Much of the CEO panel discussion during the Vehicle Finance Conference hosted by the American Financial Services Association revolved around underwriting, originations, compliance and other matters associated with a finalized retail installment contract needed for delivery at the dealership.
However, moderator Charlie Vogelheim, who is the host at Motor Trend Audio and a partner at TPC Management Co., turned the conversation toward the importance of remarketing for few minutes. Each of the four finance company executives on stage described various points of view regarding the challenges commercial consignors have, especially with growing off-lease volume.
“What we’re looking for is stability in the industry. The better the remarketing channels are, they better they can distribute those vehicles, the better it is for evaluations,” said Vince Rice, who is executive vice president and head of national consumer finance at Bank of the West.
“From a lender’s perspective, the more stable things are, the easier it is for us to price to the market and estimate our losses. The better and more remarketing channels is always more positive for us,” continued Rice, who also was installed as the new chair of AFSA’s Vehicle Finance Division Board.
Dale Jones, executive vice president for the Americas at Ford Motor Credit, referenced the off-lease volume projections many experts have shared, noting that likely way more than 3 million units will be coming down the lanes this year.
“As (volume) continues to grow, that’s a lot more vehicles that are going to be pushed through the same brick-and-mortar channels at the physical auctions,” Jones said.
Vogelheim followed up by asking how not only the auction market but perhaps online entities such as Shift and Carvana will help to absorb the excess off-lease volume.
Under a new partnership between the two companies announced in December, Hertz will use Shift’s online vehicle sales platform to sell its fleet vehicles directly to consumers.
Meanwhile, nearly a year after doubling the floor plan credit line for online retailer Carvana, Ally Financial announced a new agreement with the company in January where the finance company will make up to $600 million available to Carvana during the next 12 months through financing and bulk purchases of contracts.
“Using online as a way to look at remarketing and purchasing vehicles … it makes for a nice combination of what goes through the physical auction and what goes through online space,” Jones said.
“I’m sure they’re growing and will continue to grow, especially as the supply of off-lease continues to grow over the next couple of years. We’re going to need both,” he added.
Mark O’Donovan, the chief executive officer at Chase Auto Finance, also joined the conversation about remarketing. O’Donovan shared that since the bank handles leasing programs for its manufacturing partners — including Mazda, Subaru, Land Rover and Jaguar — “as percentage of our overall business, it’s quite manageable.”
But an area O’Donovan mentioned that commercial consignors need to monitor closely is how data can assist them in securing the best performance possible out of the remarketing efforts.
“Our vehicle remarketing head is working diligently on a very detailed plan on how we can use data more effectively to help us. It is going to be critical. Every $50 to $100 matters when you’re talking about this kind of volume as they go through the funnel,” O’Donovan said.
“The data is massive and getting ahead of it is massive,” he continued. “There’s a lot of opportunity out there but it’s a question of how do you get to the data and use it to your advantage. A lot of data to me is useless unless you have the right analytics and framework around it to make it useful. We’re very focused on that.”
The fourth executive involved in the CEO panel was Exeter Finance’s Jason Grubb. While that finance company doesn’t participate in leasing, rather catering to consumers in the subprime space, Grubb offered another perspective on what might eventually happen to off-lease units and the critical component remarketing has.
“The cheaper that used cars get in the future, the better that will be for our customers,” Grubb said.
“Affordability for our customers is really important. Those 2015s, those are good cars for our customers. It will be great for our future originations,” he added.