Maximizing Your Reconditioning ROIIARA Roundtable Discussion

Doug TurnerAmerica’s Auto Auction, Regional Manager

IARA Standards Committee Chair

Julie Picard,Manheim, RVP West

Kurt Madvig,ADESA, VP Auction Operations

Session Objectives

Provide an overview of the current state of reconditioning optimization in the remarketing industry

Discuss pain points related to optimizing reconditioning investments

Brainstorm solutions to maximize recon investments

• Highest ROI on:• Below average to average pre-recon grade

vehicles• Higher value vehicles

• Recommended Repair items:• Low cost items that improve cosmetic appearance:

– PDR, chip repair, wet sand buff and partial bumper repairs• Perform multiple items to increase grade by > 0.1

points

Source: Cox Automotive Consulting

Recon ROI

MMR% by Grade

Recon ROI Example:Move vehicle from

2.8 to 3.1; increase

MMR% by 2.7%

(+$351 on a $13k

vehicle)

Cost to increase 0.3

grade points = ~$172

ROI = $2.04 per $1.00

investment

Source: Cox Automotive Consulting

Recon opportunities in below average to average grade vehicles

Average Cost to Increase Grade

$85$121

$172$211

$257$289

$338$373

$401$366

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0

Assurance & Certification

6

Assurance products help sellers build buyer confidence, increase margins and protect their reputation

Assurance products provide a baseline of confidence and peace of mind.

W H E N B U Y I N G W H E N S E L L I N G

A lot of time I am purchasing these vehicles from a distance away so I want to make sure they are as advertised and if not I have some type of recourse.”

Drivetrain conditions and cold engine mechanical conditions cannot be determined during the auction or within couple of hours immediately after the auction for green light/ auction guarantee status.”

Because the sellers typically do not disclose many things wrong with the cars. You are forced to buy these products to protect yourself due to the auction having zero repercussions for the dealers that try to get away with cars with defects.”

The more info provided, the more potential online action you can get. People buying online are not buying units if they cannot see a condition report of some kind .

Because I want to sell something that will not come back to me and put my reputation at risk.”

They show the buyer you are confident in your sell and increase the selling price.”

Certification• Benefits

– Builds trust with buyers

– Brand value

• Costs & ROI

• Sale strategy

Assurance• Assurance Products

– Condition Reports – Primary assurance product for most buyers

– PSI & Return Guarantees– Secondary Products

• Core Drivers– Most buyers want to avoid arbitration and

use assurance products to do that– Most buyers believe that assurance

products are a critical part of the process… online or in-lane

Source: Cox Automotive Research & Market Intelligence

Small Group Activity• Elect a table leader to lead the dialogue at the table and

a scribe to capture key takeaways

• Groups will have 20 minute to discuss questions

• Afterwards, there will be a large group discussion and Q&A around the topics

Open Q&A