Jason Trevisan: Of course. So I wouldn’t think about them as returning faster than dealers. They are really running a different type of business that tends to be — well, it’s clearly tethered to travel trends, but is also much more seasonal than dealers would experience. And so they’ve always been on our platform in some form. And there are certain times in the past and it often ties seasons where they will be heavy buyers, but they have more recently, especially as they defleet this time of year, been more active as sellers on our platform. We have not given guidance or directional indications as to what we think they’ll do in future quarters, Q4, Q1, but we continue to believe and know that they really value the programmatic, the ease of programmatic buying and selling.
And so we’re a compelling platform for that. We also have, over the past couple of years, learned how we can have them work on our platform in a way that doesn’t disrupt any of stability of the platform.
Q – Tom White: Great. Thank you.
Jason Trevisan: Thanks.
Operator: Our next question is from Naved Khan with B. Riley. Please proceed.
Naved Khan : Yes. Hi. Thank you. A couple of questions from me. Jason, you had mentioned that you’ll be done with the ABR for this year, but we’ll continue to look at opportunities into next year. Can you give us some sense of the scope of that, what percentage of dates might be still paying significantly below when the rate card is? And then I had a follow-up question. If I look at the wholesale gross margin, it was down sequentially. Is it just because of the scale being down sequentially? Or did anything change in terms of arbitration rate going on or anything else been on in that line? Thank you.
Jason Trevisan: Sure. I can handle the first question and then Sam, if you want to speak to the second question or go ahead, Sam, why don’t you take the first one, on ABRs.
Sam Zales: Okay, happy to take that one and jump in later if you like. Naved, thanks for asking. I want to keep reminding that our Carfit [ph] number, which has grown so successfully year-over-year and quarter-over-quarter at 9% year-over-year. We’re thrilled with, but it doesn’t just come from the ABRs. I’ll take your question because it’s a good one. I just want to remind that Carfit is growing because we’re bringing on new customers at a higher price point. We’re up-selling customers to higher packages, premium packages. We’re cross-selling new products and programs like this New: Sell My Car – Top Dealer Offer, it’s a tremendous opportunity to keep growing our subscription revenue. On ABR specifically, we’ve said that we’re going to renew about 20% of our base this year.
So that last quarter is happening right now. Those were the largest price point customers away from the market rate, if you will. They were the lowest priced customers, as you can tell, each quarter, we’ve gone after the next set of price point customers slightly below the market rate for us. We’re still seeing that success, as Jason just said, renewing them agreeing to the price point and if they say no for a short period of time coming back on again. Our thought is that there will always be ABR components to our Carfit growth. By next year, as our lead volume continues to grow, we can keep producing an ROI for our customers. There will be more customers that we will be able to renew on an annual basis. So we can’t tell you what percentage that will be.
We’ll continue to go after that ABR component as part of our Carfit growth. The beauty is, though, that’s only one portion of that Carfitgrowth. We know we’re going to keep acquiring customers as the question just came up, we’re winning more new business and acquiring that at higher rates. We’re going to keep adding to our premium packages. So customers move up to a higher platform, digital deal now in our featured premium package. That’s going to be a tremendous lift to Carfit as we go forward. And then obviously, as we sell additional products like this New: Sell My Car – Top Dealer Offer, is an additional way to keep growing Carfit. So ABR, we’re very excited about continuing it, but it’s just one of those many levers that grow Carfit for our business.
I hope that answers the question on that.
Naved Khan: Just the quick follow-up there Sam, on the Sell My Car or The Top Dealer Offer, what’s the subscription pricing on that? Have you determined that? Or is that still something that you’re testing?
Sam Zales: Yeah. I don’t think we’ve announced that publicly, Naved. It’s a great question, and it would be looked upon as a product at similar price points to the others that are out there in the marketplace. What’s been great about that product, we’re still what we call it in a pilot mode. We’re out at 18 regions of the country and we’re not fully out to market yet. But the — we launched this in the fourth quarter from a pricing perspective. It’s had great take rates. I think what you want to think about the Sell My Car – Top Dealer Offer program, is, number one, it allows the consumers something very different in the marketplace. They can choose the white glove experience and say, “I like what IMCO is, pick the vehicle up from my home, let me get a digital payment and you can drive it away from me.
But consumers are now getting a second offer, which is a choice, would you like to drop that off at your local dealership and get a higher price point there, while there isn’t the same convenience factor, you get a higher price point. Dealers requested us to build this product. Our largest dealer said, “Could you build something like this. We’re not satisfied with the tool sets that are out there in the marketplace. You heard about the NPS score, we’re getting from our customers on it thus far. They’re getting a great return on that subscription investment. And it’s adding significantly to Carfit and will be a long-term growth lever for our business as we scale it. We’re only in 18 markets right now. And then on your second question around wholesale and arbitration.
So wholesale unit prices are – have been trending down this year. They’re the lowest, I think, this past month than they have been since the spring of 2021. So it has been a steady decline since then. And – and we expect it to probably continue to decline in aggregate over the next — through the balance — till the end of next year. Conversion rate as a result is down. So the number of transactions that actually occur in wholesale versus those that were attempted is also down. And it’s up a little bit recently because the UAW strike, but tends to be tends to be down. And — but our — and those two factors would point to, all else being equal, arbitration increases. But as you’ve heard us talk about, our operational and product-related improvements that we’ve made at CarOffer are really limiting in a nice way arbitration.
And those are things like inspection, integrity, ability to see cars to different product machinations that we’ve built off the matrix, ability to have a more discrete matrix, faster delivery times, textile registration processing. I mean all the things that go into transparency of a transaction and customer satisfaction have – have helped keep our arbitration levels really low, really nicely about.
