Remarketing During COVID-19: Resale Value Impacted but Rebound Expected
By Darrin Aiken April 17, 2020
During this time of economic uncertainty, it’s understandable to have concerns on the impact to the used-vehicle market.
Our remarketing strategy leverages a variety of sales channels with the goal of achieving a fair price. During times of market variability, I monitor daily performance of these channels using both leading and lagging indicators. Wheels will continue to sell vehicles on your behalf as long as we are able to obtain a fair resale price.
While we’re still in the early days and can’t predict how the market will ultimately fare, here are some insights gleaned from the data available so far.
Vehicle sales now 100% online
By mid-March, the two largest auctions Manheim and ADESA along with independent auctions made moves to temporarily halt in-person selling and are now fully utilizing a simulcast- or digital-only model.
Before the pandemic, 40% of Wheels’ vehicle sales occurred online due to our well-established infrastructure and brand reputation. This has allowed us to swiftly adapt to the present situation and sets us up for success in current market conditions.
Remarketing yields are presently impacted
Wheels’ assessment on the state of the used vehicle market is based on our daily performance metrics. Based on this data, the pandemic started impacting vehicle value toward the second half of March.
The Black Book Commercial Index (BBCI) is an important metric for analyzing used vehicle sales. However, it’s a lagging indicator due to its monthly publishing cadence. Its latest report was published before the pandemic’s impact on the market took hold. Once BBCI is republished it will appear as performance has improved due to the adjustment in the index values. Leveraging a variety of sources allows us to measure the true impact of the pandemic.
I’m monitoring our daily performance at both a regional and unit-type level. The regional breakdown of the index shows a near even decline across the U.S. and Canada. However, there are slight variations among unit type. Specialty vehicles, such as minivans and regular sedans, show less of a downturn than their SUV, full-sized sedan and light truck counterparts.
The silver lining: The market is expected to correct itself. As we settle into our “new normal,” buyer caution will likely diminish, and activity will increase.
Continue vehicle cycling unless business needs conflict
In most cases, there’s no need to divert from your present course. The only known factor amidst this pandemic is its unpredictability. Some people might believe holding onto a vehicle can help yield a larger return when the pandemic ends. However, this is a risky move. When a vehicle passes the optimal replacement point, the risk for unplanned maintenance rises. The cost of additional maintenance increases the total cost of ownership for that vehicle, potentially eroding the benefit of the higher resale price.
I recommend having discussions with your fleet consulting manager to identify a strategy for when it’s best to hold or sell your vehicles. As this situation evolves, we’ll remain in close communication to provide our most up-to-date recommendations.
If you have questions, contact your Wheels Account Team or reach out to me at email@example.com.