And again, none of this relies on what I had mentioned in our prepared remarks, which is that the whole undertaking around EVs puts us in a position longer term to think about fleet management, to think about autonomous vehicles and the like, again, all of that as an add-on to sort of the baseline business that we’re putting EVs to.
Chris Woronka: Okay. very helpful. Thanks, Stephen.
Operator: Thank you. Our next question comes from the line of Ian Zaffino of Oppenheimer & Company.
Ian Zaffino: Thank you very much. Very good color. Can you maybe touch upon Manheim? Residuals have been pretty volatile recently. How are you now thinking about that impact as you manage the business going forward? Thanks.
Alex Brooks: Hey Ian, it’s Alex. I’ll take that question. Yes, you’re right, we have seen decreases in the Manheim Rental Index published over the last few weeks, about a 4% decline for the month of June. And we’ve seen diminished pricing in the spot market. But when you think about that Manheim Rental Index, I think it’s important to put it in the context of where we started the year. So, it’s pretty much a round trip on that in terms of where we started January. And even compared to the beginning of Q1, we increased and then came back down in the last month of the quarter. So, just to put that in perspective. In terms of how we think about managing residual risk in the business, I mean, as you know, driving to a profitable disposition of the vehicle as it exits our fleet is a important component of return on asset and how we manage the return on asset.
So, in a declining residual environment, it’s more important than ever that we divert volume away from auctions and a baseline wholesale price to more profitable channels. This includes dealer direct, and right now we have more of our volume going through our dealer direct channel than we do at auction. And we also really feel like our differentiator is our retail channel and our car sales operations. So, our car sales operations includes our partnership with Carvana, and we’re yielding much better returns than what we would otherwise realize by disposing of these vehicles through auction. Our Carvana volume is growing and contributes to us in a meaningful way. So, that being said, in the current residual environment, we’re even more focused on disciplined fleet management and managing our fleet size within the demand curve.
And as we mentioned in our prepared remarks, we are going to reduce our fleet size towards the end of the year, so it stands modestly higher than where we started the year. And this is a function of managing to the downside risk, understanding that if demand indicators more end, we can pivot quickly to the upside and manage that through spot market purchases. So, with that context and as we look forward to Q3, as I mentioned, we’re expecting net depreciation of $275 to $300 per unit, and this is a view on the gains that we expect to realize in car sales given the current residual environment, as well as the impact of the current spot market on the forward, in other words, on the forward of the fleet in terms of how long our holding period and future dispositions at future dates.
Ian Zaffino: Okay, thanks. That’s really good color. And I guess just from listening to the prepared comments that you made, it seems like you guys or the business is performing, or the outlook is better than expected, or at least what you thought initially. There seems to be a nice growth component here. You’re talking about a lot of free cash flow coming in in the second half of the year. So, how are we thinking about buybacks here? And I know you bought back about 6 million shares this past quarter, but what should we really be expecting, and how are you now thinking about kind of the value of your stock and the purchase of shares just given your seemingly improved outlook? Thanks.
