The Car and Truck Fleet and Leasing Management Magazine

How Should Fleet Resale Performance be Measured?

January 2006, by Mike Antich - Also by this author

A variety of resale guides are available for commercial fleet managers to use in benchmarking vehicle resale values and measuring the performance of their remarketing vendor. Recently, the advent of online resale guides is prompting some fleet managers to actively consider the use of other industry benchmarks. “I think with the availability of many online price guides at our fingertips, AMR is no longer the sole industry source. However, having said that, it is still a source of data. I continue to benchmark resales with our lessor against AMR percentages, but alternatively monitor other sources when there are significant differences between like-kind vehicle resale,” said Joe LaRosa, associate director worldwide administration for Bristol-Myers Squibb in Princeton, N.J. “Other sources available on the Web are,, and Kelley Blue Book.” Some fleet managers use online resale guides to price vehicles for employee sales. “We price vehicles for employee sales via for several reasons. Our drivers most frequently quoted this Web site as their benchmark, it is well known and respected by most, and is very accessible. No one was familiar with AMR; it was perceived as some secret pricing tool and resulted in mistrust of our employee sale quotes. For my remarketers sales (not employee sales), a reliable source is Manheim Market Report,”said Sue Miller, senior fleet manager, Fleet Management Services for McDonald’s Corp. Most fleet managers recognize there are no industry resale benchmarks that are 100 percent reflective of current market conditions. “As you know, AMR is supposed to be an unbiased guide based on an average of actual sales results from auctions around the country broken down into three zones. This seems to be a good way to benchmark prices on vehicles, but the data definitely needs to be cleaned up and clarified. No matter what the benchmarking source is, people need to realize that it’s not a bible on what cars are worth; it is a target to get close to or surpass, while taking into account market conditions, time of year, condition of vehicle, and the costs to sell, such as transportation, recon, etc.. A car is worth whatever the highest bidder is willing to pay for it that day, at that time, when it comes to an auction,” said Steve Ferdinando, president of Western Fleet Remarketing. “There is no one definitive price for a used vehicle,” added Jim Anselmi, fleet manager for Lorillard Tobacco. “I once researched the resale value of a specific Caravan. This included trade-in, wholesale, private sale, auction, and retail quotes from several established industry sources. The result was that no two prices were identical. There were major differences in prices between publications with an approximate $2,500 spread.” {+PAGEBREAK+} Reliability of Data a Factor
Consistency is an important factor in whichever resale benchmark is used. “My opinion is as long as everyone uses the same measure with the same consistent information for apple-to-apple comparison purposes, then it’s okay. For example, when quoting percent of AMR, it should only be stated consistently, as adjusted for miles, options, locations, before expenses and reconditioning,” said Tina Kourakos, senior manager, fleet & safety for sanofi-aventis in Bridgewater, N.J. However, some fleet managers want a new benchmark to measure resale values of commercial fleet vehicles. “Fleet managers want a different benchmark that is more true to the market. However, if AMR continues to be used as a benchmark, most fleet managers have to make an adjustment knowing that receiving 100 percent of AMR means the vehicle was probably in poor condition. At a minimum, I’m looking for approximately 150-percent AMR to know that I may have obtained the correct market value,” said Shelly Lofgren, fleet manager - North America for Honeywell International in Minneapolis, Minn. Scott Mayo, fleet director for Wendy’s International in Dublin, Ohio, seconded Lofgren’s viewpoint. “AMR does not represent the industry benchmark and has not for about two years. Their values are so far off that we stopped using them about 18 months ago as a benchmark even though we still receive their publication,” said Mayo. “It used to be that we all used the figure of 100 percent of AMR as a measure of how we were doing with used cars. Over the last year or so, it was not unusual to get 150-180 percent of AMR when we sold cars at auction or through our wholesalers. So if you went into a transaction hoping to get 100 percent of AMR, then you were leaving a lot of money on the table. It made it nearly impossible to use AMR to price vehicles to employees and gauge what you should be getting from wholesalers. We started using more auctions, especially Manheim, because we could get a true feel for the market based on what our vehicles actually sold for. We also started using the Manheim Market Report (MMR) as a benchmark. MMR seems to be much more accurate, and its data is current compared to AMR data that was always at least two weeks old,” said Mayo. Other fleets are transitioning to other industry benchmarks. “AMR has been the primary tool for many years by all fleet companies. In my opinion, AMR has not kept up with technology, and their numbers over time have not remained accurate with what is going on in the marketplace. For this reason, most major leasing companies are in the process of converting to new sources. I believe the three main sources of focus are Black Book, NADA, and direct with the major auction houses. Over the years I have found Fleet Lease Disposal to be a valuable source of information, as they have always been on the cutting edge of technology, pulling electronic data from multiple sources and data mining,” said Tom Armstrong, director of fleet operations for ThyssenKrupp Elevator. Frank Memolo, fleet manager for Panasonic, agrees. “AMR was always the yardstick used to benchmark vehicle sales and measure how well our leasing company performed at auction. Well, that yardstick is no longer good. What troubles me now is there isn’t an industry-accepted standard (yardstick) anymore, making it difficult to determine how well your used vehicles are selling,” said Memolo. High Mileage Deductions Concern Some Fleet Managers
