Revisiting the use of wholesalers

March 25, 2009

I understand that many dealerships are reluctant to use the services of wholesalers. Whether or not you believe that they are bottom feeders or sharks, I contend that maybe there is a temporary and important role for wholesalers in today’s market. Why? Because as I have traveled over the past several weeks, I’ve observed a deficiency in most dealerships in “know-how” for sourcing vehicles in the wholesale marketplace. Just having the title of Used Car Manager and occasionally going to the auction to fill in holes or to bulk up on inventory does not make a true buyer.

What does it take to be a true buyer? A true buyer is one who spends the majority of his time examining buy lists, researching values, traveling to auctions, standing in lanes and check out lines and waking up the next morning to do it all over again. In today’s auction lanes, not only is there a group of true buyers but, also, a very large group of occasional buyers. This is because trade-ins are currently few and far between, driving everybody out to the auction to compete against one another. The inexperienced (occasional and never before seen buyers) are actually pretty dangerous in terms of what they’re willing to pay for a vehicle. Their belief is that if one person is willing to pay the money for a vehicle, it must really be worth it. So what does this mean for the average dealer?

I think that the average dealer must develop or obtain quality buying expertise. Under present business conditions, few dealerships are prepared to staff a new position for this purpose. As an alternative, consider reaching out to a trusted independent wholesaler in your market. We all understand that wholesalers make their living capitalizing on the inefficiencies that still exist between valuing and sourcing proper inventory. I think it makes a lot of sense for the time being to put aside any natural bias against these guys in favor of leveraging their expertise. Everyone knows a wholesaler that they respect for their ability to “work the auction” properly. To be clear, there must be a proper incentive program in place to make this work. Such incentives should reward how quickly and profitably the purchased vehicles are sold rather than the quantity of vehicles that are purchased.

Right now it might be better to have a real buyer at the auction on your behalf than to have an “occasional or never before seen buyer” out there with your checkbook. I think that as we go into summer we might be adding a new category of buyers – the “never seen again buyers”.