Leased vehicles accounted for about 25 percent of total vehicle sales in 2016 and 31 percent of retail sales. While leasing continues to play an important role in boosting production and sales, it will be challenging for the industry to manage the current level off-lease volumes without producing large residual losses, and affecting sales.
The industry expanded in recent years to accommodate the used cars on the market as well as record new car sales, but now all that is softening. When we have new car sales softening along with this glut of used cars, we have increased supply and lower demand.
The glut of off-lease vehicles could also make buying or leasing a new vehicle more expensive. An oversupply of used cars could diminish the value of trade-in vehicles. Plus, lower used values translate to higher lease payments, which will make it less attractive for people who want to lease.
To combat the emerging trends, a few OEMs and Captives have already started utilizing technology to more efficiently manage their off-lease inventory, and garner a larger share of used car sales.
BMW launched BMW Group Direct – an online auction – to provide their dealers with a more convenient and efficient access to off-lease BMW Group vehicles. BMW dealers can perform research, enter proxy bids, purchase, and even arrange unit transportation for a flat $250 buy fee.
BMWGroupDirect.com was created out of the necessity for their dealers to gain exclusive, broader access to BMW and MINI inventory before it was offered to the wholesale buying community. Given the changing dynamics facing the grounding dealer and with more off-lease inventory entering the market, BMW wanted to become more proactive with their remarketing efforts.
With its national reach and new inventory postings each day, BMWGroupDirect allows any registered dealer to find and purchase vehicles anytime, anywhere. The open platform means dealers no longer have to reserve time to attend simulcast online auctions at set times or attend on-site live auctions, saving them both time and money. Dealers can see off-lease inventory across multiple auction locations, making it an efficient way to source BMW and MINI vehicles.
VW’s subsidiary, Volkswagen Financial Services, is taking a more aggressive position in the online market for used cars with the launch of their new platform – HeyCar. The website is part of an ongoing effort to increase the company’s share of retail used car sales in Germany. Some analysts say VW is beefing up its used-car sales strategy to also counter falling residual values for diesel cars in Germany.
With HeyCar, VW wants to attack the existing online competition, by offering an alternative to the existing large aggregator portals such as mobile.de and Autoscout24.de. One of the primary objectives of HeyCar is to grow market share from the existing online, used car market.
What makes HeyCar different than existing platforms, is that participating dealers will be pre-selected, a move aimed to create “more security and confidence” among consumers. Another main benefit from the VW move is Volkswagen Financial Services will control all financing options via the HeyCar platform.
While VW’s example might not appear that innovative, behind it is a more subtle strategy. The virtual market place – HeyCar – will allow used car dealers from all over Germany to offer their stock of cars for second hand sale.
Going forward, I believe more OEMs and captive finance companies will look to similar digital solutions as a way to deliver more efficient processes for managing their end-of-term vehicles, residuals and sales.