Navigating Market Change: A Canadian Perspective
NAVIGATING MARKET CHANGE:
A CANADIAN PERSPECTIVE
Toronto – September 2019
IARA Canada met with Bryan McIntyre, the Senior Manager of Remarketing at Hyundai Capital Canada. Bryan is the first ever graduate of the new Canadian CAR certification, and was named a Remarketing under 40 honoree at the March 2019 Automotive Remarketing conference produced by our Cherokee Media Group partners.
The interview took place at the Loose Moose in downtown Toronto. Bryan shared his observations on the Remarketing market in the past, some effective tools to help dealers improve the efficiency of their wholesale purchase, and his vision for the future in an industry prone to heavy changes.
IARA - Bryan, thank you for taking some time from your busy schedule to meet with us. First, could you tell our readers a little more about yourself?
BM - I have been in the automotive finance industry since 2008, with experience in Captive Finance, Subprime Auto Finance, and Bank Auto Finance. These experiences brought me through several layers of the business, most of them directly linked to a remarketing standpoint before my current role with Hyundai Capital Canada.
In my current role at Hyundai Capital Canada, I manage the Remarketing portfolio for 3 OEMs: Kia, Hyundai, and Genesis. In terms of our position in the used vehicle market, we at Hyundai Capital Canada offer access to highly desirable off-lease inventory from our OEM brands. The used car market in Canada has seen some significant Y.O.Y gains in the compact/sub-compact segments, which helps make our off-lease product offering quite desirable. Given the volume of Trucks/SUVs being exported to the US market, much of the used car opportunity has shifted to smaller vehicles. Fuel prices have certainly played a role as well. As the captive lender for 3 different brands, our off-lease product offering covers a wide range of options for used car buyers.
I like referring to Remarketing as a hidden gem: it is an integral aspect of the automotive industry which has significant impact on future vehicle values, and provides additional revenue opportunities to dealers.
“I like referring to Remarketing as a hidden gem.”
IARA - Thank you! Since you started working in the Remarketing industry, what significant changes have you seen in the Canadian market?
BM - Our business has faced many transformations over the years. As an example, we have observed a significant uptake in online vehicle transactions for both buyers and sellers. Many used car buyers no longer feel the need to attend a physical auction; the need to touch and feel a vehicle is being replaced by a more efficient online purchasing process. Online auction transactions also mean we are now significantly cutting transportation costs and depreciation time.
The evolution of high-resolution images and the launch of standardized condition scores, such as AutoGrade, have greatly increased online buyer confidence. In addition, our dealers can now rely more comfortably on the accuracy of the inventory listed online to ensure a well-informed buying decision.
Increased participation in online purchasing always leads to two things a Remarketing professional will always appreciate: reduced depreciation and disposal costs. I have also observed an important change with the vehicles themselves. Looking back ten to fifteen years, we saw a lot of variability in the vehicles that came off lease. We had trucks and some SUVs, but a great majority of the vehicles were sedans. In recent years, we have seen some OEMs almost completely walking away from the sedan segment. CUVs and subcompact crossovers - which did not even exist ten years ago - seem to be dominating the new vehicle sales market.
The other significant piece we've detected over the last decade is the technological enhancements of these vehicles. Only a decade ago, many of the major impacts to resale value were things like Auto vs. Manual transmission, AWD vs 2WD, Leather, Navi, Sunroof, etc.
“Today, as our market is moving toward fully autonomous vehicles, we are confronted with new pricing challenges.”
Today, as our market is moving toward fully autonomous vehicles, we are confronted with new pricing challenges. Features like rear cross traffic alert, blind spot monitoring, and forward collision alert are pretty much standard in today’s vehicles. These enhancements did not exist ten years ago, and data on how these items affect resale values is still limited. In the past, factory navigation would have a significantly positive impact on a used vehicle value. Today, most vehicles are being delivered with Apple Carplay/Android Auto capability, which defeats the need for factory installed Nav. If you have a cell phone, you can now have Nav.
IARA - How can new features in current vehicles potentially affect their resale value?
