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.