Fleet vehicles are difficult to benchmark due to the fact that they are typically late-model vehicles with high miles that exceed consumers’ perception of normal mileage. “We continue to use AMR simply as a validation of the numbers that our lessors and used-vehicle brokers provide us. I’ve found over the years that AMR has been a good resource, but their mileage deductions are very aggressive. I’ve also used Kelley Blue Book and Edmunds online to check prices from time to time,” said Brett Quigley, fleet manager for Kellogg’s. Likewise, other fleet managers are concerned that mileage deductions are higher than they should be. “My opinion of AMR for fleet vehicles is not real high; the reason is most fleet vehicles are high-mileage, and AMR has huge deductions for mileage. Many guidebooks overstate actual market prices. I’m looking for a realistic book,” said Randy Burwell, fleet manager for Valero Energy. Timeliness of Data is an Issue
“I relied on AMR data for years. It provided us with benchmarks to ensure fleet management companies were getting a favorable return for vehicles coming off lease at the auctions. AMR allowed us to measure their performance. I also established employee purchase prices based on AMR,” said Anselmi. “Unfortunately, their biweekly publication became unreliable.” Anselmi continued, “There was a time when we did not receive an issue for months. We even subscribed to their electronic version and never received any data. This forced us to investigate other industry benchmarks.” Anselmi concluded, “A benchmark is only a reference point to measure performance. Whichever benchmark is used, it must be available, easily accessible, consistent, valid, and reliable. I don’t believe that’s too much to expect.” Henry Paetzel, fleet manager for General Mills in Minneapolis, Minn, echoed this feeling. “Today, not only is AMR not reflective of actuals, but I have not seen a copy of the magazine since early spring. In lieu of it, I’m using Black Book’s Used Car Xpress online product, NADA Evaluator program, and Manheim Market Report, although I’m not happy that any of these accurately reflect the resale value of vehicles,” said Paetzel. “Today, auto manufacturers promote their products based upon residual value as defined by ALG, and fleet management companies have their own methods for determining used-vehicle values. In theory, the auction report is the most timely and thus accurate to real market conditions, but I believe the condition of the vehicle is blurred, optional equipment is ignored, and values can be distorted with only a small number of sales of a specific model. Also, I can’t find a way to go back in time and view auction results for a vehicle sold in the past. My choice for now is to look at all, but use NADA ‘loan’ as the benchmark number. It’s not right, but it is a monthly publication allowing me to look up past values, shows adjustments for equipment and mileage, and appears close to auction numbers,” said Paetzel. {+PAGEBREAK+} Some Advocate Creating a New Industry Benchmark
“If AMR can no longer be depended upon to maintain current and timely data, it can no longer be relied upon to be an industry benchmark. The time has come for us to establish a new industry benchmark that all fleet management companies can rely on and utilize. I believe if we were to have a publication derived from composites of Manheim, ADESA, and ABC Auctions, this would serve as a better industry benchmark,” said Mark Radzely, director, government leasing for Mike Albert Leasing. One suggestion for a new industry benchmark is to use the resale databases maintained by the major auction chains. “I think the trend is to use AuctionNet or some other type of process that gives better and more current information than AMR is able to provide. The value of vehicles changes so fast that you need a source that is current and accurate,” said Dick Malcom, fleet manager for State Farm Insurance. Lofgren agrees. “I would like to see the benchmark as the average of actual auction prices received - maybe a Manheim measurement or a combined auction measurement. I think the better source to find the answer to this question is from the buyers (dealers) who attend auctions. When I visit an auction, I see many buyers carrying a NADA book. Are they bidding 80-percent NADA, 100-percent NADA, or loan value? Maybe this should be what the fleet industry should use as the benchmark,” said Lofgren. Another trend is to create composite benchmarks using various industry sources. “Right now we utilize a formula and strategy designed by our primary leasing vendor, Wheels Inc. called Wholesale Market Value, which, simply stated, reflects the vehicle sale prices in the current wholesale used-vehicle market,” said Jim McCarthy, director of vehicle management services for Siemens Shared Services in Iselin, N.J. “The value is based on vehicle specifics including year, make, model, equipment, mileage, and condition, and is indicative of the current used-vehicle market. Results from industry-recognized sources, including AuctionNet, NADA, and AMR supplement the Wheels sales results to determine the vehicle-specific Wholesale Market Value.” In the final analysis, consistency is the most important criterion for commercial fleet managers. “It would be nice if AMR would continue to provide the information that many of us have come to rely upon. People may have had their differences, but there appeared to be a stronger level of consistency with AMR than among other players. The question is: has their time come and gone, and are they still a viable entity?” said J.J. Keig, fleet administrator, Rentway Inc. in Erie, Pa. “The ultimate problem is how does a fleet manager benchmark values?” Despite the available alternative benchmarks, not all fleet managers are satisfied with the choices before them. “I have not found a ‘good’ guide to use in place of AMR. I have been trying to utilize online tools from the major auction chains, as well as my recent sales history,” said Debbie Mize, fleet manager for Hallmark Cards.
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