By on January 14, 2016

ChevyDealership03.jpg

General Motors will sell highly coveted lease returns and company cars online starting next month through a program called the Factory Pre-owned Collection.

The program, which we’ve covered briefly, will sell lease returns and company cars through an online portal that makes those cars available nationwide. GM said its inventory would be roughly 30,000 cars, which all have fewer than 37,000 miles and be covered by extended warranties from the factory. Potential owners can apply for credit through the online portal and pick up their cars at a nearby dealer.

So … if GM is selling the cars owned by GM and GM Financial (or related bank) from a nationwide database, which can be financed online, and merely picked up at a nearby dealership, isn’t that just a direct sale?

Not exactly, according to a GM spokeswoman.

The program simply inserts the public into a buying process that dealers have used exclusively for company cars, rental cars and lease returns. Those sales already return a healthy profit for the respective parties.

With this program, dealers would still be able to bid on those cars at auction if a private buyer doesn’t pick it up first. If there is no private sale, those cars go onto dealer lots just like they always have. However, should a buyer pick up a car before another dealer can, the nearest dealer buys the car from GM or GM Financial before selling it to the customer. That’s how GM avoids the direct sale to customers and biblically pissing off its dealers.

In return for bringing that incremental business to their dealers (30,000 used cars isn’t a huge slice of the pie), GM gets to better control residual values for its cars and offer leases on new models at lower prices based on those better prices.

(There’s an argument as to whether that higher residual value is a better deal for used car buyers, but that’s a different story. — Aaron)

Not a bad idea if you’re GM, really.

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44 Comments on “GM’s Online Sales Program Isn’t Direct-sale, But It Is Pretty Clever...”


  • avatar

    another example of the factory interfering with retail and not caring about it’s franchisees.

    • 0 avatar
      highdesertcat

      But these are used cars, not new.

      So it is no different than Hertz, Avis, Dollar, Thrifty, Budget, and Ugly Duckling et al selling their program cars through company owned facilities instead of releasing them to the highest bidder at auction for resale at a dealer’s used-car lot.

      GM is trying to cut out the middlemen and harvest a little extra cash for themselves. And if it works for them, why not?

      I say, “hats off to Ms Barra.”

      • 0 avatar
        28-Cars-Later

        The “company cars” cited may have never been titled and would not technically be “used cars”.

        • 0 avatar
          highdesertcat

          True, but this is also an avenue for Lemons bought back by the factory to be reintroduced for resale.

          Chrysler was bagged doing that, IIRC.

          Who knows how far this can be milked and where it goes from a money-making venture to a venture to recycle lemons and rejects as bonafide recertified company cars?

          Caveat Emptor applies here.

          Do you remember when Katrina-flood cars started to show up in the unlikeliest arid places?

          • 0 avatar
            28-Cars-Later

            Yes I do recall hearing about Katrina cars, the same happened with Fukushima cars in other countries.

            http://www.autoblog.com/2014/07/15/fukushima-radiation-in-used-cars/

            http://amsterdamnews.com/news/2014/jan/16/radioactive-cars-japan-turning-caribbean/

          • 0 avatar
            highdesertcat

            Right on!

            The newest scam in my area recently were the “ever so slightly hail-damaged” brand-new never-been-titled cars they were trying to wholesale to the public AFTER retailers had collected the insurance off-sets.

          • 0 avatar
            28-Cars-Later

            Sounds a little like fraud. Won’t the state catch up on this when it gets involved and starts issuing titles?

          • 0 avatar
            highdesertcat

            I think in many cases the DMV/MVD turns a blind eye to many questionable transactions as long as the MVD/DMV collects their share of the bounty in fees and taxes.

            And on the flip side, there are always people who need a decent ride for a very soft price.

            Personally, I can live with hail damage. Hell, you should see what my 2011 Tundra looks like after exactly five years of ownership. It was used for work, not some wannabe boulevard cruiser for someone to look good in.

