Remarketers Learn Through Downturn

By Jeffrey Bellant June 12, 2020
Retail prices of vehicles were fairly flat through the downturn, while wholesale prices took a 20 percent dip according to J.D Power Retail prices of vehicles were fairly flat through the downturn, while wholesale prices took a 20 percent dip according to J.D Power

Remarketing leaders juggled numerous challenges in the national shutdown and they discussed those during a recent webinar for the International Automotive Remarketers Alliance.

Doug Turner, of JD Byrider, said the pandemic disrupted how they normally do business.

“Traditionally, our business model has been a very hands-on approach,” Turner said. “What I mean by that is sales, collections, service and buying. Traditionally, we like to see and touch and feel it.”

Quickly, however, Byrider realized it had to tweak the way it did business.

“One example is that online retail sales have been a big success for us and we’ve even had to push ourselves harder than what we have done in the past to transition over from on-lot sales to online transactions,” Turner said.

“So, that’s been a big win for us.”

Chris Clarke of ARI said the early part of the downturn presented some “pretty significant challenges” like big drops in conversion percentages, issues with transportation and significant price drops.

But March and April were followed by more positive news during the past four to six weeks, Clarke said.

ARI has seen a little bit of a V-shaped recovery, partially due to the mix, he said.

Eric Janca, remarketing manager of Canada-based SCI Lease Corp., said one challenge involved a customer on the lease maturity side of the business.

“We really worked on securitizing the customer and giving them an extension if they needed it for the vehicle before they returned it,” Janca said.

The other goal was to securitize the firm’s assets, getting vehicles off dealers’ lots and moving them to auctions in secure environments.

“It was a challenge since a lot of dealerships were closed down, especially here in Ontario and Quebec in Canada,” Janca said. “Every day seemed to be a new challenge for us.

“Everything became more important, like becoming friends with a service department, because if they’re open, maybe they can get that customer’s return back for you.”

Communication within an organization changed as well.

Byrider CEO Craig Peters
JD Byrider CEO Craig Peters

Turner said JD Byrider CEO Craig Peters did a “fantastic job” in daily communications with both company stores and franchises.

“It was just a basic daily summary of what’s going on, but he kept everybody in the loop,” Turner said. “He also challenged the leadership team to get out to the stores. If we’ve got team members out in the stores, we need to go out and talk to them and listen to them.

“We did not become secluded in an office or at home. (Peters) did that right with us. That was really good to see.”

Janca said town halls for SCI Lease Corp were set up through weekly video and Zoom sessions.

“They also set up podcasts, which I think was really neat,” he said. “Whenever the employees have time to watch it, they watch it.”

Employees whose workload dropped off – such as those in credit and funding – came in to help others in collections and lease maturities to get cars back and take care of customers, Janca said.

Tough decisions were also made to move inventory when most auctions were closed.

Turner said putting a lot of repos on hold did affect the number of vehicles they bought and sold at auction during the downturn.

“Now that’s starting to pick up because we’re starting to repossess those vehicles,” he said.

But with vehicles that wholesale between $2,000 and $2,500, an online venue would not normally be an optimal choice.

“In normal situations, we always had a belief we had to liquidate that across the block,” Turner said. “This time has really opened up our eyes, No. 1, to the value of CRs as a seller and No. 2, to making sure we can give a comfort level to the buyer that they can buy a sub-$5,000 car online.”

Byrider has taken a more “dramatic” approach to selling through online sites, even with repos.

“We’re seeing some very good success stories,” Turner said.

Brooks Stewart of US Auto Sales & Finance said deciding whether to buy or hold was in some cases out of their hands.

“We’ve got some lender agreements that we have to follow,” he said. “We just don’t have any choice.”

But Stewart’s company did do a lot of deferments to allow companies to have additional time for their paycheck protection program (PPP) loans to kick in.

Janca struggled with the dichotomy between retail and wholesale demand.

Repos affected the # of vehicles bought at auction during the downturn
Repos affected the # of vehicles bought at auction during the downturn

J.D. Power reported how retail prices of vehicles were fairly flat through the downturn, while wholesale prices took a 20 percent dip, Janca said.

The company had to choose between the risk of holding a car for a month or two at $150 to $200 a month or taking an immediate 20-percent price drop in the lanes.

“I’m OK with holding a little bit,” Janca said. “I don’t mind waiting a month to see how this all unfolds. It worked out well for us.”

Clarke, however, has clients from various industries, with different motivations.

“We quickly shifted to a risk manager,” he said. “We continued to sell. Looking back, I still think it was

the right decision that we sold.”

It was about mitigating the client’s risk and converting vehicles into cash.

“Because, at that point, we had clients who didn’t know what rightsizing their fleets would look like,” Clarke said. “It’s always a delicate balance.”

Stewart said there is still uncertainty about the future.

“I do feel like what we consider the spring market has been delayed,” Stewart said. “I also think it’s unforeseen how long this is going to continue.”

But he expects an increase in repos moving into the late summer.

“How the market reacts to those will really be an indicator of whether it will be a V-shaped or U-shaped recovery,” Stewart said.

Rate this item
(1 Vote)
Last modified on Saturday, 13 June 2020 14:51