Automotive News F&I Special Sections of 2008 - (Page MAY30) 30 • MAY 5, 2008 The resilient dealer INSIGHT Record repos? Repossessions are forecast to jump steeply this year. About 80 percent of all repos are then sold at auto auctions. 2,000 1,600 Number of repossessed vehicles Repossessed vehicles offer dealers a profit opening Ryan Beene rbeene@crain.com 1,200 800 400 0 *Estimate Source: Manheim Consulting Vehicle repossessions are rising, and the trend could present new profit opportunities for dealers. Mike Farley, owner of Keystone Chevrolet in Sand Springs, Okla., sells about 300 used cars a month. He says his biggest profit margins come from cars he buys from repo auctions throughout the United States. Farley says repos bring in 20 to 30 percent higher profit margins than comparable used cars that his Chevrolet store receives as trade-ins. Even with those margins, repos also save his customers about 20 percent off the sticker price of a comparable trade-in, he says. Positive perceptions “People always think (they’re) getting a better deal on a repo,” Farley says. “Even in the housing market, people think they’re getting a better deal on a foreclosed house than they Lead Prospector Internet are on a house that’s listed. It’s the same perception.” Typically, Farley’s lot is packed with about 1,000 used vehicles. About 20 percent of his inventory was purchased from repo auctions, up from the 15 percent Farley usually carried before credit markets tightened, he says. Throughout the year, Farley’s dealership holds sales and promotes bargains on the repossessed, off-lease and rental fleet vehicles filling his used inventories. He calls the sales “the trifecta” for the marketing promoting the three types of used cars on his lot. Customers come “looking for a big discount, and a lot of times, they’ll get it,” Farley says. Repos rising As creditors tighten their grip on borrowers, the rate of vehicle repossessions is increasing. Last year, repossessions rose 10 percent, said Tom Webb, chief economist for the vehicle auction giant Manheim Inc. Webb told Automotive News he expects that trend to continue in 2008. That means more repossessed vehicles could be found at auctions and end up on dealerships’ used-car lots. “Repossessions as something that (dealers) buy at auctions generally offer pretty good profit opportunity,” Webb said. “A lot of wholesalers buy those repossessions because a lot of times, with just a little cosmetic work, they can be resold.” The key is finding high-quality vehicles at a repo auction — and that can be hit or miss. Farley says that if a vehicle is in poor shape, especially if it needs body work, he will pass on the car. If the car only needs general reconditioning, he will buy it. Webb said buying tactics such as Farley’s are standard for dealers who buy from repo auctions. “They’re not going to put a lot of money in these cars,” he said. “That would be throwing good money after bad.” See More Prospects SAVE 22% On Leads! Tainted image Webb added: “The repo has a little bit of a stigma to it, so unless you’re doing a major event, you normally don’t advertise the fact that it’s a repo.” Some dealers shy away from repo vehicles because of negative connotations accompanying the term. “There’s enough bad news going around,” says Rob Mudd, president of Mudd Advertising Inc. In Cedar Falls, Iowa, which specializes in auto dealer advertising. “You’re better off saying, ‘We’ve got value in used vehicles starting at this (price) per month or this number,’ rather than saying you went to a repo sale and bought somebody’s bad luck, and now we’re going to turn around and sell it to you.” Although Manheim’s Webb acknowledges the stigma associated with the word “repo,” he said the term also can attract a specific type of customer. “To a certain extent,” said Webb, “the minute you say ‘repo,’ you’re enticing the customer looking for a bargain.” c see more prospects. *Offer expires May 31, 2008. Good for first 50 customers that sign up. One rooftop per offer. Call for details. http://www.CREDCOservices.com/seemore http://www.CREDCOservices.com/seemore
Table of Contents Feed for the Digital Edition of Automotive News F&I Special Sections of 2008 Automotive News F&I Special Sections of 2008 Automotive News F&I Special Sections of 2008 - (Page Cover1) Automotive News F&I Special Sections of 2008 - (Page JAN18) Automotive News F&I Special Sections of 2008 - (Page JAN19) Automotive News F&I Special Sections of 2008 - (Page FEB70) Automotive News F&I Special Sections of 2008 - (Page FEB71) Automotive News F&I Special Sections of 2008 - (Page FEB72) Automotive News F&I Special Sections of 2008 - (Page FEB73) Automotive News F&I Special Sections of 2008 - (Page MAR20) Automotive News F&I Special Sections of 2008 - (Page MAR21) Automotive News F&I Special Sections of 2008 - (Page APR30) Automotive News F&I Special Sections of 2008 - (Page APR31) Automotive News F&I Special Sections of 2008 - (Page JDB2) Automotive News F&I Special Sections of 2008 - (Page MAY25) Automotive News F&I Special Sections of 2008 - (Page MAY26) Automotive News F&I Special Sections of 2008 - (Page MAY27) Automotive News F&I Special Sections of 2008 - (Page MAY28) Automotive News F&I Special Sections of 2008 - (Page MAY29) Automotive News F&I Special Sections of 2008 - (Page MAY30) Automotive News F&I Special Sections of 2008 - (Page MAY31) Automotive News F&I Special Sections of 2008 - (Page MAY32) Automotive News F&I Special Sections of 2008 - (Page MAY33) Automotive News F&I Special Sections of 2008 - (Page MAY34) Automotive News F&I Special Sections of 2008 - (Page MAY35) Automotive News F&I Special Sections of 2008 - (Page MAY36) Automotive News F&I Special Sections of 2008 - (Page MAY37) Automotive News F&I Special Sections of 2008 - (Page MAY38) Automotive News F&I Special Sections of 2008 - (Page MAY39) Automotive News F&I Special Sections of 2008 - (Page MAY40) Automotive News F&I Special Sections of 2008 - (Page MAY41) Automotive News F&I Special Sections of 2008 - (Page MAY42) Automotive News F&I Special Sections of 2008 - (Page JUN24) Automotive News F&I Special Sections of 2008 - (Page JUN25) Automotive News F&I Special Sections of 2008 - (Page JUL26) Automotive News F&I Special Sections of 2008 - (Page JUL27) Automotive News F&I Special Sections of 2008 - (Page AUG32) Automotive News F&I Special Sections of 2008 - (Page AUG33) Automotive News F&I Special Sections of 2008 - (Page SEP30) Automotive News F&I Special Sections of 2008 - (Page SEP31) Automotive News F&I Special Sections of 2008 - (Page OCT48) Automotive News F&I Special Sections of 2008 - (Page NOV26)
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