How Artificial Intelligence Could Improve Vehicle Remarketing & Evaluations & Reduce Overall Portfolio Risks

The summer of 2023 could be called the summer of artificial intelligence (AI). AI is definitely the buzz word of the year, as well. I spent a good amount of time researching and listening to experts talk about the impact AI may have on broader areas like healthcare, investments, and process management. Remarketing and auto finance are smaller sectors, but it won’t be long until AI is expanded for those of us in our industry. In fact, I have no doubt its uses are being further developed as I write this. Now is the time to decide how to reap its benefits and avoid its potential pitfalls.

I heard a veteran wholesaler say the other day that he thought that AI evaluating & pricing cars was laughable. It got me thinking though. Wasn’t it not long ago that many car dealers thought that the idea of people essentially mail ordering a car to their door in masses was a pipe dream?? Yes, and I would argue that AI will change the way we practice remarketing and other aspects of automotive finance in the coming years.? Will it fully replace humans in the process? Absolutely not, but it will change how we operate and maybe some existing roles will need to be modified.

Brainstorm with me for a few minutes. There are lots of good, but siloed and often subscription data sources in our business today that we all rely on when evaluating and pricing vehicles. Not to mention other tools for those of us who also set residuals on leases and do regular portfolio evaluations. However, we are often reliant on outside partners and data sources to do these things. And doing so takes human resources, time, and money to make decisions.

What if that data was aggregated either through industry collaboration for the benefit of its users or made more accessible through AI models to make better and easier decisions on things like where each vehicle specifically should be sold based on the different, recent marketplace performances for specific years, makes, models, & mileages, days supply matched to consumer retail demand geographically, vehicle damage assessments & recommended true value add reconditioning, vehicle history report or title brand impacts, market variables in a certain region like seasonality & best time for fleets to cycle vehicles, and considers transportation costs to get it to areas of the country where top values can be maximized now. We can do these things individually today, but this is where “the machine” if properly fed the right data could truly change the remarketing value proposition for organizations and make them much more efficient. This is especially true for those of us with a lot of variety in our portfolios and who don’t sell a few, specific models.

The potential benefits don’t end there though. What about how we evaluate our portfolios and/or set vehicle residuals? Many of us do that today by pulling historical data from our own portfolios and evaluating market data and residual predictions from experts, as well as considering the future impacts of various risk factors. But what if we could get more granular by combining some of those data sources by using AI to speed up evaluations and to better predict residuals by knowing what volumes others in the market are doing and the potential impacts those may have on future values, not to mention considering future impacts of new models, technology changes, & potential economic risk scenarios in the greater economy. We all do this today to varying degrees, but it is very in depth and time consuming, but what if we could get more scientific and more efficient with the use of artificial intelligence engines taught to interpret our data sets to make better and timely evaluations? AI won’t predict the future, but can give us more insights to do it more accurately.

I know it all sounds a little like a pipedream and it may be today, but AI holds lots of possibilities for our entire industry. Some may say, Jason, you are advocating for the replacement of our jobs though. I learned early on in my life that you should never fear technology. Use it to make what you do better and easier. While it may eliminate some jobs, it will create others. Vehicles, particularly used ones, vary widely, as do economic impacts on the car market, and they will require human oversight to perfect what opportunities AI may give us. Not to mention, the data models used by AI will be created by and be kept up by warm blooded and breathing individuals.

So where does this all start and how will it evolve? I hope it will start with brainstorming discussions with experts from all areas of remarketing and automotive finance, including those who have the data and those who may build the AI tools. The horsepower behind the curtains, if you will, will likely start (and realistically is well underway) with those with the biggest sources of vehicle sales & evaluation data, but I hope it doesn’t end there. Additional collaboration between competitors has always been a hope of mine, and I realize it may never come to fruition, but our industry is small enough and willing to pay for the benefits that it would bring to us all.

The time to start brainstorming and developing how new AI technology can help us also is upon us. I hope you will join me in exploring the possibilities and helping guide the industry away from any avoidable pitfalls. I am less fearful of job loss and more excited for the improvements we will see with better use of data. We all stand to benefit from innovative technology used wisely.

About the author:

Jason Herman is a 23-year veteran in the remarketing and automotive finance world and an avid car enthusiast. Having managed bank and fleet lease end operations, 1st?and 3rd?party remarketing, residual value setting & risk mitigation, and the sale of well over 1 million off lease & repossessed vehicles in his career, he enjoys providing guidance and expertise to both those new to and experienced in the automotive finance industry, as well as helping end consumers purchase or sell vehicles. Should he able to help, Jason can be reached at?[email protected].?

Please check out my automotive finance & car buying blog:?https://www.carguy4u.com/car-buying-and-auto-finance-blog

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