at
an average of 66% of original MSRP), and notes
that the Soul is at 61% of MSRP. Singling out
model year 2012 cars, Gutierrez says the Honda
Civic, Hyundai Elantra and Toyota Corolla tend
to be the top performers in the mid-range car
category.
In assessing Kelley Blue Book’s rankings side
by side with the Consumer Reports list, Gutierrez says he takes both original MSRP and actual
auction value into account. “We look at how well
these vehicles are performing in terms of what
they’re selling for at auction versus what they
sold for new at retail,” he explains.
From that perspective, Gutierrez says both the
midsized truck segment (Toyota Tacoma leads
the pack in that category at 85% of MSRP) and
the higher-end luxury SUV market are doing particularly well on the auction block.
“On average, these vehicles hold 65% to 75% of
original MSRP,” he says, “which, after three years, is
pretty tremendous.” Consumer Reports doesn’t rank
pickup trucks in its used-car recommendations, but
it ranks the Tacoma third on its list of “reliable used
cars for every budget” category.
BIG BUCKS ON THE HIGHER END
On the Consumer Reports list, the highest-value SUVs fall into the $20,000 to $25,000 range,
where the Lexus GX (2006-07), Nissan Murano
(2011-12) and Toyota Highlander Hybrid (2009)
hold the top rankings. At Kelley Blue Book, the
Murano falls into the midsized SUV category
and holds an average of 61% of MSRP.
“Surprisingly, that vehicle is a bit lower within
its segment, sitting at 19th place among a total
of 23 unique models,” says Gutierrez, referring
to KBB’s own rankings. Within the higher-end
SUV segment, he points to the BMW X5, Mercedes-Benz M-Class, Range Rover Sport and
Porsche Cayenne as some of the best auction
bets.
“A lot of this has to do with the fact that we’re
getting close to a seven-year low in terms of av-
The 2011-2012 Nissan Murano ranks high with
Consumer Reports, and unsurprisingly retains, on
average, 61% of its original MSRP after four years.
Premium SUVs are an increasingly good auction bet.
erage fuel prices,” says Gutierrez, “and the fact
that higher-net-worth households have a bit
more disposable income, due to a healthy stock
market and real estate market, for example.”
In general, Tom Kontos, executive vice president and chief economist at ADESA Analytical Services, says lists like those published by
Consumer Reports commonly reflect the activity
that’s taking place at auction. “Generally speaking, what is considered a good value based on
prices and availability at retail should be a reflection of what is a good value in terms of prices
and availability at wholesale,” Kontos explains. Right now, for example, trucks and SUVs are
fetching the highest prices at auction. “There’s
an abundance of small and midsize cars,” he
says, “but not as many big trucks and SUVS that
we once had.”
THE PROGNOSIS
Looking ahead to the rest of the year, Gutierrez
expects pricing and availability to remain “relatively steady” for wholesale used vehicles. And
while some premium prices are currently being
paid today for SUVs and trucks, he expects that
trend to soften over time. “The ramp-up in interest in these vehicles isn’t something that just
happened all of a sudden this year,” says Gutierrez, who points to the leasing trend as another
variable within the market.
“Leasing has obviously become more utilized
in the marketplace, particularly in the SUV and
luxury segments, where we’ll see supply start
to increase throughout this year,” he says. “So
while values have been relatively strong in those
areas, we do expect to see some softening in
2015 and certainly into 2016.”
Retail rankings may differ from industry data
provided by Kelley Blue Book and others, but
they can still be valuable to dealers. After all, at
least some of those four million readers will be
looking to buy cars this year.
10
STRATEGY
TOP DOLLAR
Dealers share four tips for getting the
most value from your auction experience
BY DAVE SCHAFER
Even though they’re not selling on the showroom floor, dealers still want to maximize their
profit from the vehicles sent through an auction,
whether it’s a $20,000 SUV or a $2,000 sedan.
Getting top dollar isn’t always easy, though.
Here are four tips from auction veterans on how
to get the best price for your vehicle and the most
out of the auction.
1. CLEAN UP AND CHECK THE LIGHTS
It starts with making sure the vehicle is clean
and, crucially, free of warning lights. “You want
to make sure they’re clean and you’re addressing
any noticeable issues with the car, such as checkengine lights or airbag lights on the dashboard,”
says Robert Magan, used-car manager at Jim
Koons Automotive Co., in Vienna, Va. “Overall
cleanliness of the vehicle inside and out helps it
attract more dollars.”
