The last two years of unprecedented used car values made vehicle remarketers look like experts — without having to work that hard at it. But as the wholesale market corrects to historical normality, consignors need to flex new muscles to keep holding costs at bay.
There is plenty of room for improvement, two remarketing experts say, from buying smarter and rethinking reconditioning to inspecting and streamlining your disposal process.
Buying for Resale
Getting the most for your car on the back end begins at the front. This means buying a vehicle for fleet that the end buyer wants, says Joe Lyons, remarketing and fleet sales manager for Marple Fleet Leasing.
Having a vehicle that is properly contented for the used car buyer has “been a fleet issue for 30 years,” says Lyons, who was also a remarketing manager for Dollar Thrifty Automotive Group.
Power windows and locks are essential equipment today, even for the cheapest of subcompacts. Lyons recounts taking a $400-$500 hit at auction with Dodge Calibers because they didn’t have power windows. “It’s worked its way down to that level,” he says. “There are people today who haven’t experienced a car with crank windows.”
Color counts. Lyons remembers a group of Ford Focuses in pastel green that sold for $300-$400 less than those with more neutral colors. But choosing cars with colors that sell can be a moving target. “Certain colors come in vogue and then become the kiss of death, and suddenly the manufacturer brings it back again,” he says.
Watch out for certain finishes on new cars, such as three-stage paint or pearlescent coats, because they cost more to repair and those types of finishes are harder to match the paint, Lyons contends.
Interior color matters as well. “Go with darker interiors,” he says. “Lighter interiors show every stain imaginable.”
Where you sell is a factor. You might save some money by buying SUVs without four-wheel drive, for instance, but you could feel it on the back end. While Lyons says he would have a hard time selling a two-wheel drive SUV in his area, metropolitan Philadelphia, “You’ll sell the heck out of them in Texas and Florida and Alabama,” he says.
On the other hand, if you bought four-wheel drive SUVs in the southern markets, you wouldn’t necessarily see a commensurate return on resale. While moving vehicles to sell them in a different region is an option, cost is always a factor.
Before you buy, understand what’s hot and what’s not — options, powertrains, color or trim level — in your used car market. Lyons suggests gaining input from whoever will remarket your vehicles, whether it’s your remarketing department or wholesale buyer.
Watch the Odometer
Certainly, mileage correlates to sale price. But in Lyons’ experience, vehicles with inordinately high miles could lose more money at auction than expected. “With higher miles on a relatively new car, sometimes the MMR (Manheim Market Report) adjustment may not be in line with what the actual market is bringing,” he says, adding that higher miles could hurt the value even more, especially for premium and luxury cars.
Dealers don’t want cars in the current model year with mileage higher than the teens, Lyons says, understanding that a current model-year car competes with a new one. For a 1-year-old car, 20,000 miles into the low 30,000-mile range is acceptable, while a 2-year-old car should be sold with mileage that is still under warranty.
Pulling cars out of fleet with some mileage left on the warranty makes it easier for the dealer to get it certified for a manufacturers’ CPO (certified pre-owned) program. It’s also cheaper to add an extended warranty if the car is still under the manufacturer’s warranty, Lyons says.
The Recon Question
Aside from a thorough cleaning, a traditional rule of thumb when it comes to reconditioning is to spend $1 to recoup $2. Another guideline is to understand if the reconditioning will improve the grade of the car. Outright repairs can get tricky, Lyons says, because in the auction grading system, you’ll still be marked down for a “previous repair.”
Paintless dent removal (PDR) and glass repair is generally money well spent, Lyons says. PDR improves the quality of a panel without getting hit for a previous repair because you don’t have to repaint it.
Chips in bumpers can be repaired for $200 or less, and repainting a bumper is an acceptable repair.
Wheel repairs are similarly acceptable. There are services to repair a scraped wheel for $75 without having to replace it for $400, Lyons says.
A small crack in a windshield that hasn’t “spidered” can be repaired for about $45 with a resin solution. If you have to fully replace, aftermarket glass may be cheaper but can lead to problems. Lyons has seen cars rejected at auction because the windshield replacement blocked a clear view of the public VIN plate on the top of the dash. In addition, if the dealer wants to get the car certified, manufacturers require OEM glass for that model.[PAGEBREAK]
The Tire Strategy
Having mismatched sets of tires seems like an obvious no-no, but “it happens — you’d be surprised,” Lyons says.
