lanelogic lacks liquidity

lanelogic is still one of my favorite remarketing companies, but I think a serious issue has emerged in its business model, despite securing more credit. Liquidity. lanelogic is the auto industry’s first large-scale market maker, but in order for them to make money on this model they either need incredibly wide spreads or highly liquid markets.

Unable to create wide spreads, lanelogic has forced liquidity. As part of lanelogic’s agreement, dealers are forced to buy cars lanelogic purchases on the dealer’s behalf. While cars may start off fairly valued inevitably they move out of the money. Since dealers have 45 days before turning a car over to lanelogic, the car depreciates while the vehicle cost increase because of lanelogic’s margin and reconditioning allowance.

By limiting relations to large, retail dealers lanelogic has hamstrung itself. Wholesalers provide a valuable market function by increasing overall liquidity, even while increasing costs. lanelogic needs companies that voluntarily take off setting positions, these companies with superior demand information, because of relationships, can profitably trade in and out of cars.

This would require more transparency about market supply and demand, which makes it interesting to me that Driven XChange never took off to a greater degree.

17 responses to “lanelogic lacks liquidity

  1. I really don’t know Lane Logic’s business model so these are questions.

    Any chance that they are insuring the risks of depreciation?

    I know the large OEM groups like AutoNation speak highly of them.

    How much volume would they need to do in order to be viable?

    Perhaps they are doing this as a “let’s try it” idea. Their exposure would be limited to the # of vehicles in the pipeline of 45 days and they all won’t be returned. That needs to be assessed vs. the # of new customers + increased volume that this policy brings.

    I think it is an interesting idea, but businesses exist to make money. If it helps them do that or figure out if it will do that, then I’m all for it.

    Thoughts.

  2. Hi Brian,

    Good questions. I should start out by saying I really do like lanelogic’s business model. These thoughts emerged from talking with a few franchised dealers that were not owned by a public, dealer group. They all said the same thing, “Great idea until we had to buy cars there were 3-5k over MMR.”

    I bet lanelogic prices the depreciation into their option premium.

    I am not sure about the volume aspects either, but I would imagine it’s a question of how quickly they need to trade out of cars. A normal wholesaler buys a car with a few buyers in mind. As a market maker, lanelogic has to put a bid on any car a dealer wants to sell, meaning that lanelogic ends up buying cars without a specific buyer.

    I think lanelogic needs more direct competitor that could provide the necessary market liquidity, absent that, wholesalers might be able to provide a comparable value.

    They’ve been in business for a few years now and raised millions, thought not as much money as Zag.com.

  3. Michael Brairton

    Great marketing company, you are right. I had a great time at their NADA kick off party last year. Quite a coup based on the number of us that signed up that night. Like you said though, while AutoNation might have a place to hide the $3K off market Grand Cherokee that lanelogic sends them until they can ship it back, but on our lot there is “no place to hide”. Right idea to look at managing the risk, wrong execution though.

  4. Lanelogic is a scam, there is no way possible to actually make a profit from the turds they send you.

  5. Lanelogic is a bust! they have left many dealers holding the bag. You can’t control the used car market. The 45 day turn they talked about was more like 60 days once you actually get paid. The choice of inventory was terrible. You could buy everything they offered at any off lease sale for thousands cheaper. which is what people started doing and selling them to lanelogic. That’s why Lanelogic ended up with 300 ford products and nowhere to go with them. I’m just glad I saw this coming and was able to get out before they went belly up. I would beware of caroffer as well.

  6. Please, let’s not call it Lanelogic any more. The more appropriate name should be Lame Logic. Bad business model and worst execution. I guess Bruce didn’t learn from his failures at AutoXchange. Took the investors and employees for rough ride.

  7. Our Florida Auto group got out just in time. We just booted aaxchange and never drank the Kool-Aid with lanelogic. Caroffer is a joke too. Who’s going to buy those cars now? There is an online consumer car buying company here now called MyTradeWorth.com that is really dealer friendly. We’re betting on that one.

  8. Any dealers interested in participating in a case study to track declined or deferred service repairs please email me at jtareen@thedrivealliance.com. This offer is only good for Dallas/Fort Worth dealer at this time. We will do a free repair order analysis for you to tell you what your service decline/deferred rate versus actual service sold rate is. We will further tell you which technician is up selling more effectively and more often and which advisor is closing those up sells more effectively and more often. Based on the number we will further provide you with a list of recommendations to improve process and profits.

  9. Anon who "knows"

    Lanelogic was not a scam, nor a bad business model. What I do agree with is that it had HORRIBLE execution at the operation level. A strong operations mgr would have made Lanelogic a phenomenal company. As they say “It’s not the product, it’s the team”. The lack of execution allowed the observant dealers/wholesalers to enter arbitrage as BWM suggested. I hope Bruce learned from his mistakes and puts a great operations person at the helm of CarOffer, one who knows Used Car markets…

  10. I agree with the last comment. I think the business model was good, however the “execution” was flawed. This was not the case because there was a lack of competent people working at Lanelogic, but the operation was so huge that the very own growth of the company needed to be maintained at a slower pace. Perhaps launching in one market, getting customer feedback and re-tuning the process should have been the right approach. We can all sit around after the fact and do Monday morning quarterbacking, but one thing is for sure that Bruce deserves kudos for embarking on such a difficult journey. Once again he is proved that he is way ahead of his time. Now it is just a matter of time before Lanelogic busines model actually becomes viable, albeit not under the ones who introduced it.

  11. Great idea gone bad due to wrong execution and some incompetent employees. Also the rate of growth was too fast without any ‘lessons learned’ Mistakes were repeated on and on again, hence the demise.

  12. Is Lanelogic officially out of business? I haven’t seen any news about them recently. Caroffer.com appears to be up and running still. I assumed they would suffer the same fate.

  13. No one important

    I have a friend who worked at lanelogic. Smart kid but he definitely drank the koolaid. His biggest complaint was they implemented new policies every day without really looking down the road at what might go wrong which of course would come around and bite them in the ass. Also another big issue he mentioned was that half of the dealers were scam artist and your typical “used car salesmen”. They were always trying to pass one over my buddy and when they did they would screw over the next dealer in that transaction chain. Which in turn would create a negative environment. Lastly, the GMs/ owners who signed up for the program where usually very excited about the process but then would assign a UCM or someother sales person to manage the account. Most of the UCM’s he talked to hated the program b/c they either did not understand how it works or why it can be beneficial. If a dealer followed the program correctly it would work. Long and the short of it Thomspon tried to revolutionize an industry that did not want to be changed. The auto industry is one of the last great old boys clubs and it will stay that way. I am just glad I did not take the job there.

  14. Is Driven XChange still in business?

  15. still unemployed

    I worked at LL. I loved it there. But I have read all of these post and I can say that each of them have a little truth. It was a good idea, and if you used it the right way….it worked. However, the did change things too fast, and without informing us in the field, or asking what we thought. I was the one who had to hear all of you in the field, so I do understand.
    I still have not been able to get a job. I was let go a year ago. Thank you Lanelogic….

  16. Its been over for months. Both companies done, out of business, broke, and dead……

    Too bad for anyone involved….

  17. Glad I said no...

    I periodically checked up on LL as they were one of 2 companies I was looking at out of college. I passed on LL as I was too skeptical that their great idea would stick in the marketplace. Instead, I went to a steel manufacturer, took advantage of some REALLY good times in the marketplace, and left after we were bought up by a bigger player.

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