Dealer auctions....

[recycled sixtie]

While waiting to pick up my Miata yesterday I started talking to a guy that had just picked up two Nissan vehicles at the dealership next door. He said he got them from a dealership auction. His process was to fix them up and resell them. Now a couple of questions for you. What qualifies a person to be a dealer so they can go to a dealership auction? Next question is what is the typical discount the "dealer" buys at versus the guy on the street? Perhaps this is the way some curbers operate?

[nota]

no idea how it works in the frozen north
but each state makes it's own rules here
some are just pay a fee and get a tax number

some with a dealers license here in south fla
with allow you to go with them for a fee
there are ads on craig's list for that

most nice cars are retained by the dealer
auctions are for the ruff or problem cars or over stock dumping
and you have no chance to do more then look and listen
no PPI or test drives
my older brother was a manager/salesman

[Christien]

Regulations to obtain a dealer's license vary province to province, but here in Ontario it's not something the average joe can do. You need a bricks and mortar building with parking in an area zoned for car dealerships, a permanently fixed sign, a mechanic on-site or arrangement with a shop certified to safety tests and they come and inspect it once in a while. It's not something you can really operate out of your house. Access to the dealer auctions is very strict - you have to be an employee of the dealership and registered with the Ontario Motor Vehicle Industry Council (yearly fee, open-book test to get registered, must be employed by a registered dealership). They used to allow a family member into the auction if they shared the same last name, but not anymore. So it's not easy to get access to the dealer auctions.

Curbsiders aren't picking up cars at wholesale auctions, that's for sure. I've never been convinced it's a real problem here in Ontario - in 13 years in the industry I've come across precisely one.

Typical dealer markup is 30-40%, though that varies widely depending on the vehicle, but that's a good starting point. So if a car listed for $10k, the dealer probably paid 6-7 at the auction.

[onewhippedpuppy]

30-40%!!!! Damn I wish, you guys must be able to get away with better margins up North. Many of the cars at Manheim are selling for maybe 10% under book retail. I've watched cars sell for more than book retail at wholesale auctions, and definitely more than what I could sell them for. I would, however, believe 30% markup on trade-ins. If I could consistently make 30%, I would probably be doing this full time.

I have a dealer's license and do it as a side gig. In KS it requires a correctly zoned location that is not your home address, signage, a telephone, bond, and insurance. Definitely not something you can do out of your garage. Some dealerships do have an "auction" of their back lot trade-ins where they will offer them locally as-is before taking them to a true wholesale auction. I suspect your friend is buying cars in a similar manner.

[Christien]

10%? How does that break down into reconditioning & overhead vs profit? Maybe that's the difference between what winter driving conditions in Ontario do to cars! (though KS gets pretty hard winters too, don't you?) Generally recon here is going to run $5-1000, lot pack is about $500-1000, sales commission $300, so on my $10k example you're only looking at about $1000 at most dealer profit. Mind you, I've only ever dealt in cars in the $8-15000 range, so it might be different on higher-end vehicles.

[asphaltgambler]

In Va to obtain a dealers license is a big deal. You have to already have / lease minimum Sq/Ft RE and building to codes(s). You have to show proof of becoming bond-able, no criminal history, etc etc. In this state it requires a lot of upfront $$ commitment before ever inserting the key into the front door.

A lot of regulation has really tightened in the last 2 decades or so. The idea is to prevent the 'shady's' from setting up shop, fleecing the people then vanishing.


There are some small dealers that will, for a fee, take you along and buy a car for you. Although it's really skating very close to the line................

Also, there's almost as much non-sense going on a dealer auctions as with 'public' auctions. Potential buyers spotting a car they want in the lanes and as they are giving it the once over, pull a fuse to activate a fault light. The upside the cheapo cars will have a arbitration price point. IE: Any vehicle below $2K there's no arbitration for defects found after the sale.

[RF5BPilot]

Originally Posted by asphaltgambler

...You have to show proof of becoming bond-able, no criminal history, etc etc....

Heck, that eliminates almost everyone on this site already.

[LeeH]

A few years ago I had a wholesale license and spent a lot of time at my local auctions. I was shocked at how high the bidding would go on decent cars.

I had a retail dealer I could sell through. Based on book values vs retail (Craigslist, AutoTrader, Cars.com), I'd come up with a target auction price. Usually, the hammer price would be higher than what I thought I could sell it for retail! I made more money buying off of Craigslist and selling at the auction than I did buying at the auction and selling retail!

