CarLotz owners say they founded the company because they were “frustrated with the process of selling a used car.” About three to four years ago, the company began helping commercial clients ease those same frustrations.
And recently, CarLotz came up with a new method that it says can help companies sell those vehicles quickly with higher profits and address a blind spot, of sorts.
It’s calling the product, the Facilitated Virtual Marketplace, or FVM.
Before starting FVM, CarLotz’s initial service to those commercial clients was to help them “get retail dollars for their cars,” making thousands more than wholesale, “and we would do all the work for them,” said CarLotz founder and chief executive officer Michael Bor.
Over time, the company began working with clients that it described as “assigned blind,” meaning those clients would assign cars to CarLotz before they had a chance to determine the vehicle’s condition. Some of those vehicles “just don’t lend themselves well to retail,” Bor said.
“It might be in much worse condition than anyone guessed, from a mechanical or cosmetic perspective,” Bor said. Or it might be at a trim level that is unattractive to the retail market, Bor said.
What the Facilitated Virtual Marketplace entails
“So there are a few reasons why a vehicle might show up and … not be suitable for retail,” Bor said. CarLotz started the Facilitated Virtual Marketplace to address such situations.
If a substantial number of a company’s vehicle consignments are blind, meaning they are consigned to the remarketing channel of the seller’s choice before the seller receives a formal condition report or even has anecdotal knowledge of its condition, the seller might send retail-ready units through a wholesale channel that might bring lower sales proceeds than the seller would have received through a retail remarketing channel.
Bor adds that on the other side of the equation, the seller might send vehicles to a retail remarketer that are more suitable for a wholesale channel, and that could waste time and transport costs.
CarLotz sought to help sellers maximize proceeds through retail channels while also unloading more challenging vehicles, and doing that without sacrificing time and money.
The selling company could ship the vehicles to a physical auction in hopes of selling quickly through the physical lane. The seller could also use one of the new online auctions, which typically allow the seller to list and sell faster and avoid the cost of shipping to the physical auction. But with that option, the seller must conduct a vehicle assessment that could cost time and money.
CarLotz says its Facilitated Virtual Marketplace is another option that it says can help sellers sell vehicles quickly with higher profits.
How it works
When a remarketer sends a vehicle to CarLotz for retail sale, the CarLotz team conducts a condition report and quickly lists retail-ready vehicles for sale. CarLotz says that leads to the fast sale that remarketers want but with the higher financial return of the retail market.
In some cases, however, the vehicle condition report process shows a great deal of cosmetic or mechanical issues that make the vehicle more suitable for wholesale remarketing. Shipping those vehicles to a physical auction could cost the remarketer hundreds of dollars in transport costs, according to CarLotz.
Instead, CarLotz brings the FVM process to its retail stores. The company describes it as a “streamlined experience” that it says saves money for remarketers who don’t have to pay additional shipping fees to the physical auction.
It also speeds the sale through selling virtually, “instead of waiting for the once-weekly cadence of the physical auction.”
“It’s really enabling our account to more confidently send us higher volumes of vehicles because they know whether it’s retail-appropriate or not, it’s going to get sold,” Bor said.
CarLotz’s commercial accounts include large fleet management companies, banks, credit unions, third-party remarketers, other dealers, small- and medium-size businesses and all the way up to Fortune 500 companies, “really anyone who otherwise might sell a car at auction,” Bor said.
Bor said that when a company sends it a vehicle for retail sale, the CarLotz team performs a condition report and lists retail-ready vehicles for sale. That results in a quick sale that the remarketers like and also results in the higher financial return of the retail market.
Bor said, however, that the condition report for some vehicles might show many cosmetic or mechanical issues that would make the vehicle more suitable for wholesale remarketing. Shipping those vehicles to a physical auction can cost the remarketer hundreds of dollars in transport costs, Bor said. Instead, CarLotz brings the FVM process to its retail stores.
Bor gave a more specific example of how it works. If a commercial client communicates with CarLotz that it wants to sell 35 Ford Fusions in a specific area of the country, CarLotz will handle transportation of the vehicles to the CarLotz location that is closest to the vehicles’ location.
CarLotz then checks the vehicles’ mechanical condition, determining whether each vehicle should be sold through retail or wholesale.
“Our clients typically send us stuff that’s … ready for retail, so if it’s a retail vehicle, we … get it reconditioned, made to look perfect, and put it on our front lot and we sell it like any retailer would sell a vehicle,” Bor said.
If the vehicle shows mechanical or cosmetic issues CarLotz deems it to be not retail-worthy, or if CarLotz determines that retail is not the right venue for that vehicle, it will then partner with ACV, TradeRev or another online auction and sell the vehicle through one of those channels.
“So without having to ship it to an auction location, [or] deal with it through a wholesale channel, whenever the auction is running that week or next week, we can do ACV or TradeRev the next day and get it sold very quickly at a wholesale price, and our clients get their wholesale proceeds,” Bor said. “And we don’t incur any additional time or expense to get it done, and we get that car sold for our clients.”
Bor said CarLotz is in the process of rolling out the FVM service to all of its clients.
“The goal is for our clients to feel more and more comfortable that they can blindly send us vehicles and regardless of whether it’s retail-ready or not, we’ll be able to triage the vehicles and do the right thing for that vehicle for our clients.”