Manheim’s Analysis of Repossession Remarketing Challenges
After discussing 2012 repossession volume and where levels could be heading, Manheim explained how the remarketing of repo units remains a “struggle” as auto finance companies are looking to move substantial volume upstream and online.
Manheim acknowledged lenders are focused on converting repossessed units into cash as quickly as possible. Although the biggest stumbling block to a quick sale often lies outside the control of the lender or auction (such as state laws that dictate the process of collateral collection and liquidation), the company stated auctions and lenders have been successful in streamlining the processes that they do control.
“Still, there are several hurdles to overcome when remarketing repo units upstream,” the compnay said in the 2013 Manheim Used Car Market Report, which Manheim released this past weekend at the NADA Convention & Expo in Orlando, Fla.
Manheim explained the most critical factor is to ensure that units are listed on a platform that aggregates a large buyer base and is governed by transparent policies that protect both buyer and seller.
That process begins with third-party inspection so the units can be posted online.
“The condition report is critical to help online buyers assess the condition of the repossessed unit and make a smarter buying decision,” the report said.
“Understandably, third-party inspection companies can struggle to staff inspectors at many repo satellite locations due to the unpredictability of recurring volume,” the report continued. “This creates an artificial delay in the upstream listing and posting process, which in turn, can contribute to a higher propensity of the repossessed unit incurring additional lot damage while waiting on an inspection.”
Manheim calculated that the cost of timely and accurate inspections continues to erode margins for both dedicated repo remarketers and third-party remarketing companies.
“Emerging seller-initiated mobile listing applications such as Manheim’s myMobileListing tool may ease this burden in the coming months,” the report said.
Manheim noted additional process challenges occur when selling units upstream. Webb pointed out many repossession agent locations are not staffed to support vehicle pickup and release functions. He also mentioned many of these facilities are not designed to facilitate post-sale transactional processes, including vehicle pickup.
“Many repossession lenders have adopted a hybrid approach, listing units for sale while in transit to a physical auction location, or using a midstream listing approach where repo units are posted for sale in recurring online event sales prior to running in a physical lane,” the report said.
“This strategy has proved to be very successful for many dedicated repossession companies, third-party remarketers, and larger institutional lenders,” the report went on to say.
Furthermore, Manheim reiterated that repossessed units are typically remarketed with no reconditioning. He said these units are often purchased by wholesalers who do some cosmetic work and then re-wholesale the unit.
“This arbitrage should not be looked at as a lost opportunity by the remarketing lender, but rather as the wholesale market efficiently getting vehicles to dealers in the condition they desire,” the report said.