Former National Sales Manager
Former National Sales Manager at IAA
The executive is the Former National Sales Manager at IAA, where she oversaw account development for national corporate accounts. The executive also has over 20 years experience in whole car remarking and was previously Director of National Sales at Auto Auction of New England, and independent whole car auction house.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.
I guess a good place to start would be how you got to IAA, what you did when you were there, and why you left?
I worked in automotive remarketing for about 20 years. 17 of those were in an independent auto auction, which was more of a whole car setting. We are in the northeast and we ran about 1,000 cars a week. There were different types of vehicles and a very small percentage of that was salvage or total loss, if you want to call it that. That seemed to be where I did well. When I wanted to move on from the independent world and go into a more global type of business that had more to offer and more upward mobility, I chose IAA. I always heard they were a great company to work for, and they were. They have a global footprint, they're very technology-driven and they've done a good job so far. I worked with them for about two and a half years and when I first started there, they had me in a hybrid role where I worked with insurance companies, with commercial accounts, and with vehicle purchasing companies; all different types of verticals. It was great because I got to wet my toes in several different types of total loss vehicles.
It might be helpful to give an overview of the business from your perspective. How does it all work, specific to IAA?
I was brought up in the auto auction industry. It's a big industry; the largest players are Manheim and ADESA and it's primarily whole car. It's a whole different animal with IAA and Copart; it's more of a commodity sale. 75% of their sales are total loss, but they are trying to grow the commercial part because they've done the work on the back end. They have a global buyer base, which the other auctions don't have. They never really spent time building a buyer base out of the country, so they have a pretty good advantage, especially now where everything's gone digital and technology-based. They could make some strides into that whole car space now, especially since people have become more comfortable with buying things online. Copart, for instance, has done it for 17 years and made the transition about a year ago to go fully digital. While many people thought that might hurt them, I think it only helped them. It made their global buyer base stronger. As far as them just being only total loss, I think it will grow.
Additionally, the numbers of total loss vehicles continue to rise because as vehicles become more expensive and become computers on wheels, they cost more money to fix, so they become a total loss much quicker. I read a study that showed that from 2014 to 2019, it increased by about an additional 17%. With the world changing right now, the only questions that you have there are, will there be fewer cars and will that create a problem with total loss. Every vehicle that's ever made will become a total loss at some point, so you can almost gauge how many vehicles you're going to have running through your business when there are only two competing companies. Every single car is going to end up there eventually. It's just in a different period of its lifecycle that it might be running through a different type of sale, wholesale or a retail. Eventually, it's going to get to one of these markets. The question is, when will it get there? Over the last decade, the miles went up on vehicles because they were just built better. So they were older vehicles that were then becoming total loss, but still, there were more vehicles being sold. There are all kinds of equations to understand and make sense of it, to know if it will continue to grow or not.
From my perspective, of course, I was more intimately involved in IAA, so I saw what they were doing on the tech side to create enterprise value and, as I said, they were very technically driven. They were good at merchandising the vehicles, which made new revenue streams for them as well. They were looking at other products. IAA total loss sold a software package to insurance companies that enabled the insurance companies to work with the finance companies and have the vehicles paid off and then the title sent. They cut that time down from 30 days to seven days because they had the connectivity. Interestingly, it took that long to get any type of a loan payoff like that. It seems like it would be something that would organically grow out of the business, but it took a long time.
Could you talk a bit about the whole car side and how it's different from salvage?
That’s more of a dynamic trading ground. You have the franchise dealers, who sell their new cars, but many of them, in the last 15 to 20 years, have recognized a significant revenue of selling used cars. With some of them, that's become more of a revenue heavy business than the new car. Some need to go out and get used cars that they can sell in their market. If you wanted to buy a used Toyota Rav 4, you'd probably go to your Toyota franchise dealer and see if they had a used one. The chances are that the vehicle wasn't traded in at their store; chances are the dealer bought it at an auction, at an ADESA or a Manheim, or one of the 190 independent auto auctions out there. The cars that go to those auctions come from off-lease vehicles, from dealership trade-ins and from fleets; any type of managed fleets.
