Why Remarketing Remains Resilient amid the Housing Collapse

by Mary Wisniewski

The collapse of the housing market that began in 2007 has ravaged the U.S. economy, but done particular damage to the state economics with the most dramatic home-price inflation. Intuitively, remarketing in states steamrolled by the housing market should suffer, too. Yet, that’s not necessarily been the case. GreenLight Remarketing sat down with Tom McDermott, owner and general manager of Metro Area Auction, an independent auction house in Phoenix, to find out why. Metro conducts an auction weekly and employs 17.

Q: How has the depressed housing market in your region affected the sale of remarketed autos?

A: That is a complicated question. The economy as a whole has affected the auto market morethan the housing market specifically. Housingand auto sales often go hand-in-hand. But I don’t believe the auto market here is any worse or any different than the rest of the country. I think you’ll find the same situation all over.

Q: How has the remarketing market treated your company in recent months?

A: It’s very unusual for us, because we’ve been growing in a very weak economy. We’re an anomaly in that if you look at our sales and our operations, it’s like we’re saying, “What recession?” We were a greenfield site three years ago, and we’ve been able to grow our business every year. If you have been in this business as long as I have, you know this is the worst car recession in recent history. That said, we’re growing. Had there not been a recession, our growth would most likely have been much greater. I guess you could say this recession slowed our growth.

Q: To what do you attribute your growth to?

A: We’re not cutting back services in a recession. We’re adding services and staying ahead of the curve when others are cutting back. That has allowed us to take away marketshare in a weak economy.

Q: What kind of competition do you face?

A: We compete against four other auction houses in the Phoenix market. There are two Manheim dealers, one ADESA, and one other independentauction house. Since we’ve been able to grow since starting up three years ago, we have taken market share away from the competition.

Q: Has the type of buyers you’re seeing at auction changed since the housing bust?

A: We have not really seen a big shift in buyers. We have fewer buyers today, as the hard times have put some of the weaker dealers out of business.But among the buyers we have seen, there has not been a big shift in the type of buyers coming to our auctions. And people still seem to want to buy the same things as they always have wanted.

Q: Have you seen a shift in demand for vehicle types?

A: Not necessarily. I’ve been in this business for 30 years, and you’ll always see certain auto types in demand for a while and then there will be a shift in what people want. When gas prices went up [in 2008], you saw some movement away from SUVs and pickup trucks, but there were still people who wanted those cars. The typical American still wants to buy a luxury car or a big truck. As odd as it sounds, we really have not seen a big shift in the types of cars we’re selling. The only difference is that some cars that used to bring a premium — like many of the Honda models — are not getting as powerful of a premium as they used to get. The demand for these cars is still strong. They’re just not holding the strong value the way they used to. I think that is the biggest surprise we’ve seen.

Q: What do you see for 2010?

A: I think we’re still 18 months away from a recovery in this market. Still, we’ll be adding capacity and expect more growth in 2010. It will be tough to keep getting a strong supply of cars, but we’ll keep growing our marketshare.

Q: What are your near-term expectations for the local market?

A: October to December is always slow — it’s been that way ever since I can remember. It will be interesting to see what January brings. January sales are always a good indication of whether the market is ready to bounce back.

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