Dealer Auction Marketing Guide

Many of you will be obtaining a dealer’s license for the sole purpose of attending dealer only auctions. If you have never been to a dealer only auction, you are in for a new experience. Dealer auctions can be a very fun environment but can also be costly if not approached correctly. When you obtain your dealer’s license, you can check the dealer auction list at the back of the Dealer Training Manual for helpful phone numbers and contact information.

When you arrive at a dealer auction for the first time there are a few things you will need to bring. The dealer auction will want a picture ID, a copy of your state automobile dealer’ s license, and they may also require a letter from your bank stating your checks will be honored for pre-approved amounts of $25,000, $50,000 or higher depending upon your relationship with your bank. They may also ask you to sign an Power of Attorney form. The Power of Attorney form will allow the auction to sign a title for your dealership if you are not available when a vehicle you own is sold through the auction. This grants the dealer auction rights to sign and complete the odometer information that is required by law on the back of most vehicle titles. This is a great service to dealers which does not require you to be present when the cars in your inventory are being auctioned. You can drop your cars off a week before the auction date, conduct sales on your retail lot while the auction takes place which allows the auction staff to take care of all your wholesale transactions.

Upon completion of the application process to your first auction, you can have your photo taken for your Auction Access ID Card. An Auction Access ID card is the size of a credit card and can be issued by most auctions throughout the country. Your Auction Access ID card will have your dealership name, contact information, your photograph, and your individual Auction Access ID card number. It will take about 3 weeks after you applied for your Auction Access ID card to receive it the mail. This card will allow you access to every dealer only auction in the United States and Canada. These dealer only auctions will welcome you with open arms because you, as a licensed motor vehicle dealer, are what drives their business. They will contact you to let you know about certain types of upcoming auctions, dealer’s specials, and discount days. They want you at the auction as much as possible, because more dealers, mean higher prices, which means higher auction vehicle charges.

All dealer auctions are free to attend for licensed dealers but you will be required to pay buyers fees for every vehicle you buy, and seller’s fees for every vehicle you sell. Most dealer auctions charge $100 to $200 for most vehicles bought or sold for under $10,000. Your charges can be much higher when you purchase or sell “Highline” vehicles, which run $50,000 or more. Be sure to ask for a cost overview sheet, to find out the exact charges for any vehicles before bidding on your first vehicle.

A dealer auction runs vehicles through “Lanes”. Most dealer auctions are small and have 2 to 3 lanes. Each lane has a certain type of vehicle that runs through it. One lane may be for new car trade-ins, another lane may be lease returns, and another lane may be dedicated to vehicles with high mileage that are to be bought as is. Most large cities in the United States have giant dealer only auctions with as many as 20 lanes that run simultaneously. These larger auctions have lanes dedicated to new car trades, lease returns, high line vehicles, power sports, recreational vehicles, classic vehicles, historic vehicles, commercial vehicles, commercial equipment, cars under $4000 and many more. You may also find limousines, tractors, semi trucks, lawn mowers, go carts, and just about anything that has wheels. These large auctions are amazing, and sell as many as 3000 cars a day. Having your dealer’s license will let you gain entry to these incredible auctions that exist only to support the dealership industry. These dealers auctions are your doorway to unlimited profits.

OK, you have gained access to your first auction, what do you do next? Buy 7 or 8 cars to put on your lot? Absolutely not! Never, ever purchase a vehicle at your first dealer only auction. Your first few auctions should be for observation purposes only and to find out how auctions work. I would highly recommend that you attend 5 to 6 auctions before you bid on your first vehicle. You will need to get an idea of what vehicles are selling for. Never assume a vehicle is worth a certain amount by your gut instinct. You may see a vehicle that you can win for a bid of $4000 and think you can sell it for $5000 on your lot. You purchase the vehicle, get it on your lot and realize the dealer down the street has 10 identical vehicles that he or she can’t move for $2500 each. This happens very frequently to inexperienced dealers and you should try to avoid this common mistake. The greatest way to make money in this business is to know vehicle prices. You need to know prior wholesale values on every vehicle before placing your first bid. Remember, never bid on a vehicle when you are unsure of prior wholesale values no matter how much your heart is beating and no matter how much your adrenaline is flowing. By raising your hand and placing a bid, you are obligated to purchase that vehicle. Failure to follow through on a bid can actually get you banned at some dealer auctions. If you bid, be ready to follow through with the purchase.

