Upstream Vehicle Remarketing Arrives for Closed-End Leases
Emkay, one of the nation’s oldest fleet management companies, launched its upstream remarketing product, Fleet Exchange, with the client in mind: higher net realizations on vehicle sale with less administrative burden on the fleet manager. But one of Fleet Exchange’s biggest customers may be Emkay itself - through upstream remarketing of Emkay’s closed-end lease vehicles.
A national company, Emkay manages some 60,000 vehicles for more than 1,000 clients; more than 10,000 of these vehicles are on closed-end leases. The closed-end portfolio is primarily cars, SUVs, and minivans, with lease terms of about 30 months/50,000 miles. Until recently, Emkay has remarketed its closed-end vehicles through traditional channels such as physical auctions and wholesalers. “But the realizations can be uneven, and as the closed-end portfolio grew, we would have to add staff to manage the remarketing,” said Greg Tepas, group VP, operations and international sales. With the introduction of Fleet Exchange, Emkay looked to improve this situation.
Full Features Offered
Fleet Exchange is a full-featured, online upstream vehicle remarketing program. Vehicles approaching the end of lease term are offered first to the driver, then to other fleet client employees, third to employees of any participating Emkay fleet client, and finally to selected institutional buyers. Users search for vehicles on the Fleet Exchange Web site, powered by Driveitaway, Inc. Users can view the vehicle description, a third-party inspection report with up to 30 photographs, and often, full service records and any accident history. Call center support is available for users who experience difficulty.
According to Emkay, Fleet Exchange improves net realizations on vehicles sold upstream by eliminating out-of-pocket expenses, such as transportation costs and auction fees, and by selling the vehicle before turn-in (reducing depreciation). “We’re targeting an increased net realization of $800-$1,200 for each upstream sale, and the Internet platform reduces the administrative burden on the fleet manager,” explained Tepas.
dapted to Closed-End Leases
While Fleet Exchange was designed for open-end lease clients, Emkay quickly decided to adapt the program to its own closed-end leases. “If we recommend Fleet Exchange to our clients, then certainly we should be using the same approach ourselves,” noted Jack Rennels, senior VP. Emkay applied upstream remarketing to closed-end fleets with at least 20 vehicles. Client reaction was favorable. “Some clients expressed interest in applying Fleet Exchange to their open-end vehicles, and we’ve been issuing passwords to our demo site,” commented Jeff Bescher, VP, remarketing & fleet services.
The current re-order cycle represents the first experience with upstream remarketing closed-end lease vehicles, but Emkay expects solid results. “Upstream programs can sell 25-50 percent of the vehicles listed, depending on pricing strategy and the range of potential buyers on the system,” said Tepas. “Within a few order cycles, we expect to be at the top end of the range.”