Lithia, Penske & Remarketing Off-Lease Vehicles

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Yes, but if net-net, including the depreciation of the vehicle, they're able to sell it at a higher price, netting Carvana's fees, then why not? This is what I'm trying to understand. Maybe a first question would be, since rental companies sell retail, as you're telling me, why do they even consider selling wholesale and sending cars to auctions?

They have so many cars. I don't know if you saw the list I sent from Hertz. They have 20,000, 30,000, 40,000, 50,000 cars just sitting there that they want to wholesale. They don't have enough dealerships to sell that many cars. They also don't have enough storage space. This creates another problem. You have so many cars that you're trying to get rid of before the market turns on the cars, like before the wholesale market turns. So they're trying to wholesale these cars fast so they don't have enough locations to actually be able to retail out of these cars fast enough.

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Regarding used cars, where do they source them from? How many come from rental companies like Hertz, auctions like Manheim, or trade-ins from customers?

The ratio is normally about 40% to 50% from auctions, meaning they go to Manheim, ADESA, places like that. They can physically go to the location or do it online now too, as all these auctions have online options. So about 40% to 50% come from auctions, and 25% to 30% come from rental companies or trade-ins. So you could call it 50% from auctions and about 25% each from rental companies and trade-ins.

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No, for example, if you have a BMW Series 3, 2022 with 30,000 miles on it, and you have the option to buy it from Manheim, Hertz, or as a trade-in, which would be the cheaper option for you as a dealer?

The cheaper option, with dual advantages, is from a trade-in. With a trade-in, a customer brings the car to your dealership, you appraise it, and negotiate directly with the customer. Your competition is only the customer. You might offer $30,000 for the car and negotiate with them. Sometimes customers do research beforehand, but often they don't. They might just decide to look at a new car and have no idea what they want for their current car. This allows dealerships to typically buy these cars for less than at an auction.

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