            What I can’t live with is the stench of a flood-car should it get damp or moist again.

            I smelled a lot of nasty smells in my travels, especially in SE Asia, but none are as repulsive as the smell of the inside of a flood-car, when it gets wet again.

            Stench!

        • 0 avatar

          They were titled to the holding company, so they are most certainly used cars by every stretch of the imagination. Heck, many banks consider a brand new 2015 to be used currently for financing, though mostly the low credit tier banks….

      • 0 avatar
        stevelovescars

        Is GM really “getting in the middle” or are they just matching a car with a buyer BEFORE a dealer purchases the car wholesale? This way, the dealer gets to buy a car that a local customer already wants to buy.

        • 0 avatar
          28-Cars-Later

          I think they are “matching” the car before the factory sale, but as I query below, at what price? If GM is putting a quick pack on it and offloading it, great for the consumer, but cuts into potential action for dealer later. If GM is putting big margin on it, GM is acting as a dealer and technically competing with them.

        • 0 avatar
          Scoutdude

          Exactly the dealers make out very nicely on this set up. They have a buyer that has already agreed to purchase the vehicle before they take possession of it and thus they have no risk of their profits being ate into by the vehicle setting on the lot. If the dealer instead bought the vehicle at the auction they would have to compete against other dealers and potentially pay more for the car and then on the other end if the car isn’t selling in a reasonable time they get beat up on the sale to the retail customer.

          So the dealer who chooses to participate in this program knows that they have a set profit, little to no carrying costs and reduced selling costs. Big win for the dealer.

          It is potential win for GM if they set the transfer price correctly. Yes they may make more money on some cars at the auction but make less on others. So once they have the handle on the average transaction price at the auction for a given vehicle they can fix the transfer price at slightly above the average and increase their profits.

          It is also a potential win for the consumer who is looking for a program car. They get a much wider choice while still going though the nearest dealer. The typical dealer would have a few of the program cars and to find the color/options they want they would have to check all the dealers in their area and then negotiate the price with the dealer that has the vehicle they want. With this they have the option to choose from any cars at the local remarketing center and have it delivered to the nearest participating dealer and they just walk in and sign the paper work.

          • 0 avatar
            28-Cars-Later

            They will do well assuming they find buyers. They will be pricing things based on Kelly Blue Book per AN link I posted below, NOT Black Book which is what everyone on the block will be carrying. The cream in between will be kept by the leasing co or GM, not the dealers who don’t own the cars and who at best will be getting a “distribution” cut and/or maybe doc fees.

          • 0 avatar
            commonsense1982

            How would you know if the dealer comes out nicely. The dealer has to pay the transportation to get the vehicle to the dealership – which can be several hundred dollars, get the car ready for sale (inspection, cleaning, repairing items) for a set fee. What happens if the customer decides to purchase the car and has buyer’s remorse when they pick it up or find issues with the car?
            To me it seems like a quagmire.

      • 0 avatar

        It sounds kind of like they are trying to compete with Carmax by having vehicles for sale to a national audience, so if someone really wants something oddly specific, like a yellow automatic Camaro convertible, they can find one halfway across the country and have it shipped to them instead of having to search a bunch of dealerships.

  • avatar
    28-Cars-Later

    “The program simply inserts the public into a buying process that dealers have used exclusively for company cars, rental cars and lease returns. Those sales already return a healthy profit for the respective parties.”

    There may have been some kind of GM program I didn’t know about but historically these cars go to the Manheim “factory sale” where only franchisees could purchase product. This is a separate sale each of the domestics conducted independent of the general weekly sale.

    So… who sets the pricing? GM will know in advance what its product does on the block and no dealer will pay more than its worth. This sounds like another way for GM to offload its lease/factory holdings other than the current factory sale, which it will preempt.

    • 0 avatar
      highdesertcat

      You beat me to the posting!

