We just had the local Dodge dealership close down in Marietta. This coincided with one of the briefest sales I’ve ever seen at a nearby Friday afternoon sale. With that in mind… Dealers make a LOT of money off of trade-in’s and ‘we buy your POS’ lowball offers. No big deal. That’s always been a big part of any auto retailers bottom line. Until now. At a time when some of the larger dealer networks used to offer 80 to 100 trade-ins on a weekly basis at the dealer auctions, sources now say metro-Atlanta’s trade-in inventory is down by well over a third. Neutron bombed metro-Atlanta also appears to be fielding far more repos at these sales, and even a few high demand models that apparently are ‘Not needed in inventory’. With a local landscape that resembles the bad old days of Tecumseh Sherman, and a new emphasis on even finding reliable lending sources, it’s no surprise that even the billion dollar retail outfits are feeling more than a credit pinch.
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In the last week, I received letters from two local Hyundai dealers that “want my 2006 Azera because of the high demand for that model” and will pay “retail” plus $1000 for it on a trade for a 2008. In addition, they promise monthly payments “at or less than your present payment”.
My monthly payment is zero, so I don;t think they can match that.
If I were not retired, I would be in line for a Geneses. Saw one outside a restaurant the other night and I could go for that car in a big way.
As it is, I’ll stick with my paid-off Azera.
Steve
From earlier posts I believe you are in the auto broker business so could you explain for non auto business types on this site what part the dealer auctions play in the overall auto sale business?
How do cars end up there?
Why is participation limited to licensed brokers?
If they really wanted to move metal why not open auctions to non broker cash buyers with cars “as-is”?
At this point are brokers also worried about ending up with excess inventory they cannot move?
pahaska: I believe that is a scam to get you lassoed into the dealer
“what part do the dealer auctions play in the overall auto sale business?”
In a word, liquidity. An auctions primary responsibility is to liquidate a vehicle for as much money as possible. In ideal conditions, many dealers will switch out their inventory over 60 to 90 days if it hasn’t sold. The seller receives money (after submitting the title) and the buyer gets a vehicle that they can hopefully sell for more money.
How do cars end up there?
It all depends on the seller. Auto finance companies will repossess vehicles that, in many cases, are required by state law to be auctioned off at either a private or public sale.
Dealerships will generally bring their trade-in’s along with the inventory that hasn’t sold after a given length of time.
Factory accounts will have a combination of off-lease vehicles, repos, as well as company and corporate vehicles.
Why is participation limited to licensed brokers?
It’s limited to dealers primarily for three reasons.
1) The public is flaky
2) The public is litigious
3) Dealers in most states are generally good at lobbying
You also have the greater possibility of theft and abuse of the vehicles, along with the fact that most individuals don’t know much about cars or how the auto auction process works. Due to the level of uncertainty and the briefness of the vehicle’s stay in the lane, most public individuals actually will bid far less than even the rough wholesale even at the public sales. I buy many of the vehicles I get on the side via public auctions… but only certain ones.
“If they really wanted to move metal why not open auctions to non broker cash buyers with cars “as-is”?”
See above… dealer auctions are quicker and almost always the dealers pay out more money.
“At this point are brokers also worried about ending up with excess inventory they cannot move?”
Brokers never own the cars… dealers do.
Steve
Thank you for the excellent education. If I wanted to buy through a broker you would be my first choice. Too bad you are on the other end of the country. Best of luck to you.
And you are right. As a private buyer I would only attend an auction hoping to obtain a car below wholesale. That probably would be a bid that would not succeed and only clog up the process.
Do cars at dealer auctions have a floor or reserve price?
“Do cars at dealer auctions have a floor or reserve price?”
In virtually all cases, yes. The only time is when they are seized by the government, they are over a certain number of days if they’re a repo (and the seller states it’s absolute), or if the seller simply wants it ‘gone!’.
When I was younger I worked as a driver for a few local dealerships taking and bringing back cars to the auctions, mainly Carlisle and Manheim PA, and Baltimore MD. That was an eye opening experience to say the least. Visualize your local mall’s parking lot, and that’ll give you an idea of the size of these places. Literally hundreds and hundreds of cars on acres of land.
There was everything you could imagine as far as brands go, and trade-ins, fleet vehicles, and ex-rental vehicles. The “program” cars or ex-rentals were funny, you might see something like 20-30 Chevy Malibus all parked together and all the same color. They even ran special days for high-end import and exotic cars.
The actual auction procedure was something to be seen. They’d have a long row of stalls, like a car wash, to drive the cars through, and the walls between them were all open so you could walk between each one. The auctions in each stall were all going on at the same time. The auctioneer would be on a PA system calling out the auction in each stall, and the noise was deafaning. Sometimes you couldn’t tell what they were saying from the noise bleed through from from the other auctions going on.
They’d have a driver from the lot drive the cars into the stall, and you’d have at least 20 or so dealership buyers standing around bidding on the cars as they came through. Literally one car after the next, all day long. Offhand I can’t remember exactly how long each auction took, but I’d say it was only 2-3 minutes at the most. In that time the buyers had to look over the car as far as the condition of it goes, and then start bidding on it.
Occasionally they’d wind up getting a lemon that had something wrong with it, or some accident damage that was undisclosed by the seller. Most of the cars that the dealers took to the auction were ones that were sitting on the lot and not selling, and they wanted to get rid of them for something more in demand. The hoopty trade-ins that the dealers took in that didn’t meet their resale quality standards were sold either at the smaller local auctions, or were sold to the small corner used car lots around town.
Picking up the cars from the auction was always a fun process because they’d hand you the keys and give you area of the lot the car was parked in. You then had to walk through a sea of cars, and find the one you’re looking for by the number on the windshield matching the keychain tag. The biggest problem we had was dead batteries, so we always carried a jumper box and jumper cables. From there it was driving the car back to the dealership, and hoping it didn’t break down, blow up, or get in an accident on the way home. It was actually a fun expeience as I got to drive a wide variety of vehicles. The only downside was that the other drivers were old grumpy retired guys.
Usta Bee: “The auctions in each stall were all going on at the same time. The auctioneer would be on a PA system calling out the auction in each stall, and the noise was deafaning. Sometimes you couldn’t tell what they were saying from the noise bleed through from from the other auctions going on.”
That often happens even at the auctions with only two sale lanes. Sound system deficiencies exacerbate the problems. It’s a blessing when bids are also posted on a video display.