Satisfaction Guaranteed

This story originally appeared in the Q4 2014 issue of GreenLight:Remarketing. I was not originally assigned to this story, but another staffer dropped out at the last minute – it was reported, written, edited, and completed in 3 hours.
 

DealShield gives dealers extra confidence in their auction buys, and the power to sell creatively

 
By Alex Kwanten

Peace of mind — it’s what every used-car buyer wants. Buyers want to know that their investment in a particular vehicle won’t sour, either due to external factors or to the vehicle itself. The quest for safe purchases has driven demand for products like CPO programs, which offer guarantees and protections buyers could only dream about in decades past.
What is good for consumers is also good for wholesale buyers and dealers, who are always looking to ensure that they can maximize their inventory and not get stuck with four-wheeled paperweights. Providing dealers with the reassurance they need to feel confident in their purchases, and even to expand the nature of what and how they buy, was the seed of DealShield, a sister company to Manheim Auctions that was rolled out nationally in September.

DealShield’s purchase guarantee offers wholesale buyers the choice of returning a vehicle — for any reason — for a full refund, including buyer’s fees, within 21 days of purchase and with fewer than 500 miles on the odometer since purchase.

A better mousetrap

Conceived in 2011 by DealShield founder Matt Trapp, then-director of strategic planning at Manheim, the concept of a purchase guarantee to easily return a vehicle if it somehow wasn’t right came from conversations with dealers about what Manheim could do to improve the buying experience. “The mission was to improve the confidence in the marketplace,” says Stu Dressler, DealShield’s interim chief operating officer. “What product would provide buyers with confidence on the lanes?”
Unlike consumers — who can debate a purchase for hours, even days or weeks — dealers who buy at auction need to make decisions about a particular car in minutes. This makes the reassurance provided by DealShield that much more valuable, because if something does go awry, the purchase is covered.

During the development of DealShield, Manheim used its vast reserves of used-vehicle data to shape the parameters of the program to offer the maximum benefit to customers with the fewest restrictions and with the least risk to itself. That latter point is significant because DealShield buys back the cars from the purchaser and returns them to the auction system. Manheim remarkets those vehicles at the location to which they were returned, disclosing “everything about the vehicle, like a good seller should,” Dressler says.

The “alpha” phase of testing the product was conducted on DealerMatch — another sister company — and is popular on that online service to this day. “If you think about a market where you can’t see the vehicle, don’t know the dealer, and don’t have an auction in the middle, it’s the perfect product [for those purchases],” Dressler says. The program was first rolled out Manheim’s Statesville, N.C., auction facility in early 2012, and was immediately popular. Since then, DealShield has guaranteed more than $1 billion worth of inventory.

A Multi-Purpose Program

There are obvious reasons why a dealer would want to return a vehicle. For instance, underestimating reconditioning costs is a major driver of the program, as are discoveries of mechanical issues.

Yet the program offers two interesting scenarios that give dealers more flexibility to buy vehicles they might not often purchase. The first is a dealer who purchased a very specific vehicle for a buyer, only to have the buyer change his mind. An unusual vehicle in a high-impact color, such as a bright green Mustang Boss 302, may be a hard car to move if the buyer backs out.

Second, the program allows dealers to experiment with vehicles they would not ordinarily sell and might lure new and different customers. For example: an urban customer might not often opt for a full-size crew-cab pickup, but a potential sale could be quite profitable. The guarantee offers an opportunity to reduce the risk of testing these waters.

The program doesn’t currently cover transportation expenses or lost expenses in reconditioning prior to return, though Manheim and DealShield are considering testing such features on a limited basis. DealShield’s guarantee covers as many as 97% of vehicles crossing the lanes at Manheim’s locations, the company says. Those that don’t qualify tend to be high risk, out-of-the-norm purchases for most dealers — salvage cars, pre-1995 models, cars with more than 250,000 miles, and cars with $100,000 price tags.

The guarantee can be applied to purchases either a la carte, or by buying a DealShield 360 membership, which offers blanket protection to dealers who purchase more than 40 cars a year. The cost of protection levels can vary. Buyers can choose only seven days or 250 miles if they wish for lower costs, which can be as low $75 per vehicle. The price depends directly on the risk of the transaction and the condition of the vehicle.

Most dealers choose a DS360 membership, Manheim says, as it guarantees all purchases and many tend to be high-volume customers who only experience issues with a small number of vehicles. “What they love about the purchase guarantee is that we’re there if they need us,” Dressler says.

Perhaps that is the best reassurance of all.

Photo: Ford