Former Director at CarNext, LeasePlan & Former COO at Carwow
Andrew has over 12 years experience in digital automotive from all different angles; online classifieds, used cars, new cars, and aftermarket parts and accessories. He was most recently in charge of launching CarNext, Leaseplan’s wholesale and B2C remarketing division, which competes with Cazoo, Cinch, and other used car supermarkets. Andrew is also the Former COO at Carwow, the UK’s new car aggregator, and he spent over 7 years running eBay’s motor business in the UK. Read moreView Profile Page
Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.
Andrew, can you provide a short introduction to your background in the automotive space?
I’ve spent the best part of the last 12 years in the world of digital automotive, taking the sector on from a number of different angles, such as used cars, new cars, parts and accessories in the aftermarket, from the perspective of both marketplaces that I have been involved in but also as an operator of a used car online retailer.
Can we just start with your most recent role? Could you lay out what you were doing at CarNext?
Most recently, I was managing director of CarNext, here in the UK. CarNext is the remarketing division of LeasePlan. We were building a business which enabled not only wholesale buyers to source LeasePlan inventory but also to sell those cars directly to consumers across the UK.
Can we take a step back and really look at the options that lessors or leasing companies have with their inventory? If I’m a consumer and I’ve got a lease car, what happens when the car goes back to the leasing company? What options do they have?
The exact approach varies from company to company but, ultimately, if you go back in time, it used to be the case that remarketing was solely prioritized with getting vehicles off the balance sheet of the lease company as quickly as possible. They wanted to free up the capital that was tied up in the cars that had run their course with their leasing customers, and reinvest that capital into more new cars, to attract more new lease customers.
To some extent, that is still the case. But the industry has become significantly more complicated and sophisticated over the years. As you’ve seen, in the market, some lease companies have started to look at selling cars directly to consumers themselves and all sorts of other innovations. Fundamentally, most of the lease companies, historically, have used auctions – the big three in the UK being BCA, Manheim and Aston Barclay – to wholesale their vehicles to retailers who will, ultimately, then find consumers to buy those cars.
Why don’t they sell direct to dealers, as well?
Some do sell directly to dealers. It depends on the individual lease company’s concerns as to how they wish to do it. Some do deals directly with retailers, either in bulk or on a smaller case by case basis. If they do that, it helps the retailer in that they don’t need to go through the auctions and they don’t incur additional costs. It helps the lease company if they have those sort of deals – particularly in bulk – as it’s a guaranteed disposal route, each month.
Doesn’t it make sense for both parties? As you said, the leasing company would probably get a higher price because there are less mouths to feed, in a way, if you go through the likes of BCA, and the dealer can then capture more margin. Is there not an incentive for the leasing company to actually push more towards dealers, rather than through the auctions?
Unfortunately, it’s not quite as simple as that, as these things rarely are. There are lots of other considerations that need to be taken into account but, beyond that, if you’re just looking at the economics of a single deal, you want to be sure that you are achieving a fair market price for the inventory that you are selling. It’s pretty difficult to ascertain exactly what that fair market price is, without going through some kind of open market retail process. It’s not necessarily a given, but selling a vehicle direct to a retailer, from a lessors perspective, means that they get more for the vehicle than they otherwise would have done.
From the retailer’s point of view, it can sometimes be beneficial because they can circumvent some of the fees and some of the other costs that they would incur further down the line. Again, it depends on the nature of the deal and how they’re structured, as to whether it actually returns a market value or not.
It really comes back to just having the market define the fair price for that inventory and the leasing company shifting it as fast as possible, off the balance sheet?
Yes; the leasing company has a number of priorities. One of them is the price they get for the vehicle and another is the speed at which it can be moved off their balance sheet. Then there are operational costs and complexities that come into the equation, as well. Leaving aside the operating costs, there is usually some sort of trade off to be borne between the speed at which you sell the vehicle and the price that you realize for it.
By mixing and matching the channels that they choose, leasing companies can balance the speed of inventory disposal against the average price or average value that they realize for each of the cars that they’re selling.
You mentioned how the leasing companies were obviously experimenting with B2C platforms. I’ve got AutoSelect pulled up here and it seems that they only have about 100 cars online, which seems low. How have you seen leasing companies, and the way they’ve changed their view or approach to these channels, evolve over the years?
It’s interesting to see how leasing companies have evolved their approach to selling B2C, over time. The concept that we see with Arval’s AutoSelect product isn’t new. A lot of large lease companies have operated car supermarket style retail outlets, going back 10 to 20 years. The idea of selling directly to the customer is not a new one. What we have seen new, in the recent past, is leasing companies taking advantage of the ability to sell online, to provide new impetus to the idea of selling direct to the consumer. It means that, theoretically, you can do without the large and relatively expensive retail locations that come part and parcel with car supermarket activity. But they would still get the theoretical upside that you get from selling direct to consumer.
What do you think could be the biggest challenge to a company like AutoSelect that seemingly only has 100 cars online offered to me, right now?
The challenges for any online used car retailer are going to be largely similar, regardless as to whether they are a retailer or a leasing company. The biggest difference from the traditional retail model, when we are talking about online sales, is that the vehicles are not seen by the consumer before they are delivered to the customer’s house. That brings its own challenges, in terms of, firstly, managing the expectations of the customer, as far as the condition of the vehicle is concerned but then, secondly, handling any post-sale questions or concerns that the customer might have, whilst not being in the same physical location. But they are challenges that the industry is already getting its head around pretty quickly. It’s more a question of how you serve the customer through new channels, as opposed to how you serve the customer, full stop. The fundamental requirements for customer service are the same, regardless of channel.