George Chamoun: Yes. Thanks, Nick. So the way to think about this is we have in our planning that the market returns by 2026, okay? And that’s really how we’ve been thinking about it. And so we — yes, it’s ’23, late in the year here, but we do have some time, right, for us to kind of — for the world to keep evolving. If you look at like dealer wholesale units even over the last few years, just in ’21 alone, it was over 10%, ’22 is likely over 8%. This year, it might end up being under 8%. So we’ve seen these changes. We’re pretty comfortable in the fact that we will see improvements over the next couple of years. The rate of improvement we should all see. But let me walk you through why I feel good saying we should see improvements.
So one is new car sales are getting incentives. And these new car sales incentives are important. They help drive affordability. We’re starting to see incentives even for across almost all OEMs right now. That’s a great bang for us, okay? So we’re starting to see interest rate in things, lease incentives. So as we’re — as you think about our primary source of supply today, being franchise dealers is where the primary source of supply comes from. As they drive more new sales, we get more trains. So that’s one. Two, the other part of what you mentioned is dealers really want to be careful with on their lots. And up until recently, you’ve heard us say dealer wholesale contracted for two reasons. Sales went down. New car sales went down. And also, dealers kept a higher percentage of cars.
You’ve heard us talk about that. I mentioned it earlier on the call. The later part of that becomes really important. As used car inventory started to add up, we believe dealers will start to wholesale a slightly higher percentage throughout the next few years and return back to normal levels. Dealers are still keeping an elevated number of these trades even today. So when you look at those two factors, we feel pretty good that over the next few years, we should see improvements. How much of an improvement? I’ve got until February to give you an opinion on next year, at least. I’ll use those couple of months to wait on our exact thoughts. But I’m feeling pretty good on some of the signs we’re seeing. We even saw a slight quarter-over-quarter improvements in the market of dealer wholesale, although really, really small.
Any type of improvement is a good thing. It feels like we’re in that trough. And even if interest rates stay high, consumer affordability for used cars stay challenged for next year, I think new cars, we’re going to see incentives coming out. OEMs are going to want to move that inventory. That’s going to be more trade. And I think franchise dealers should be careful in the cars they keep. Long-winded answer, I thought it was an important question, so I leaned in a little bit more.
Nicholas Jones: Great. Thanks, George
George Chamoun: Certainly.
Operator: Thank you. One moment for our next question. And our next question comes from Ron Josey of Citi.
Ronald Josey: Great. Thanks for taking the question. George, I want to ask about conversion rates. I think you said we’re seeing a sense of normalcy here. And I’m wondering if conversion rates are getting back to, call it, the ’21 levels or before. And if that’s the case, maybe talk to us on what are the drivers here in the past. We talked about new auction format to two-hour auctions, et cetera. And I have a quick follow-up.
George Chamoun: Yes, certainly. There’s — we think we did a little bit better than the market on conversion rates. I would say a couple of parties out there who provide data on conversion rates. When I say — I would say we were marginally better than the market. Being better is always a good thing. Probably two reasons. One is we are benefiting, to your point, from some of these innovations that we’ve been doing, whether it be product enhancements, time to auctions, enhancements we’re making to our condition report, all those things are also helping us sort of incrementally, I would say, managed seasonality well. We always plan to go in the fourth quarter, conversion rates are going to go down a little bit. That’s always the plan, and that’s the case every year.
But I would say we’re doing a good job in Q3 represented also a good job. The second is we went out — we went to market this year being a little bit more careful on pressing our sales team and our inspectors for listings and customers, and we pressed for a little — a better conversion as part of the overall success story. And so think about that as being a little bit more selective. And typical, I would say, growing up, right, as you’re getting bigger, as we’re dealing with more and more sellers, more and more listings, you just really want to make sure being prudent if we’ve got certain sellers that have very low conversion, we’re more careful on that. So those will be the two reasons that we are doing well from a conversion rate perspective.
Both was product intact and also from an operating policy perspective, we’re definitely more careful on sellers who remain low at their conversion rate.
Ronald Josey: Got it. That’s very helpful and conversion rates, I just wanted to clarify maybe something you said on the call now that we’re seeing the units reaccelerate growth, and I understand your point on incentives and supply. Just can you repeat or talk just a little bit more on pricing? We’ve seen high singles, low doubles down this year. And do you expect that to continue as supply improves? Thank you
George Chamoun: Yes. When you speak to this pricing, you’re really saying the GMV, meaning what’s selling on our platform, right? So yes, we’re — we have in our plan low single-digit, things like 2019, like 1-ish to 2-ish percent based on the month, depreciation rate as part of the plan. So we go into the quarter, planning for that to be the case, which is — which we’re finding prudent, right, because you — one is expected. So, so far, I feel really good about the team’s ability here to predict what we think is going to happen. And the plan we’ve outlined seems — we’re confident with it.
William Zerella: Yes. I think — Ron, it’s Bill. So just maybe a little more context here. So last quarter, our GMV per unit was down year-on-year, 10% down quarter-on-quarter 11%, except we managed to drive year-on-year, actually a 4% increase in our ARPU. Quarter-on-quarter was down a few points, down about 3%. So one of the strategies, and we’ve talked about this in the past, is with the pricing power that we have, as prices due to climb because that’s what we’re assuming, and that’s what we’ve baked into our forward-looking models. We believe over time, we can offset any of that downside in terms of our buy fees. We’ve been able to do that thus far. And then maybe one more level of clarity. So if you look at, in our example, our GMV per unit, about half of that is due to a modest shift in mix to less expensive vehicles in response to consumer affordability issues.
And the rest of that is just the overall market decline in prices. So you’ve got a few kind of dynamics driving it. But at the end of the day, we’re able to, I mean, so far, we’ve been able to protect our financial model from any of that volatility.
Ronald Josey: Very helpful. Thank you, guys.
A – William Zerella: Certainly.
Operator: One moment for our next question. And our next question comes from John Colantuoni of Jefferies.
John Colantuoni: Hey, thanks for taking question. Two for me. Starting with the September price increase, can you help size how it contributed to 3Q and 4Q revenue or how it will contribute to 4Q revenue? And second, turning to your 2026 revenue target. I think your outlook assumes 17% outperformance relative to the market. And that’s a bit above the 15% you saw this past quarter, which was down somewhat from recent quarters despite the conversion tailwind from longer auction formats. So just talk about what drives — helps drive the improvement in market share trends over time. Thanks .