      There was such a program available to GIs overseas where GM/Ford/Chrysler reps took orders for NEW cars at the Base Exchange, Post Exchange or Navy/Marine Corps Exchange for delivery overseas or at some dealer stateside.

      I bought my Toronado that way and had to go to Antwerp, Belgium to pick it up. But it was there, at the port, gassed up and ready to go.

    • 0 avatar
      28-Cars-Later

      Automotive News has more details:

      “GM President Dan Ammann said the system is a first for the industry and represents a “subtle but pretty significant change” in the way used vehicles are sold.

      “The vehicles will get an extended factory bumper-to-bumper warranty, 12 months or 12,000 miles for Buick, GMC and Chevy vehicles and two years, 20,000 miles for Cadillacs.

      Essentially what we’re doing is we’re opening up our remarketing channel to the consumer in partnerships with our dealers,” Ammann said during a briefing with reporters today.

      “As an organization with a lot of [used-car] volume going in there, we see an opportunity to disrupt that area and create opportunity for ourselves,” Ammann said, “while offering a better selection to used-car customers, and in partnership with our dealers to drive incremental volume and business for them.”

      GM has partnered with Kelley Blue Book to offer the consumer site’s online Fair Market Range tool, which uses prices that buyers have paid in that area for similar vehicles. Users also will get a vehicle history report from Carfax.”

      So they are using Kelly Blue Book pricing, which is fiction, and offering an included extended warranty. Therefore not as simple as adding a pack, GM is full on competing with its dealers while still using them as a distribution channel. The only silver lining for dealers I can see other than maybe getting a “distributor” cut is perhaps there will be rules stating the <15K miles cars will NOT be offered and must go through the factory sale.

      also from the AN piece:

      ” “It’s also great for our dealers and GM because it introduces new buyers to our brands and increases residual values. Everybody wins.””

      I with no sarcasm would love to see how/if increasing residuals is accomplished. By bringing more buyers into the pool? They already could go to their Chev, BPG, or Cadillac dealers and buy this crap CPO.

      http://www.autonews.com/article/20160113/RETAIL01/160119843/gm-to-launch-online-portal-for-low-mileage-used-cars

  • avatar
    stevelovescars

    This is clever. It sounds like a customer has his or her pick from a large inventory of off lease cars. It’s then matched with a buyer and shipped to a local dealer for delivery.

    This seems to make better sense than having the car sit in dealer inventory somewhere waiting for a customer. I live in a relatively rural area and used car inventories around here are pretty lackluster, this could work well if I wanted a used GM car… or wanted something relatively oddball like a manual transmission or option package. OTOH, I imagine the customer is in a pretty poor negotiating position with regard to price since they are essentially ordering the car and having it delivered, right?

  • avatar
    DeadWeight

    What will Ruggles think!!!???

    • 0 avatar
      tresmonos

      WWRD

      • 0 avatar
        DeadWeight

        If this cuts even 2% of franchised dealership sales, Ruggles may file a lawsuit claiming it violates state franchise legislation!

        • 0 avatar
          Scoutdude

          The dealer is still buying the car from GM and selling it to a retail customer. The big difference which is a plus for the dealer is that they are buying a car that is already sold so there is no risk on getting a car that will sit on their lot too long and eat into their profits.

          • 0 avatar
            highdesertcat

            Scoutdude, that’s my interpretation as well. GM is actually pre-placing vehicles that are slated to come on the market and, if effect, pre-selling them.

            When I ordered my Toronado from the GM rep in Germany way back when, I had my choice to place an order and have it built, or, as the GM rep told me, “This is what we have prepositioned in Antwerp, and this is what we have coming in. You won’t have to wait if you pick from prepositioned stock.”

            I picked one from prepositioned stock. It had more than what I would have ordered but the price was close and there was no waiting.

          • 0 avatar
            JohnTaurus_3.0_AX4N

            ScoutDude,

            He wouldve had to read the article to know that. Clearly, that is asking too much.

