So, that’s a real opportunity for this company. Obviously, working in collaboration with our sellers. The volumes are — were very, very small. A year ago, they’re starting to get bigger. Our sellers see that. They’re very focused on how can we work together with OPENLANE to maximize those conversion rates. So, we’re exercising the playbooks there. So, this is an exciting area of opportunity for us. And once cars get into that stage of the process, the open sale, those are high ARPU units, high-margin units and very profitable for us as a company.
Daniel Imbro: That’s great. And a follow-up quickly on that one. So, there are higher ARPU even without reconditioning because I feel like for pre-COVID a lot of that higher ARPU when they moved down the funnel was the recon, right? So, are they still higher ARPU even without since you sold the recon assets?
Peter Kelly: Yes, they’re higher sort of buy and sell fee kind of ARPU, auction fees is what I’m talking about, Dan. So, yes, we don’t do recon. We do, obviously, the auction fees, the buy and sell fee. These are typically higher-value vehicles, $25,000, $30,000 and up. And there’s also transportation revenue. The other thing I would like to add here, I talked about sort of the unique offering that OPENLANE represents in the marketplace. So, now that we have the commercial and dealer volumes together in one Marketplace, and in parallel with that, we’re starting to see more of the commercial volumes flowing into that Marketplace, that’s having a real positive impact on our buyer base in that Marketplace. Those off-lease vehicles are highly attractive to franchise dealers.
So, when I look at the sales report every day and see who’s buying those cars, it’s much more sort of franchise dealers buying those cars versus — on our dealer-to-dealer segment, the buyers are typically independent dudes. So, it’s broadening the mix. It’s increasing the appeal of the Marketplace to a core customer constituency, franchise dealers. And then as those dealers get to experience the power of this Marketplace, they in turn are more interested in, okay, how can I leverage this to benefit my dealership on the sell side. So, again, this goes to the strategy of what we’re trying to execute here. But I think we’re seeing the evidence of this. I think it’s going to be very positive. And again, I think we’ve got a very, very strong offering and a very differentiated offering out there for our customers at this point.
Daniel Imbro: Appreciate that color Peter. And then a quick follow-up. But did you guys say, I might have missed it, how long do you expect the volume challenges to persist in Canada?
Peter Kelly: We’re seeing some — I guess what I’ll say in Canada, we’re seeing increases in commercial volume already, Dan, quite solid increases. We saw commercial volumes through much of last year and that continuing. We have the benefit of the acquisition. So, those are incremental volumes. The challenges in Canada have been on the dealer consignment side of the business. And as best we could determine some dealers are just kind of the industry term is upside down on their inventory. They’ve got vehicles in inventory. They paid a certain price for them. They’re not able to attain that price, but they’re hesitant to wholesale them and take the loss. They’re trying to retail their way out of the vehicle. So, our dealer — it’s really been in the dealer consignment segment.
We started to see it improve a little bit here in the last few weeks. But Canada sometimes a little later to — for the spring market to really impact up there. So, we’ll have to see how it plays out over the next — over the remainder of this quarter and into April.
Daniel Imbro: Great. Thanks so much guys. Best of luck.
Brad Lakhia: Thanks Dan.
Peter Kelly: Okay. I think we’ve got time for one more question.
Operator: Thank you. And our final question comes from Bret Jordan with Jefferies.
Bret Jordan: Hey, good morning or good afternoon guys, evening.
Peter Kelly: Hey Bret.
Bret Jordan: 2.5% loss rates, is that about as high as we expected to move? I think it was almost back like 2009 Great Financial Crisis levels there. And obviously, they used retail markets challenged right now. But given how short term these are in your control over your borrower, should we expect it to cap out around here?
Brad Lakhia: Yes, Bret. So, listen, I’ll kind of just maybe reiterate a little bit of what I said. I think the first half of 2024, where we have pretty clear line of sight at this point will be similar to second half, including that 2.5% that we reported for Q4. So, you’ll see something similar in the first half of the year in Q1. So, I think to say that it’s going to cap out, difficult to kind of commit to that or say that affirmatively. But if you go back to the great financial crisis, I think the loss rates were a lot higher than. I wasn’t with the company then. I don’t know that I could quote them off the top of my head, but I think they’re quite a bit higher than 2.5%. And even I think if you go to the heart of COVID, mid-2020. They were probably around this level or about 3%. So, we’re — we don’t expect them to get back to that point. but it’s difficult to predict. I say what I said earlier, the second half of 2024, we do expect it to moderate.
Bret Jordan: Okay. And then on the physical asset to, sort of, to Daniel’s question about as you go down the funnel, were there commercial particularly off-lease sellers that liked having that opportunity to have a car refurbished prior to sale? I guess, as you’ve converted to digital-only, is there a volume that really does require a physical asset? Or is everybody is pretty much transferable to this platform?
