Sourcing Auction Vehicles: What You See Is What You Get

July 19, 2016

It’s still fairly common for dealers to offer two complaints about buying wholesale vehicles from auctions—it’s tough to find the right cars, and even more difficult to buy them on the money.

The complaints seem somewhat surprising, given there are more wholesale vehicles on the market than we’ve seen in recent years. In 2016, industry analysts estimate the wholesale market will have well over 3 million more available vehicles than last year, thanks to the rise in available off-lease and off-fleet units. Next year, analysts predict another 4 million or so available units in the wholesale supply chain.

One might think these conditions create a more favorable environment for sourcing the right inventory at the right prices. But it appears only some dealers are having an easier time in the lanes and online as they look to fill the gaps in their used vehicle inventories.

The disparity led me to ask a key question: Why are some dealers able to get the auction units they need, at the front-end-friendly prices they expect, while others continue to struggle?

The answers revealed three common characteristics among dealers who report auction sourcing has actually become easier and more profitable in recent months:

1. Buyer-smart inventory streams: Dealers credit new tools that provide an instant stream of available inventory for putting more of the right vehicles in front of them for consideration. “I used to spend hours printing out run lists for my local auctions to find cars I need,” says an independent dealer near Minneapolis. “I’ve set up my feeds to show vehicles from auctions across the country that fit my condition and profit criteria. I’ve got more choices of vehicles that make sense, and I’m not spending time evaluating cars that I’ll never want to buy.”

2. Profit-first focus: The independent dealer and others noted that their auction sourcing tools offer the ability to be more efficient by making their potential profit a first-tier consideration. “We used to look at a car, check the Carfax and condition reports and then look at the financials,” says the used vehicle director for a six-store Midwest dealer group. “Now, we instantly see every unit’s retail profit potential right up front, which allows us to prioritize and pursue the cars with the best retail potential and condition.”

3. Dispassionate bids/purchases: Several dealers noted they have an easier time walking away from auction vehicles when bidding turns their profit and purchase parameters into toast. “We’ve learned the hard way that it’s better to walk away than over pay,” says an Atlanta-based independent dealer. “It’s also easier to walk away when you’ve got less research time invested up-front, and you know there are three other cars, at the same or different auctions, that’ll work just as well.”

Through these conversations, I couldn’t help but sense a shift in the way some dealers approach the wholesale marketplace. They don’t just buy auction cars because they need them, or guess whether a car will or won’t perform. They embrace technology and tools to become more efficient, market-precise and profitable auction buyers.

You could also say these dealers are taking “what you see is what you get” at auctions to a whole new level.