Used Vehicle Supply and Demand
Current auto trends show higher demand for used vehicles, with credit union financing volume for used vehicle loans rising to $89 billion at the end of the 2nd quarter. Couple this demand for used vehicles with a reported 16% decrease in repossessions, and credit unions have an opportunity to find higher returns with their repossessions.
Importance of Price
According to Callahan’s 2007 Vehicle Remarketing Report, credit unions are losing thousands of dollars with repossessed vehicles. Of the credit unions surveyed, 51% answered that they are losing at least $5,000 per vehicle in the past 12 months. In addition, 48% of those surveyed said they are losing more than 40% of the loan amount with their current repossessed vehicles.
Creating a pricing strategy that fits within the current auto market will help credit unions benefit from the used car trends.
The most straightforward approach to pricing a vehicle is to review NADA or Kelley Blue Book prices, regional sales, and age of the vehicle. Even with pricing preparation, however, credit unions can find pricing discrepancies based on the environment.
Credit unions selling to dealers are faced with a difficult consumer. Dealers want deals, not just the vehicle. They work their hardest to get the price as low as possible. Members, on the other hand, are interested in buying a car to drive to work, run errands, etc. Their needs become a part of the value of the car beyond the wholesale price. Credit unions with member-focused remarketing efforts may see higher return than credit unions focused on dealer remarketing.
Location, Location, Location
Although a cliché, this point holds true: location matters. There are three main venues used by credit unions, and it is important to note how each is beneficial to vehicle remarketing.
- Parking Lot – Some credit unions choose to sell their repossessions in the ‘safety of their backyard.’ Credit unions focused on selling to members to increase their services, have a reputation as a local vehicle supplier, and have strong marketing efforts within the community will find success with this approach.
- Internet – If you have an off-road vehicle and your member base is in the flatlands of Kansas, you may not find member interest. Many credit unions are finding the internet to be a great forum to reach a wider geographic audience. In addition to the geographic scope, you can also increase turnaround time with the 24-hour exposure.
- Public Auctions – Credit unions looking to expand their geographic scope and use vehicle volume to their advantage participate in auctions. Auctions offer credit unions the opportunity to develop relationships as a ‘supplier’ of used vehicles. Credit unions can find greater success at auction by working together to increase their volumes and thus receive better showroom placement.
Although credit unions can focus on one location, through the use of strategic partnerships they can effectively remarket with all three. Partnerships help credit unions to master their local remarketing, work with those that understand the internet and auction environment, and thus bring home a higher return.