Auto Finance: Residual Value is a endogenous variable
Nicola Cirilli
COO @ Plena Education | Managing Director @ Saint Louis College of Music | Strategy and Business Models Professor
I recently read this interesting article on IlSole24Ore by Pierluigi del Viscovo
https://www.ilsole24ore.com/art/motori/2018-02-15/ecco-come-tecnologia-altera-valore-residuo-dll-automobile-180417.shtml?uuid=AENdBx0D&fromSearch
commenting last Moody's, report “Auto Finance -- Global: Changing consumer preference and new technology pose challenges for auto finance” and I believe it's the case to add something to the intelligent analysis of del Viscovo.
Residual value is not an exogenous variable, it is influenced by Car Manufacturers’ and short and long-term rental companies’ commercial and organizational policies.
The Car residual value protection is strategic for a car company and goes through its constant monitoring, sometimes against the opinion of the companies that quote the residual values (current and future).
It is extremely important that car companies:
1) Have a solid residual values’ control structure within a B2B Sales Division (short and long-term rental company) and the Used.
2) Have a global approach, because Residual Values cross national boundaries.
3) Manage the buy-back process efficiently (starting with RAC and LTR contracts)
4) Ensure the proper used car supply to their dealer network (i.e. used cars mix and quality that guarantee a "correct" margin for each dealer) and monitor the after-sales process.
5) and finally that the Used, Fleet, New Car Sales and Marketing Departments work in symbiosis to anticipate and guide the trends of residual values. Think about the effects on VR of a new model “de-positioning” for example (i.e. decreasing price, product enrichment with optionals without increase the price, etc.)
And the Rental Companies (RAC and LTR)?
1) Surely they must have a professional RV Control Structure, which continuously adjusts the stock to the expected resale value.
2) Accelerate, as much as possible, the Car remarketing, avoiding the price lever utilization.
3) Increase the distribution channels’ number and quality, and push into digital
4) Develop Sales to individuals through a structured program of selected and guaranteed used cars.
5) Include the Used Car Division into the Sales Division or give common crossed objectives between the two functions.
What’s your opinion?
#residualvalues #RV #Marketing #remarketing #organization #digital #car #LTR #STR #rental #usedcar