BM – We are reaching significant technological improvements in today’s vehicles, with some being semi-autonomous. But the big unknown is, What are these technological advancements worth to a used car buyer?
Generally speaking, we know what a mechanical difference is worth. Remarketers know how to price, and buyers know what to pay for things like Auto vs. Standard transmission, but we do not yet have a good grasp on what something like blind spot monitoring might be worth. Even if these features are on their way to standardization, as we have seen with the backup camera in Canada in 2018, their impact on the resale value has yet to be understood fully. With the rapid pace of technological improvement, and the race towards autonomy, the remarketing industry is shaping up to be an exciting ride in the coming decade.
As a captive finance company dealing with off-lease vehicles, we often rely on external vendors. An example of this is a transport company used to move unsold online inventory to a physical auction. Imagine the day when the car can drive itself to the auction facility! Will the car even need to go to the auction? Can it just be sold from a dealer location or a customer location, and drive itself to the new buyer?
“Imagine the day when the car can drive itself to the auction facility (…), what if the vehicle diagnosed itself?”
Think about a car running through an auction today with an engine light on. You either need to diagnose and repair the issue, or declare the defect, which negatively impacts resale value. What if the vehicle diagnosed itself? The owner of the vehicle receives notification about the exact issue, whether or not the item is covered by manufacturer warranty, and schedules an appointment for service. Take it a step further, and the car drives itself to the service center while the owner is at work.
As we move into the future, there will be significant investment in, and focus on, the data these vehicles are able to produce and the privacy considerations to which data collection gives rise. Increased vehicle performance/driver behavior metrics should lead to such industry enhancements as more precise, cost effective warranty programs and insurance coverages, as well as greater capacity to pinpoint the market value of a vehicle.
IARA - How can a wholesale buyer judge the quality of your inventory?
BM - I think the very first thing most of our buyers are looking for is AutoGrade. This tool launched as an industry in Canada around five years ago and rapidly became the dealers' benchmark for condition-based purchase decisions. High quality condition report pictures have also proven to be a benefit to wholesale buyers.
Among some of our own buyers, we notice patterns in the utilization of AutoGrade. Some will only bid on a vehicle at 4+, while others like to bid on vehicles with grades less than 3. As a seller, it helps us to gauge the types of dealers interested in our inventory. Dealers buying only high grade vehicles likely have a retail buyer lined up already, or would like the car as close to “retail ready” as possible. Dealers who buy lower grades may not need to turn the vehicle as quickly, but see an opportunity to recondition the unit themselves, and still be profitable.
For us as the seller, AutoGrade helps determine the most accurate fair market value. We can now make a more educated decision on the amount of reconditioning required on our inventory. This is a significant time saver as well: looking back a decade ago, prior to the launch of AutoGrade, dealers did not have any kind of a numerical benchmark to guide the condition of a vehicle. They had to rely on a significant number of condition report line items, as well as their estimated repair costs. AutoGrade groups these items together and assigns an overall condition score, so there is not as much guesswork for the buyer. It might be tough for a seller to determine the resale price impact of three scratches on a car, but if those scratches cause the AutoGrade to drop, that price impact can be measured accurately.
IARA - I noticed you have recently been CAR certified. What led you to pursue this certification?
BM – In the Canadian market, there is not really any other opportunity to become trained and certified in Remarketing specifically. The CAR Certification provides the remarketing educational backing which the Canadian automotive market has long been missing.
In a specialized field like accounting, you can hold a CA designation, but there has never been a specific designation for expert Remarketers. The CAR certification fills that void by offering Canadian-specific course content, and recognized certification for those who successfully complete the program.
CAR certification also ensures our dealer and OEM partners have even more confidence in the value our Remarketing operation brings to the table.
“CAR certification also ensures our dealer and OEM partners have even more confidence in the value our Remarketing operation brings to the table.”
I also believe it is important to be CAR certified in order to ensure a high level of confidence in how your remarketing operation is run, a benefit your organization's executives, stakeholders, and employees will experience from this highly regarded industry certification.
Interview by Xavier Kleinermann