There's a good mix of vehicles and not only franchise car dealers but also independent car dealers can find their niche. They can find what sells in their market. They can pick and choose because technology has advanced so significantly. A lot of the auctions, where they were siloed into the types of cars they have and the cars you can buy from this location, have changed because they've added on to other platforms. For instance, you may go to an independent auction and buy a car through their lanes but you might also log onto their site and buy a car from several other auctions like OPENLANE, OVE or SmartAuction because they have to offer additional platforms for sale for their commercial accounts.
It's becoming smaller but also more extensive. It's becoming a small world, in that everyone's providing the product on many different platforms, but at the same time, there are all these new technologies and new platforms coming out. I feel a little bad for the used car buyer in this day and age because they have to be all over the place; they have to be everywhere to source the right vehicle. Technology has helped a lot, but it's also created so many more channels and it's not the easiest thing to be an independent car purchaser now.
And you've seen what's happened in used car prices.
Oh my gosh, they’re insane.
Do you have a view on that? A lot of it might be temporary because of COVID, but there's also a long-term trend in these prices going up.
A lot of it has to do with COVID. It has to do with the chip shortage. They're not getting any new fleet cars, so nobody's turning in their fleet cars. The prices going up exacerbates the problem even more. Now you have the consumers with vehicles coming off lease who would typically turn in the vehicle and the dealer would have a chance at that vehicle. But the consumer has become smart because the vehicle has actually risen in price. It's become an appreciating asset, which hasn't been the case in a very long time. For instance, I had a vehicle I was going to turn in and I called and said, what's my residual value on this? What's my buyout? They told me, $11,500. I plugged into Carvana or Vroom – you have access to all these tools now – and it popped up as $15,000. I said, I'm going to buy it. Why would I ever turn it back in? I'll just sell it. This is an anomaly that's never happened. Trying to source vehicles has been such a problem for this period now.
With the adoption of more carshare and rideshare, I wonder if that might even out. I think people understand. They have a vehicle, they've been working from home and the vehicle sits in the driveway 95% of the time. If I lived somewhere where it was feasible, would I rent out that vehicle on a new platform like Turo or Getaround or HyreCar or any one of these platforms that are creating a more shared fractional ownership model? That could happen, but what does it mean? Does that mean most cars are going to be total losses sooner? Probably, because you're going to have people driving them that don't care about the vehicle because it doesn't belong to them; it just belongs to the vehicle's shared ecosystem.
I try to have an exact opinion about what's going to happen, but I don't think anyone really can. There are two sides to every story. You have the people that say, well, people aren’t going to give up car ownership because everyone's moving out of the cities and into the suburbs and cars are your freedom; you need to have a car to live that far away. That's a good point. But then all these people are now working from home. I have four sons; back in the day, I had six cars in my driveway when they were all home. Do you need six cars in your driveway when you're all working from home? I don't think so. I think, with the United States specifically, having a car means freedom to many people. It's such an ego purchase or, not even an ego purchase, it makes you feel comfortable, it makes you feel American to have a car. It's going to be harder to give that up for some people, but I believe that with behaviors changing, there will come a point when that seems not only more accessible but more desirable.
Add on top of that the new subscription formats that are coming. I have a vehicle now that fits what I do, for the most part. Maybe I want to have more of a fractional ownership piece where I'm part of a club; maybe it's part of GM, or it's part of Stellantis. I'm able to have a vehicle that's a sports car for three months and then I turn it in and get a truck without having to go through the financing and insurance and all the rigamarole of getting a new car. You can be part of a subscription plan and you can choose cars depending on what membership level you are. I have a gold membership; I get the Mercedes or the GMC Sierra. It's hard to say if there will be more total loss cars and if that will continue to make the IAAs and Coparts grow. There potentially might be fewer cars, but I think they are smart enough that they're doing enough other work in building the technology and creating the market share that they're both going to be good to be invested in from my perspective.
You mentioned that it was harder for the used car buyers now. I imagine it's incredibly difficult to compete with an IAA or Copart on any of this.
Yes, I think it's incredibly hard. Additionally, you have these companies that are closing the gap between wholesale and retail. These companies are purchasing wholesale and selling directly to retail, without going through a franchise dealership or a dealership that's able to take the asset, intelligently understand what it needs, then add to the vehicle to move it to the condition level it needs to be, to then be sold as a retail car. I think the consumer is smarter. The consumer is going online and checking everything out before they make a purchase. They know what they want.