Although this may seem like obvious advice,
not every dealer cleans a vehicle before taking it
to auction, says Scott Kegley, used-car director at
Bob Rohrman Auto Group’s eight Lafayette, Ind.,
stores. “You’d be shocked at how many people will
send through a $20,000 car that’s filthy,” he says.
2. BOOST THE CONDITION SCORE
Making sure the vehicle is presentable doesn’t
necessarily extend to fixing damage. If you do
that, you’re putting more money into it and could
be cutting into your profit, Magan says.
Making your product
presentable is easy,
and yields good
returns for relatively
little effort or cost.
However, doing minor work on the vehicle to
upgrade the score on a condition report can be
beneficial, says Allen Chery, general manager of
Larry H. Miller Fleet Lease of Salt Lake City.
Miller pays careful attention to condition reports on the vehicles it will be selling at auction,
Chery says. Knowing that many buyers will only
purchase cars that meet certain standards, the
dealership upgrades the vehicle to hit the next
half measurement — for example, upgrading a
3.3 vehicle to 3.5, or a 3.7 vehicle to a 4.0 vehicle.
The fleet lessor also gets buyer “mindset” reports from auctioneers — reports that contain
information on what condition report scores buyers are searching for on auctioneers’ websites. “If
we’re told buyers who click to get the condition
reports only look for cars of 3.5 or better, then it’s
our job to make sure our cars meet those standards,” Chery says.
“Setting your order is, I think, the most important
thing you can do.”
4. BE IN THE MIDDLE OF THE PACK
The lane you end up in and the number you
have are also hugely important, Kegley says.
The lane you want to be in depends on the auction, but typically a dealer wants to be in the middle. If you’re at either end, you’re just not going to
get the same exposure.
“You don’t want to be the first person in, but
you sure as heck don’t want to be the last,” he
says. “I’d rather be first than somewhere down
the stretch. Toward the end of the auction, guys
have already spent the amount of money they
can afford.”
Kegley says he ideally wants to be about the 20th
car in, and he wants an auctioneer who knows the
market, knows the buyers, and doesn’t kick the
car off at $4,000 over value and just start walking
it down by $500s. “I want to see maybe $1,000 to
3. PUT YOUR CARS IN ORDER
The most important thing is to sell your first
car, Rohrman’s Kegley says. That allows a dealer
to be more aggressive in accepting bids later in
the day. “You see a dealer just kill his run by saying no four or five times in a row. You just can’t
do that. You don’t bring your vehicles there to appraise them. If you bring them to the auction, as
long as they’re trying, you sell them.”
To help that process, Kegley puts his “winners”
first. Those are the ones he knows will sell, hopefully gathering him some “house money” so that
as he gets down to the cars that aren’t as good,
he can say yes even if he’s not getting top dollar.
After four or five cars, you may have $4,000 or
$5,000 of house money, and you can sell a lot
more liberally, he says, adding that “having house
money for that 15th and 16th car makes all the
difference in the world.”
“One of the worst things to have happen is
you said ‘No’ two or three times and then your
second-to-the-last car comes in, and it makes you
$2,000,” Kegley says. That means you may have
said no to cars you should have said yes to earlier.
Order matters — Dealers consider cars on the
lane, and by the time the last few cars are moving
through, they’ll have made their selections and
spent most of their cash.
$1,500 over, but slowly get to the money and get
it started,” he says. “There’s nothing I hate more
than waiting 30 seconds before he finally gets to
the money that the car is worth.”
Smaller dealers don’t get the lane and number
priority that the bigger dealers get, Kegley notes.
There’s not a lot that can be done about this, but
building a strong relationship with an auctioneer
over time can help.
IT’S ABOUT TIME
The key to getting the most out of the auction,
like creating value anywhere else, is in investing
the time. Make the vehicle presentable, do the
work to upgrade the condition report, get your
cars in order, and get to know the auctioneers and
auction house. It may not bring in the big bucks,
but it could be surprisingly effective at securing a
few extra dollars.
TRENDS 11
SEASONAL
STRENGTH
Wholesale prices defy long-term weakening in March, with trucks in the lead
BY TOM KONTOS
Wholesale used vehicle
prices were up on both a
month-over-month and yearover-year basis in March.
Though this is indicative
of both seasonal and secular market strength, supply
Tom Kontos
growth is nevertheless exerting downward pressure on prices as witnessed by
lower conversion rates and price weakness in particular age, sale type, and model class segments.
