The auto auction business, which grew out of a need to help dealers resell vehicles they were unable to sell through a retail transaction, has undergone significant changes over the years. In hindsight, bringing buyers and sellers together in a ‘mass’ marketplace was an elegantly simple solution to the dealers’ challenges.
The auction model proved long ago that many assets tend to sell quicker and for a better price in such an environment; when multiple bidders interact to determine a market price where a transaction can occur. Auto auctions perform this function very well and as a result, the North American used-vehicle market now has hundreds of auctions serving the needs of buyers and sellers.
These auctions are very disparate entities. At one end of the spectrum, you find the smaller, independently owned and operated sites that cater to local area dealers and generate most of their consignment within their immediate region. At the other end of the spectrum, there are the massive, multi-lane facilities with reconditioning bays, eBusiness centres and cafeterias, selling thousands of vehicles for large national consignors.
A personal touch
Regardless of the footprint, the auction has always been a place of business and social interaction. The auction continues to draw dealers in week after week because it adds value to their business and allows for interaction with colleagues facing similar challenges and striving for similar objectives.
“When I was just starting out, I was at the auction all the time, and now my buyers are at the auction all the time,” says Jim MacDonald, principal at the MacDonald Auto Group on Cape Breton Island.
“This is how you know what is happening in the market. There are no secrets, you have to be involved and see what happens in the lanes.”
MacDonald owns four franchised dealerships and a stand-alone used-car store and has found great success in the used-vehicle business. His rewards from attending auctions include purchasing his burgeoning Ford dealership based on his first-hand observations at the auction. “Over the years, standing in the lanes, I noticed that the quality of the Ford vehicles was improving… so, last year, when I had the chance to purchase a Ford dealership, I did it. Not everyone thought it was a good idea, but I knew, from what I had seen, that this was a great opportunity. I definitely made the right decision. I don’t think I would have made it if I had not had that knowledge and experience from the auction.”
Lisa Scott, VP of sales and marketing for ADESA Canada has learned plenty through the auctions. She has been in the business for more than 20 years and has seen first-hand how integral they are for both new- and used-car dealerships. “Things just happen when people are face-to-face,” she says. “You have more conversations, you learn more from each other and you get value from that.”
More added value
Certainly, as a source of inventory, the auctions are essential for dealers. The selection, service and protection derived from purchasing at the auction are definitely valued by dealers. Scott notes that there have been some changes to the auction environment and the resulting interpersonal relationships due to the rapid adoption of technology and online sales.
MacDonald’s business is an example of how online services offered by auctions have changed his performance. He used to keep all the old paper-based auction sales reports that he received so that he could accurately appraise a vehicle, using three months worth of actual auction sales data to get an average that was more accurate than guide books. Fast-forward a few years and he notes, “the information is online and we use the market guide constantly to price vehicles because it is accurate and timely. That is what helps us make better decisions”.
Now online purchasing provides dealers with greater selection and the ability to source units at a convenient time for themselves. The wholesale market now affords multiple buying opportunities and, more and more, sellers are striving to ensure that their units are available to dealers around-the-clock, throughout the entire lifecycle.
No longer constrained by the locations of physical auction sites – which are inaccessible to many – dealers have found comfort in using all available channels to purchase vehicles, whether they be next door or on the other side of the country, and then having the auctions coordinate transportation. The volume of vehicles moving across provincial borders is now substantial because barriers have been removed, opening up a huge supply of inventory that only a few years ago would have been difficult to find.
The sourcing side of the business continues to deliver enhancements for buyers as well. In years past, dealers would have to wait for auction day to get most of their units. With the many upstream and midstream remarketing programs now running, dealers have access to off-lease and off-rental units much earlier and, truly, whenever they want.
Good for business
According to Dan Depagter of Haldimand Motors in Cayuga, Ontario, the changes in the auction industry are good for his business. “As one of Canada’s largest independent car stores, we get great benefit from the significant evolution in our industry. The advances in technology allow us to research and buy vehicles anywhere in North America, from many different venues, including all auctions,” says Depagter.
He notes that the vast amounts of information provided by the auctions are critical in ensuring they buy the right vehicles with the right quality at the right price for their lot. “We have been in business over 25 years and have seen an evolution in our customers as well. The same technology that has allowed our buyers at the auctions to be highly educated has helped our customers, who now arrive at the dealership with all the information about the vehicle they are interested in, the true market value and what the retail price should be”.
The auctions have embraced the ability to provide more content and more tools to the dealers that are purchasing the vehicles. “We want (dealers) to be empowered to make good decisions for their business and that is what you hear when you speak with dealers like Dan and Jim, who know how to get the most out of their relationship with the auction,” says Scott. “They see the value that the market guide, the condition reports, the inventory listings and the search tools provided and they are better prepared for the challenges in their business”.
Auctions are truly where the action is as they offer a harmonious solution for both new- and used-auto dealers. And the auction companies continue striving to bring dealers new and improved tools and solutions to help dealers improve their businesses.
