I briefly mentioned lanelogic’ blocklogic a few posts ago, but never followed up. Blocklogic is a put option that gives the dealer the right to sell the vehicle back to lanelogic 45 days after purchase, blocklogic is for cars purchased from auction. I’m not sure how they price the options, but I would think Binomial would work better than Black-Scholes. Blocklogic is great to offset the risk a vehicle does not sell.
OVE has a new, buy back policy that could also be viewed as a put option. When a dealer purchases a vehicle from OVE, and a PSI covering frame and mechanical, the dealer then has 14 days to return the vehicle to any Manheim location, less buy and PSI fees. In this case, OVE has extended a 14 day put options where the premium is the PSI + buy fee. OVE’s option insures again vehicle condition risk. Note: Certain limitations apply.
Both companies are protecting against vehicle risk for the dealer, but I think OVE’s option may be more valuable. There are a number of market data providers that help dealers make good purchase decisions, decreasing the risk of a vehicle not selling. However, vehicle condition, even with condition report and physical inspections, is inherently unknowable, except with a full inspection by a mechanic.