A problem with relying on sales prices for assessing market conditions, even based on the
robust data set available through the millions of
auction transactions we analyze in this space,
is that this data set omits the vehicles that nosold. A large portion of off-rental program vehicles that would have been sold in late 2014 and
whose sale was curtailed until early 2015 were
no-saled in March in hopes of better prices in
forthcoming sales. Ignoring this factor leads to
a false sense of confidence in the strength of
wholesale values.
Another factor that should be considered, and
which has been repeatedly stressed here, is that
average sales prices continue to be biased upward by a “richer mix” of institutional vehicles
this year compared to last year. The late-model
off-rental program vehicles mentioned in the
previous paragraph have had particular impact
in elevating average prices.
In short, average wholesale prices are holding up well, but a deeper analysis indicates that
supply growth is putting downward pressure on
prices as one would expect.
TRUCKS MAKE A COMEBACK
According to ADESA Analytical Services’
monthly analysis of Wholesale Used Vehicle
Prices by Vehicle Model Class1, wholesale used
“The truck classes, which include
vans, SUVs and pickups, performed
much stron­ger than the car and
crossover classes.” – Tom Kontos
vehicle prices in March averaged $10,646 – up
4.7% compared to February and up 2.0% relative
to March 2014. The truck classes, which include
vans, SUVs and pickups, performed much stronger than the car and crossover classes.
Prices for used vehicles remarketed by manufacturers were up 4.5% month-over-month but down
8.3% year-over-year. Prices for fleet/lease consignors were up 7.4% sequentially but down 0.6%
annually. Dealer consignors registered a 6.0% increase versus February and a 1.7% increase relative to March 2014.
CPO sales were again strong, rising 12.4%
month-over-month and 7.4% year-over-year, according to figures from Autodata.
WHOLESALE USED-VEHICLE PRICE TRENDS
AVERAGE PRICES ($/UNIT)
Mar. 15
Feb. 14
Mar. 14
AVERAGE PRICES ($/UNIT)
LAST MONTH Vs.
Prior Mo. Prior Yr.
Mar. 15
Feb. 14
Mar. 14
LAST MONTH Vs.
Prior Mo. Prior Yr.
Total All Vehicles $10,646 $10,167 $10,435 4.7%
2.0%
Total Trucks
$11,694 $11,035 $10,856 6.0%
7.7%
Total Cars
$9,382 $9,054 $9,336 3.6%
0.5%
Mini Van
$8,477 6.9%
13.1%
Compact Car
$7,544 $7,465 $7,414 1.1%
1.7%
Fullsize Van
$12,746 $12,120 $10,889 5.2%
17.1%
Midsize Car
$8,148 $8,075 $8,521 0.9%
-4.4%
Mini SUV
$14,275 $12,981 $12,794 10.0%
11.6%
Fullsize Car
$7,951 $7,829 $7,569 1.6%
5.1%
Midsize SUV
$8,446 Luxury Car
$13,139 $12,352 $12,425 6.4%
5.8%
Fullsize SUV
Sporty Car
$13,969 $13,132 $13,235 6.4%
5.5%
Luxury SUV
$13,297 4.7%
-3.5%
Compact Pickup $7,886 $11,239 $10,835 $12,109 3.7%
-7.2%
Fullsize Pickup
Mid/Fullsize CUV$13,980 $13,240 $14,508 5.6%
-3.6%
Total Crossovers $12,827 $12,253 Compact CUV
$7,934 $7,811 $7,493 8.1%
5.8%
$11,676 $11,174 $11,360 4.5%
2.8%
$19,183 $17,897 $19,718 7.2%
-2.7%
2.6%
4.1%
4.1%
8.0%
$7,683 $7,983 $7,574 $14,342 $13,783 $13,284 Source: ADESA Analytical Services
The analysis is based on over six million annual sales transactions from over 150 of the largest U.S. wholesale auto auctions, including those of ADESA as well as other auction companies. ADESA
Analytical Services segregates these transactions to study trends by vehicle model class.
1
The views and analysis provided herein relate to the vehicle remarketing industry as a whole and may not relate directly to KAR Auction Services, Inc. The views and analysis are not the views of KAR
Auction Services, its management or its subsidiaries; and their accuracy is not warranted. The statements contained in this report and statements that the company may make orally in connection with
this report that are not historical facts are forward-looking statements. Words such as “should,” “may,” “will,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “bode”,
“promises”, “likely to” and similar expressions identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially
from the results projected, expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the company’s Securities
and Exchange Commission filings. The company does not undertake any obligation to update any forward-looking statements.
WALKING
THE
WALK
Buyers deserve more than just talk about
meeting high standards at the auction.
We walk the walk as one of the largest
remarketers of certified vehicles in the country.
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