CARY, N.C. -

Editor's Note: This is a special online preview, available only to CMG Premium subscribers, of Auto Remarketing's upcoming special print edition for the NAAA Convention. The excerpt below is Part I of the feature, which looks at reconditioning trends. Stay tuned for Part II, which examines transportation/logistics.

Unprecedented trends surfacing during the first half of the year created unique — but similar — business activities for the wholesale auction industry’s two largest operations.

At Cox Automotive’s Manheim and KAR Global’s ADESA, soaring wholesale values triggered changes in which customer segment sought reconditioning services. And rising wholesale prices pushed dealers to look far from their lots to find profitable inventory, triggering more demand for transportation.

Auto Remarketing reconnected with top executives who elaborated about these circumstances, beginning with KAR Global chief executive officer Peter Kelly.

“We have seen some changes within the reconditioning side of our business, but for different reasons,” Kelly began. “Historically, our focus has been on wholesale reconditioning, getting cars suitable to run down the auction lane. Most of that work was done for commercial sellers. It was certain work like dents and minor mechanical things. I would say that work continues. But there are factors at play. One, the commercial supply of vehicles at auction has been lower. Also, since it’s been such a strong market, some sellers are less inclined to spend the dollars because they already know they’re going to get a good price without the recon. In a strong market, we oftentimes find sellers on the margin not investing in recon.

“But we are seeing significant growth in demand for what I will call retail reconditioning. Getting cars fully reconditioned to a retail standard, which is a considerably higher standard of preparedness of the vehicle,” Kelly continued. “There’s a 160-point check, reconditioning to meet certain standards, safety checks and more. We’re seeing growth in that from some of the large independent used-vehicle retailers but also from dealers, as well.”

Kelly’s assessment prompted chief financial officer Eric Loughmiller to add, “When you deliver a car to a consumer, they want that car to show up at the lot or show up at their driveway ready to go,” noting that ADESA shops are replacing lots of tires and batteries nowadays along with completing oil changes.

Over at Cox Automotive, it’s a similar scenario. Alan Lang is divisional vice president at Manheim.

“We’ve seen quite a rise in demand. But the thought of full-scale reconditioning services being the same as they’ve been historically has not necessarily been the case,” Lang said during a phone conversation with Auto Remarketing. “You have to look at through the lens of two different rooms. Wholesale recon services have actually declined. But we’ve seen a large uptick in retail reconditioning demand. Essentially that’s a byproduct of a high-demand, hot market.

“From a seller’s side perspective, we’re typically seeing things related to detail only and maybe bypassing some of the other areas because of the sheer lack of inventory out there. Some units are coming in a little bit rougher but the demand has been so high that price and retention values have been so high that it has not been as relevant for the wholesale recon side when you think of mechanical and body work. It’s mostly been in the detail room,” he continued.

“One of the things from the buyer side we’ve seen a tremendous increase in demand for our retail reconditioning services. That’s something we’ve certainly invested in as a company for the last several years, not just related to the pandemic and the reactionary move toward some of those services,” Lang went on to say. “That’s been centered around detail, dent removal, small mechanical areas, things like that so the dealer is getting the car from the auction location to their front line without having to do those things themselves as they’ve experienced challenges in their own shops and marketplaces. At Manheim, the value we bring is scalability to be able to handle all of that for them.”