Return of 'Normal' Used-Vehicle Market Demands Seasonal Remarketing Strategy
For the past three years, everyone has been a remarketing genius. The low inventory of used vehicles in the wholesale market helped inflate resale values by about 10 percent. However, as greater volumes of used vehicles begin to enter the wholesale market, vehicle supply will start to meet buyer demand, which will put downward pressure on resale values. In many ways, the new used-vehicle market will demand returning to the basics, namely recognizing the seasonality of the used-vehicle market.
For the past three years, everyone has been a remarketing genius. The low inventory of used vehicles in the wholesale market helped inflate resale values by about 10 percent. However, as greater volumes of used vehicles begin to enter the wholesale market, vehicle supply will start to meet buyer demand, which will put downward pressure on resale values. In many ways, the new used-vehicle market will demand returning to the basics, namely recognizing the seasonality of the used-vehicle market and knowing the best (and worst) time of year to remarket vehicles.
“During 2010-2012, remarketing success was a result of simply offering your product due to the very limited supply of used vehicles in the wholesale channels. As the volumes increased, it has become more important than ever to be strategic in one’s remarketing efforts. Not only using the appropriate channel and venue, but retention and depreciation levels are related to seasonality. You can’t just hold cars out of the market and out of service and wait for the stronger markets, but must work to take vehicles out of service during the more active and aggressive market times,” said Ricky Beggs, senior vice president, editorial director for Black Book.
So, what are the best months for vehicle remarketing? Traditionally, the best time to sell used vehicles is in the fall (September to November) and the spring (February to May). During these months, resale values may increase as much as 15 percent, as opposed to selling the identical vehicles in winter or summer.
Ad Loading...
The worst time to remarket vehicles is from late November until mid-February. Why? Many dealers are reluctant to put automobiles in their inventory prior to the first of the year because they have to pay property tax on them. Also, as cold weather and the holiday season approach, there is a decrease in the number of buyers in the market. With more inventory than buyers, prices soften. As a result, dealers try not to carry a lot of inventory during the winter. The exception is 4x4 sport/utility vehicles, which usually sell well during winter months.
After February, used-vehicle acquisitions by dealers usually begin to increase. After the winter season ends, dealers sell out the remainder of their inventory and are once again hungry for used vehicles. That’s why the spring used-vehicle market is so strong.
Sometimes this is easier said than done, due to the staggered new-model introductions by OEMs and long order-to-delivery delays due to quality holds.
“Often driven by the availability of replacement units, this is another area of change within the fleet industry as release dates have moved away from the traditional August to September time period,” Beggs said.
Despite this, one of your top job priorities as a fleet manager is to obtain the highest resale price for each company vehicle taken out of service. The best (and easiest) way to do this is by timing your vehicle replacement to coincide with seasonal highs in the used-vehicle market.
Ad Loading...
Also, keep in mind that certain categories of used vehicles have their own seasonal selling cycles. For instance, demand for used minivans is strong just prior to summer because this is the traditional vacation period and families are eager to buy this used vehicle type. On the other hand, full-size sedans traditionally are in high demand in March and April.
Knowing this, you can control vehicle depreciation costs by simply timing vehicle replacements to take advantage of seasonal market highs and avoid seasonal lows. Avoid selling vehicles in mid-December through January, because there is very little demand for used vehicles at that time of year. Not only do vehicles take longer to sell, but they also sell for less.
With a minimum amount of effort, you can lower your depreciation costs by simply remembering that fall and spring are traditionally the best times to sell your used vehicles.
During this period of ongoing supply constraints, the trust that fleet managers had with OEMs, upfitters, and dealers has been strained. Fleet managers say they have had too many experiences over the past three years coping with erroneous information, adjusting to multiple price increases, and feeling betrayed by inadequate transparency from suppliers.
The ongoing difficulty in sourcing replacement vehicles is forcing companies to extend the service lives of vehicles that are unable to be replaced, which, inevitably, increases unscheduled maintenance expenses.
Fleet simplification identifies asset functions to uncover commonality among the equipment and assets. Simplification increases operational efficiency as end-users become accustomed to the controls, displays, and operation of less diverse units.
A fleet policy is a living document, flexible enough to adapt to evolving business priorities, developing industry trends, and changing industry best practices and standards.
Corporate procurement staff are often driven by short-term, immediate cost reductions. However, a longer perspective to soft cost savings is critical because fixating on short-term results will hurt a company in the long run.
Fleet data analysis can identify recurring downtime issues. It’s important to determine the root causes of downtime so procedures can be developed to minimize such problems.
Vehicle weight relates directly to fuel economy. In today’s era of electrification, there is also a direct correlation between vehicle weight and battery range.
The line between creative thinking and problem solving and doing what the data indicates is thin. To lead in fleet management, you need to balance understanding the fundamentals and embracing what smart technology offers.
