Upstream digital remarketing isn’t a future trend — it’s already a game changer in parts of the remarketing business, and a drag in others. The difference comes down to where and how you use it.

As we discussed in the first segment of this series (read the first article here), let’s take a look at why, how, and where it’s best utilized today.

The upside is straightforward. Who doesn’t want to avoid moving an asset to a physical auction, save on transportation and reconditioning costs, and sell a vehicle up to thirty days sooner for the same or more money than downstream?

Many physical auctions today have a large base of digital simulcast buyers, but a digital-first strategy still delivers outstanding national reach. As we covered in the first segment, success here depends on the dealer base a marketplace has and how well that dealer base matches the product mix being offered. The right product mix and sellers, paired with proper marketing, will bring the right dealers along with them.

Having spent 15 of my 20 years with remarketing as part of my responsibilities at a large financial institution using upstream remarketing, I can say confidently that it works well for banks and captive finance companies selling off-lease vehicles once they’re grounded. That’s not a gut feeling — it’s confirmed by extensive data analysis across multiple sales channels.

You’ll occasionally hear that vehicles can be offered before grounding, but that almost always turns into an operational nightmare. Some will also raise concerns around stolen vehicles, storage issues at grounding locations, and double sales — legitimate risks, but ones that a disciplined grounding-verification process and key controls largely manage with some exceptions.

Once a vehicle is confirmed grounded — whether the lessee reports it by phone, through an app or web notification, or the grounding dealer notifies the financial institution via a grounding portal or phone call — it becomes prime merchandise for digital remarketing before moving to a physical auction. Done correctly, this can produce net retentions similar to or even better than downstream remarketing, in a much shorter timeframe. Between transportation and reconditioning savings and reduced depreciation, you can conservatively save $300–$400 on a typical off-lease vehicle.

Moving to fleet: it splits clearly between rental fleet and off-lease corporate fleet. Many larger rental fleets have bought into the benefits of upstream remarketing as part of their strategy today. Storage constraints often limit what they can do, but otherwise they see benefits similar to banking and captive finance sources. Corporate fleet outside of rental is a different story.

I spent time in the corporate fleet business from 2019–2021 and advocated strongly for upstream selling. I ran into a brick wall more often than not — fleet presents unique challenges, particularly vehicles that need service before sale, and fleet companies answering to multiple stakeholders.

Many of these obstacles can be worked through once the financial upside is clear, because upstream selling can meaningfully improve net results for both the fleet company and its clients.

Before I entered the fleet business, I was told it often lags ten years behind on technology adoption. I was skeptical, but a lot of that proved true. Of course, there are some exceptions. Things are improving as fleet leadership turns over and the business adopts technologies already proven elsewhere, as well as newer remarketing technology being adapted for fleet. That said, not every fleet vehicle is a fit for upstream — use analytics and operational KPIs to determine which ones are.

Finally, there’s repossessed assets. The potential benefits are the same, and the population of eligible vehicles is large, but the challenges are amplified by where repossessed vehicles are grounded and stored at scale. Repo agents are generally — with a few exceptions — not positioned to help auctions and lenders reduce storage time, cut key-making expense, or streamline pickup for purchasing dealers and transporters. Lenders also often have limited visibility (and limited resources to monitor it) into what’s still sitting on repo lots post-sale, which means they can’t always act before additional storage charges accrue. This isn’t a knock on repo agents — their job is genuinely hard, and most operate lean without the resources to take this on. They’re doing the toughest job in the pipeline, often picking up vehicles involuntarily and handling secure storage largely on their own.

So, this is an opportunity for the industry to change, or to find a better way to bring repo agents into the remarketing process. Neither is new territory, but I lean toward structural change as the better path to scaling upstream remarketing’s benefits for lenders. If I’d written this a week ago, I’d have ended there. But Copart’s acquisition of ACV Auctions gives me new reason for optimism in the repo space. One thing I learned early at ACV: scaling upstream repossession sales requires storage outside of repo agent lots.

I have no financial stake in this relationship, but I’m bullish on what it could mean for the industry — 200+ new potential marshalling and storage facilities in the U.S. for ACV to store upstream repo and other commercial vehicles instead of relying on repo agent lots. How successful this expanded storage network proves to be will depend heavily on execution between the two companies, and how well they work with commercial clients and their repo agents to make the most of the new footprint — transporting, storing, preparing, and thoroughly inspecting vehicles quickly enough to sell them faster without having to move them a second time and for equal or better net proceeds than the full downstream auction route repossessions typically take today. It’ll be worth watching closely over the next year.

 

This article was originally posted here: Part 2: Where Upstream Remarketing Works, Where It Struggles, and Where the Opportunity Still Lives | LinkedIn

Next week: A closer look from both sides of the gate about physical downstream auctions, auction reps, use of technology and analytics, auction guidelines, and scorecards.

About the author:

I’m a 25+ year veteran of the remarketing and automotive finance world, and an avid car enthusiast. Over that career I’ve managed bank and fleet lease-end operations, 1st- and 3rd-party remarketing, residual value setting and risk mitigation, and the sale of well over 1 million off-lease and repossessed vehicles. I enjoy sharing that experience with others in the industry — whether they’re new to automotive finance or seasoned veterans — as well as helping everyday consumers buy or sell vehicles with more confidence.

I’m actively seeking full-time opportunities in this space, and I’m also open to consulting engagements, including remarketing portfolio and strategy reviews. Reach out — I’d welcome the conversation.