          • 0 avatar
            DeadWeight

            John, what Taurus do you think had better sporting characteristics and build quality, the 1986 with the 2.5 L HSC I4, or the 1996 LX Vulcan V6 (roar!)?

    • 0 avatar
      dal20402

      I’m sure in three or four days you can come back to this post and find a reply to every single comment here, all assembled nicely at the bottom, setting forth his position in great detail.

      • 0 avatar
        DeadWeight

        Seriously though, why can’t Ruggles seem to learn to use the reply button properly?

        It’s not that difficult.

        I’m really not trying to be a d!ck (not too much), but am mystified by his inability to do so.

        Maybe that’s why he despises Tesla’s direct sales model; fear of progress.

        He’s probably typing a furious response to my statement on his Selectra right now.

  • avatar
    PrincipalDan

    Personally I love it.

    Back when I was living in Southfield MI (2000-2002) I loved AVIS Ford’s used car lot. There were so many lease program cars and cars that had been owned by people on all the various Ford plans.

    The lot would usually have rows upon rows of clean low mileage Taurus and Sable sedans and wagons. Those cars looked the most new of any used cars I’ve ever seen.

    • 0 avatar
      highdesertcat

      I bought a rental 1988 Towncar from Budget in Tucson, AZ, for a sweet price. Our good experience with it motivated me to buy a 1992 Towncar for the wife.

    • 0 avatar
      JohnTaurus_3.0_AX4N

      My parents bought a 1997 Sable GS (with the decent options package including alloys, ABS/4 wheel disk, power seat etc) with like 18-19k miles on it (iirc) at a Ford dealer in Washington State, along with a new 1998 Ranger 4×4 for dad. The Sable was flawless, truly like new. It was an excellent car, even though I regularly beat the shit out of it in high school lol (class of y2k). Very reliable, many long distance trips. I made sure the trans was serviced semi-regularly, always properly.

  • avatar
    APaGttH

    I am convinced had almost any other automaker announced it, it would have been hailed as brilliance.

  • avatar
    Big Al From 'Murica

    I see potential friction when someone buys the car for a set price only to show up and have to pay the doc fee, dealer prep fees, and whatever else they slip in.

    • 0 avatar
      28-Cars-Later

      The only time you don’t is when you deal with a private party, why would this be any different?

      • 0 avatar
        sproc

        Because assuming these are true no-haggle online prices–and not necessarily the best possible price negotiated for an equivalent car–I’d like to think the way to make this succeed is to let people see the true, final out the door price with all taxes and fees before pulling the trigger. What’s the chance this will actually happen?

        • 0 avatar
          28-Cars-Later

          No haggle? I wonder if ex-Saturn people are in charge of this venture.

          • 0 avatar
            sproc

            Well is it:
            a. No haggle online pricing–the price you see is the price you pay with the final price with all taxes and fees easy to determine
            b. Online auctioning, where you bid against other potential buyers and the winner can clearly determine the out the door price with all taxes and fees before they even get off their couch
            or
            c. Some sort of squishy price where you’ve made a commitment to buy the vehicle, but when you show up at the actual dealership have to figure out/negotiate over what that car will actually cost you?

          • 0 avatar
            28-Cars-Later

            I’m thinking A or C.

  • avatar

    So, this is pretty much public access to browse SmartAuction or a closed GM sale limited to only franchise dealers or no crossline buy. A GM dealer still facilitates the sale.

  • avatar
    John

    Do they offer used Cobalt lock cylinders?

  • avatar
    Carlson Fan

    I’ll have to check it out. I’m in the market for lease return Volt.

  • avatar
    CoreyDL

    “Potential owners can apply for credit through the online portal and pick up their cars at a nearby dealer.”

    So they think many people are going to buy a used car from an online DB without seeing it in person or driving it before the purchase?

    Rightttt.


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