With over 200,000 off-lease vehicles set to hit the remarketing channels this year, KAR Auction Services has much to look forward to, both in its online and physical auction channels — an environment company management said is “full of opportunity” during the company’s presentation at the J.P. Morgan 2014 Auto Conference.

But others in the industry are eying expanding used supply, as well, such as the publicly traded dealer groups, some of which have made significant moves into the used-car space lately.

For example, Sonic has been reaping the benefits of its in-house Sonic Inventory Management System (SIMS), as well as its standalone used store concept One Sonic-One Experience.

And Asbury announced back in April the launch of the standalone used Q Auto brand.  

During the Q-and-A portion of the KAR presentation, investors were curious as to whether these pushes would have any impact on KAR Auction Services, since some of the initiatives include bypassing the traditional auction and exchanging inventory between dealerships.  

Eric Loughmiller, executive vice president and chief financial officer at KAR Auction Services, said that these initiatives, in fact, have the potential to boost the company’s performance rather than hinder it.

“Of course they (pre-owned initiatives from public dealer groups) may have some kind of impact because they are exchanging cars between dealers, but the potential impact for us anytime there is movement of cars between dealerships is positive for our industry,” he said.

Loughmiller explained that KAR is still garnering revenue, even as dealers are “moving inventory around amongst themselves.”

“The reason is there is a lot of things we do that enhance that service. Look at the fee structure, it’s fairly nominal. We are getting $680 at auction when vehicles move from one dealer to another. And when you cut it down to online only for open-sales, its $300,” he said. “And guess what, with that fair value you create price discovery even amongst the individual locations within a national retail group.”

He also touched on the fact that many general managers rely on fair auction pricing for acquiring and selling inventory.

“As you know their general managers are compensated on local store performance. So it is very important that there is an accurate price when they turn inventory around,” Loughmiller said.

Jonathan Peisner, treasurer and vice president of KAR, chimed in, noting KAR has had a hand in the dealer-to-dealer selling space in the past, as well — an area that may hold more opportunity in the future when looking at the used initiatives of many of the publicly traded dealer groups as of late.

“We participate in the dealer-to-dealer selling space, as well. We put out a release for Prestige Auto Group in terms of helping them trade inventory among their various stores,” said Peisner. “So that’s another opportunity.”

KAR management also sees used superstores as a great boon to the company’s business, as more dealer groups launch standalone used stores similar to the CarMax model.

“The used superstores are great for us because it focuses on people who are retailing and marketing used cars to the consumer, and they have to get their inventory somewhere," Loughmiller said.

And even though many of these standalone used stores will be using newly developed inventory systems, such as SIMS, Loughmiller said this won’t put a damper on KAR sales.

He explained this assertion has a lot to do with the trade-ins these standalone used stores may be receiving.

“We absolutely know there is no inventory system that can generate the same quality of trade-in when you sell a retail used car every time. If you are selling a 5- to 7-year old used car, what are you getting in trade on those? A 10- to 12-year-old car,” Loughmiller said. “If that’s not your market, then the 10- to 12-year-old car becomes a wholesale transaction that we get an opportunity to be involved in.”

Overall, Loughmiller said KAR sees any increased focus on used cars as a positive, “though there is an element risk to it when they (dealer groups) do more on their own.

“At the end of the day, there is such a high value proposition of what we do, that we think we have a great selling proposition and have the opportunity to participate in both scenarios (standalone used stores and more dealers exchanging inventory) laid out there,” he concluded.

Editor’s Note: See the Sept. 15  NAAA issue of Auto Remarketing for more analysis KAR Services’ 2014 performance as well as strategic plans for the coming years.