If you think about it, fleet management companies and individual fleet managers seldom see the vehicles that those of us in remarketing focus on every day.
The process is fairly formulaic: A dealer delivers the new unit to a driver; we arrange the pick-up of the old vehicle either from the dealer, a remote company facility, or the driver’s location; and of course, the client wants the old vehicle off their books as quickly as possible, which is understandable since that old vehicle is no longer a "revenue producing tool.”
Terms such as upstream, midstream, and downstream are used by the industry to describe points in the remarketing process and the targeted potential buying audience.
Here at Donlen, we utilize a multitude of options along this remarketing timeline to optimize the potential of the remarketing process for our clients, and we carefully choose the right auction partners to help along the way.
Some in the industry regard auctions as the sale of last resort because vehicles usually don’t pass out of the auction without being sold. Fleet management companies rely heavily on their auction partners to get the remarketing job done quickly and efficiently. We're often asked how we select our auction partners, and I can tell you that Donlen goes through an extensive selection process to identify the right auctions.
First, to be considered, auctions must be National Auto Auction Association members. Membership in the NAAA carries with it adoption of and adherence to the high standards and ethics of the organization. In addition, Donlen has minimum criteria in areas of fees, speed of payment, Internet access, and account management that have to be met before an auction can be considered.
Frequently, we’re offered “test sales” by auctions that would like to do business with us. Donlen doesn’t participate in test sales; we feel that we have a better way to determine whether an auction adheres to our high standards. A typical test sale would be 10 or so vehicles run at the new auction. We don’t feel this small sample size is an adequate way to evaluate a potential auction’s performance.
Instead, we ask the potential auction to furnish data on at least the most recent 90 days’ sales from the fleet lease lanes. This request typically yields thousands of vehicles. Using Donlen’s National Auction Index tool, we measure the sales performance of the potential auction partner against our NAI benchmark from the time of the sale.
Since we also use NAI to benchmark our current auctions, we can compare the sales results from the incumbent and challenger auctions on hundreds, if not thousands, of vehicles over time without moving or risking our clients’ vehicles. And we do this regularly, usually two or more potential auctions each quarter.
Data analysis is only the first step in the selection process. We also look to auctions that will truly partner with us to deliver the best outcomes for customers.
They must understand our goals, benchmarks, and measurement processes. We publish a monthly scorecard ranking each auction’s performance, and all the auctions can see where they rank in relation to their competitors. The areas we evaluate in the scorecard are: sale price in relation to the NAI, days to secure, days to sell, days to the condition report, and total expenses.
We reduce all these factors into a numeric score for each auction and publish the ranking and score every month. These scorecards are watched closely not only by Donlen, but by the auctions as well. The competitive nature of the scorecard rankings has actually improved the performance by many auctions over time, which is a win-win for everyone!
Bottom line is that fleets need to have confidence that the auctions they are working with have been first carefully selected using a number of criteria, and then measured and benchmarked on an ongoing basis. This will ensure they are getting the best return on their investment.
Editor's Note: Gus Xamplas is the vice president of remarketing at Donlen.