If all four don’t match, then they should at least match by axle. Instead of mismatched brands, an option is to replace all four tires from a cheaper, lesser recognized brand so they would all match. But take caution; CPO programs not only require all four to match, they may require an OEM brand. Again, it’s best to check with the CPO program first.
It’s also best to monitor tread life, for obvious safety implications and financial ones too. A buyer will ask for an adjustment for tires if they have a badly worn tread. And some states won’t allow a vehicle to pass state inspection if the vehicle has less than 30% tread life remaining, Lyons says.
Plan ahead: When you do your last preventive maintenance on the car, evaluate whether the tires will still be safe at the time of sale. Replacing the tires during scheduled maintenance helps prevent having to buy new ones at the last minute and lets you gain some miles out of them as well.
Replacing Missing Parts
Missing interior trim parts might slip through at auction, or not. “Some of those little things will turn people off to buying your car,” he says.
Lyons recounts an instance in which a button for a radio was missing, and that button was not replaceable by itself — buying the whole radio was necessary, which ran $450. He found that model radio in a salvage yard for $75 to replace the button.
Sellers sometimes add aftermarket enhancements such as sunroofs or pinstriping for a higher return in the auction lane.
“There may be some things you can do to enhance value but be careful not to do something to prevent it from being certified,” Lyons says, pointing out that Toyota will not certify a car with an aftermarket sunroof.
Lyons is a proponent of pinstriping if it makes a dull car stand out. Going further, certain models such as a Dodge Charger might sell better with a graphics package or even by adding a rear spoiler, which better approximates that car’s sport model, Lyons says.
“The more the car approximates what the retail buyer wants, the quicker the car sells and the better price you get for the car,” Lyons says.
Inspect and Streamline the Disposal Process
Within remarketing, it’s important that you gain the most out of resale centers not only on the vehicle itself, but on cost savings in the remarketing process. “Grade and evaluate every dollar spent,” says Tim Deese, who wrote 15 certified pre-owned programs and is principal and founder of Progressive Basics, a dealership training consultancy.
Deese recommends asking yourself questions such as: Can you negotiate a better storage fee? Can you do better on your transportation costs? Where are these cars being marshaled? How many times are they being moved before going to the disposal site?
If it’s been a long time since you’ve done an investigative review of your reconditioning procedures, whether you recon internally, outside or both, now is the time.
Deese recommends a physical inspection — an impromptu one — of vehicles that have just been reconditioned. Ask for a list of items included in the reconditioning. Compare what you saw with what you’re being charged for.
Make sure your recon team is doing the little things correctly, Deese says. Be sure they top off fluid levels, air all four tires and check the spare to make sure it’s inflated. If they wash the grease out of the door jamb or hood, make sure they’re re-siliconed so they don’t squeak. Open the hood and check for battery corrosion.
Deese recounts a situation in which he found the seller had been cosmetically reconditioning cars before putting them on tractor trailers to auction. The cars got dirty along the way and sat in the marshalling yard, and by the time the sale came, they were being reconditioned again at an added expense.
In that vein, if you’re having the tires treated with Armor All, wet tires and fender wells tend to pick up sand and pebbles if the car will be driven elsewhere. “The car won’t even look like it has been washed,” Deese says.
Build the Storybook
Deese also recommends a way to increase end users’ confidence in vehicles they are buying is through a website called car-bio.net.
“In the U.S., the private individual is going to sell 30 million more cars than the dealers are,” Deese says. “How do they do it? The main thing they do is tell the car’s story. If you can tell it, you can sell it.”
Car-bio.net accomplishes this by collecting the vehicles’ service records, and, along with a Carfax report and the car’s specs and reviews, puts it into a printed “storybook” that is left in the vehicle or is available to the buyer electronically. The cost is $38 per vehicle. “When the dealer buys a vehicle that already has a storybook, he doesn’t have to pedigree it,” Deese says.