I'm not saying there wasn't an occasional bargain, but for the most part it wasn't worth the time/effort. I made the most money buying cars that appeared broken, but were an easy fix. Nice cars? Forget it!

[onewhippedpuppy]

Originally Posted by Christien

10%? How does that break down into reconditioning & overhead vs profit? Maybe that's the difference between what winter driving conditions in Ontario do to cars! (though KS gets pretty hard winters too, don't you?) Generally recon here is going to run $5-1000, lot pack is about $500-1000, sales commission $300, so on my $10k example you're only looking at about $1000 at most dealer profit. Mind you, I've only ever dealt in cars in the $8-15000 range, so it might be different on higher-end vehicles.

I'm talking straight price, wholesale gavel price vs retail price. I shop online and nationally, so it's not subject to regional bias. Very slim margins on a lot of cars, probably why most dealerships seem to make it up in volume. I only deal in higher end specialty stuff and am a sole proprietorship, so most of my mechanical and cosmetic reconditioning is "free". Much like Lee, I think you can find nearly as good of deals on Craigslist.

[McLovin]

Agreed on that. I've had a Manheim license for years and have bought many cars there over the years.

The prices are not great, and can be easily duplicated (or beat) by shopping private party sales on Craigslist.

For dealerships, shopping Craigslist really isn't feasible, because they need consistent inventory and volume.

Sometimes I'd find a minor bargain, but more often than not (like, 98% of the time) I'd be shocked at how high the cars would get bid up. For popular models and colors, often bid up past what I'd consider retail.

The problem, IMO, is that there's just too many retail car dealers. You have the big franchise dealers that just need stock to fill their lot. They send buyers who just bid basically whatever it takes. They need a lot of cars.

Then you have the small, medium, large and gigantic independent (non-factory franchise) dealers. There are a TON of those. Mostly because it's a fairly low barrier to entry business. Yeah, you need a license, but it's not hard or expensive to get. I got one just as a hobbiest.

[aigel]

Good Luck on CL. Around here, you have an older Honda / Toyota of any sort needing work, and the fixer-guys will be waiting in line to come get it and skip title turn it for a few hundred buck profit. I have tried to buy a project car to fix, drive and resell for a profit and it is near impossible. Only chance at it is buying from your personal network of friends / acquaintances which do not want to bother advertising. Dealing in used cars / fixer-uppers is like trying to make money on garage sale, storage auctions or thrift store sales. Barrier of entry is low and competition is high. Might as well open a restaurant!

G

[MRM]

I've purchased several vehicles at auction through Eric (Kaisen) of this board. He's local to me. For several years he was willing to work with anyone to purchase a car at auction for a flat fee of $1,000 plus expenses. Purchasing at auction only made sense in certain situations, but under the right conditions you can do well. Purchasing at auction works best when you're looking for 2-3 year old cars that are just coming off lease and you're looking for a higher end car that gets more of a markup. Any European car works well under that scenario but I had him purchase my wife's Mercedes E-350 (at an absolute steal) a Honda Minivan (saved a couple of thousand) and a Ford Explorer (did a little better than bargaining hard at a dealer). We were always on the lookout for the right 911, but I was never in the right position when the right car came along.

In Minnesota and Wisconsin you need a dealer's license to go to an auction, as stated above. There is an amazing process that goes with the auction. They issue a list of cars coming up on each date. They issue a brief condition report and photos that the dealer can view on line, together with a historical average of similar cars being sold. When the auction comes the dealer is either at the auction live or he can bid on line. After the sale there is the option of another inspection at a cost of something like $150 to confirm the condition. If the car fails the inspection you can cancel the sale. If the car passes the inspection you get a short warranty. After the sale you can purchase additional services a la carte, from a complete detail to changing the oil to body work. Once the car is done you have to go to the auction lot to pick it up.

All in all the process was very smooth for how complex it was. If there are a lot of that type of car coming off lease and it's something that has a pretty high dealer markup you can do pretty well. Buying smaller commuter cars doesn't make as much sense.

[Arizona_928]

If you know how to turn a wrench, and really good at diagnostics. As in better then the dealer techs at diagnostics. You can make some money. That's the key though. You have to really know your stuff. Can you recharge a/c, repaint a fender, replace parts in the transmission, ect, ect, ect? A lot of times just to pull a profit, you will be using salvage yard parts.
I've made some money on the craigslist. Have to be lucky finding the deals, not chasing the deals. Many times I have replaced a thermostat, and sold the car the next day. Other times it has taken 2-3 months just to break even. They're easier ways to make money...

