Your First Money Is Your Best Money: Why Efficient Selling Outperforms Multiple Registrations For The Same Vehicle

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By Tom Webb, Chief Economist for Manheim Consulting,
and Stacey Yeager, Analyst for Manheim Consulting

Traditional remarketing strategy suggests that consignors should attempt to balance two factors to maximize their results: efficiency, focusing on high conversion rates to get units off the books as quickly as possible and price realization, concentrating on achieving the highest prices for the portfolio.

A close analysis of more than 115,000 vehicle listings in the first quarter of 2010 by Manheim Consulting contradicts that either-or approach. The evidence overwhelmingly indicates that efficiency and price realization are not necessarily at odds with each other and that they actually go hand-in-hand. The research demonstrates that the first registration consistently provides the highest returns for sellers, while the second registration offers the best opportunity to improve on an inadequate previous high bid that the consignor believes to be too low. When units are registered in more than two or three sales:
 
• Consignors are more likely to realize a loss.

• The losses grow larger.

• Manheim Market Report (MMR) retention and values deteriorate.

• The cost of capital grows.

To pursue a truly effective strategy, consignors should be restrained and targeted in making decisions not to accept high bids. Some factors that increase the likelihood of improving upon a high bid are:

• Early in the sales cycle (only one or two previous registrations).

• Above average condition grade (high 3 or 4 grade).

• Very little unrepaired damage.

 • Extremely low bidding activity (fewer than four bids received).

• A high bid less than 95 percent to 96 percent of fair market value (based on MMR, grade and other factors).

The efficiency versus price realization concept is a false choice. A traditional focus on price realization by holding out to get the "best price" can be a very misleading, ultimately ineffective approach. In spite of the long odds, if continually reregistering a unit does achieve a higher sales price, the substantial costs associated with doing so often outweigh the potential gain. Doggedly chasing after the highest price is an endeavor fraught with risk in exchange for very little, if any, gain.

Tom Webb is Chief Economist for Manheim Consulting. Contact him at Thomas.Webb@Manheim.com, follow him via Twitter at www.twitter.com/TomWebb_Manheim and read his blog at www.manheimconsulting.typepad.com. Stacey Yeager can be reached at Stacey.Yeager@Manheim.com.