On the other hand I know a few people who buy 2-3 year old cars from the insurance auction sites just to have a new DD "not re-sale".

[flipper35]

There is an dealer auction up the road form us. Judging from the sounds of the cars on test drives it its the last reprieve before going to the crusher. I am not saying all auctions are this way, but these cars are not something that I would buy unless they were priced below scrap value.

[onewhippedpuppy]

Originally Posted by McLovin

Agreed on that. I've had a Manheim license for years and have bought many cars there over the years.

The prices are not great, and can be easily duplicated (or beat) by shopping private party sales on Craigslist.

For dealerships, shopping Craigslist really isn't feasible, because they need consistent inventory and volume.

Sometimes I'd find a minor bargain, but more often than not (like, 98% of the time) I'd be shocked at how high the cars would get bid up. For popular models and colors, often bid up past what I'd consider retail.

The problem, IMO, is that there's just too many retail car dealers. You have the big franchise dealers that just need stock to fill their lot. They send buyers who just bid basically whatever it takes. They need a lot of cars.

Then you have the small, medium, large and gigantic independent (non-factory franchise) dealers. There are a TON of those. Mostly because it's a fairly low barrier to entry business. Yeah, you need a license, but it's not hard or expensive to get. I got one just as a hobbiest.

It's also a challenge because many of the large or franchise dealerships make their money through financing or service. They can sell a car at or close to cost, knowing that they'll make it up in other ways.

Originally Posted by MRM

I've purchased several vehicles at auction through Eric (Kaisen) of this board. He's local to me. For several years he was willing to work with anyone to purchase a car at auction for a flat fee of $1,000 plus expenses. Purchasing at auction only made sense in certain situations, but under the right conditions you can do well. Purchasing at auction works best when you're looking for 2-3 year old cars that are just coming off lease and you're looking for a higher end car that gets more of a markup. Any European car works well under that scenario but I had him purchase my wife's Mercedes E-350 (at an absolute steal) a Honda Minivan (saved a couple of thousand) and a Ford Explorer (did a little better than bargaining hard at a dealer). We were always on the lookout for the right 911, but I was never in the right position when the right car came along.

In Minnesota and Wisconsin you need a dealer's license to go to an auction, as stated above. There is an amazing process that goes with the auction. They issue a list of cars coming up on each date. They issue a brief condition report and photos that the dealer can view on line, together with a historical average of similar cars being sold. When the auction comes the dealer is either at the auction live or he can bid on line. After the sale there is the option of another inspection at a cost of something like $150 to confirm the condition. If the car fails the inspection you can cancel the sale. If the car passes the inspection you get a short warranty. After the sale you can purchase additional services a la carte, from a complete detail to changing the oil to body work. Once the car is done you have to go to the auction lot to pick it up.

All in all the process was very smooth for how complex it was. If there are a lot of that type of car coming off lease and it's something that has a pretty high dealer markup you can do pretty well. Buying smaller commuter cars doesn't make as much sense.

With some looking there are deals to be had, especially compared to retail. On late model used cars there is also a massive amount of inventory to choose from, much of it good condition. I do very much the same thing for customers, and picked Eric's brain before getting into auctions. I can typically save at least 10% after fees compared to full retail.

Originally Posted by flipper35

There is an dealer auction up the road form us. Judging from the sounds of the cars on test drives it its the last reprieve before going to the crusher. I am not saying all auctions are this way, but these cars are not something that I would buy unless they were priced below scrap value.

Sounds like a "wrong side of the tracks" sort of place. I buy through Manheim, just about every manufacturer sends their off lease cars directly there. So it's easy to find nearly new, low mileage, one owner cars in excellent condition and still under manufacturer warranty. There are also a surprisingly large number of exotics, I've watched Ferraris and Lamborghinis sell for $300k+ through the same auction that runs off-lease Chevy Cobalts.

[flipper35]

When we were looking at replacing the daily driver that was totaled (hit by a sleeping driver) we asked the used car dealers where they got the cars on the lot from. Several said they wouldn't buy any cars from the auction by us because that auction took the cars the other auctions reject. It is sometimes entertaining to watch the cars on a test drive. We should have a pool for how much smoke or how many cylinders running compared to how many in the block.

A friend of ours has a body shop and has bought from several regular dealer and insurance auctions and does well.