When researching wholesale prices your first choice might be Blue Book or NADA vehicle pricing books. These books offer an affordable way to research vehicle pricing but you should careful because they are not always the most accurate pricing information that is available. The information in these books can be a little dated and the prices in one book can vary greatly from the other. I believe the most accurate way to find a vehicle’s true wholesale value is by using Black Book or an online service offered by Manheim Auto Auctions called MMR which stands for Manheim Market Report. Black Book and MMR use actual wholesale vehicle selling prices based upon nationwide auction sales reports from the previous week. Black Book can send you a new “Black Book” every week, 2 weeks, or monthly depending on the subscription service you choose. They can also email the latest prices to your computer or handheld PDA or IPOD. Manheim Auto Auctions offers a free online pricing system called MMR. This internet pricing tool is available to all dealers that are registered at any Manheim auction. Manheim is the largest auction company in the United States and they own over 200 auctions located in some of the biggest cities in the country. Manheim analyses the selling prices for vehicles throughout the country by using a number of criteria. They analyze a vehicles year, make, model, condition, and mileage then average these prices to give you a very accurate wholesale pricing guide from the previous selling week. They also figure geographical statistics to allow you to find out average wholesale selling prices for the area of the country in which you live. A vehicle that takes top dollar in the western part of the country may sell for thousands less in the south, or vice versa. Knowing your geographical area’s wholesale prices will allow you to purchase vehicles in other parts of the country for a minimum and resell them for much higher prices in a “hotter” market. Knowing vehicle prices based on geographical areas is one of the best ways to make money in this business. Your knowledge of vehicle pricing is a very powerful tool to help you achieve huge profits with your dealer’s license.

So how do you buy a vehicle in another part of the country at an auction that is several hundred miles away? Online bidding of course! Most vehicle auctions offer online bidding as a service to dealers across the country. You will be able to view an auction’s inventory in advance, then bid on the vehicle online live while the auction is taking place. You can bid during a live auction by pressing the enter button on your computer. What happens when you place the winning bid online? You will be required to pay for the vehicle by wire transfer, or credit card. You will then be given a helpful choice of shippers that are waiting at every auction. The auction should be able to provide a choice of vehicle shippers that are ready to ship your vehicle on the day the auction ends. These car shippers are standing by at the auction and should be able to give you a quote quickly and easily. Shipping vehicles to dealers is a big business and it can be very competitive so get 2 or 3 quotes for the best shipping prices available. One downside to this system is that you will not be able to actually check out the vehicle physically before the auction and once again, you will be required to complete the purchase if you are the winning bidder.

If you are bidding in person at a dealers auction, try to go to the auction early or possibly the day before. All auctions allow you to preview the inventory prior to the actual auction. This is a great time to kick tires, start the vehicle, check the fluids, view the interior, and check out the general condition of the vehicle. You will not be allowed to drive to vehicle prior to your purchase so try to check it out as thoroughly as possible.

When auction time comes, have a top bidding price in mind before the vehicle comes through the lane. Stay with this price and don’t go above it no matter how tempting. You may always think one more bid may have won the vehicle, but you’ll never know how many bids the other dealers were willing to make. Write down your maximum bidding price, before the auction starts and stick to this price no matter what. Never, ever let your emotions take over at an auction. Your adrenaline will be flowing and your heart will be racing but never go above the top bidding price you have written. If you don’t get the vehicle you want don’t worry, you have a dealer’s license, there are thousands more just like it available somewhere. You will find the vehicle you are looking for, just be patient.

If you have done your wholesale vehicle pricing research, attended several dealer auctions to get a feel for how things work, have funds available for the checks you write, checked out every vehicle you might bid on, and written down the top bidding price for each vehicle, then you are ready for you first bid.

Get up close to the auctioneer so you can understand what he or she is saying. All auctioneers want to move these vehicles as quickly as possible, so you need to pay very close attention to the current bid prices. If you can’t understand what they are saying, many auctions have a television screen above each lane that will tell you the current bid. When you are ready to bid just raise your hand and the auctioneer will acknowledge your bid. Keep raising your hand until you have reached the maximum bid that you wrote down. Your heart will be racing and your adrenaline pumping but you need to stop bidding when you reach your maximum bid no matter what!

If you are the winning bidder then congratulations are in order, you just purchased your first vehicle. Now what? You need to go to the auctioneer’s stand and sign the paper to complete the purchase agreement. After you purchase the vehicle most auctions offer what is called a “Ride and Drive” guarantee. A ride and drive guarantee will allow you to take the vehicle for a quick test drive to make sure it has no major mechanical problems. Be sure to find out what type of guarantee the auction is offering before you bid on the vehicle. Many vehicles, especially the ones with over 100,000 miles, will offer no guarantee whatsoever. Be especially careful with these vehicles. If you get the winning bid, the vehicle is yours no matter what.

If the vehicle you purchased has a ride and drive guarantee, take your purchase agreement and go to the auction lot to find your vehicle. If you are at a large auction, such as any Manheim auction, you find an actual test track on location. This will be a fenced1/8 mile lane that allows you to fully test drive the vehicle. Be extremely cautious in this area because other dealers will be testing their ride & drive cars and may be driving like maniacs. Take your purchase through a couple of times to check acceleration, transmission, listen for noises, and thoroughly check the brakes. Just be very careful and be sure to buckle up. Most auctions also offer a post purchase inspection. A mechanic with the auction will run the vehicle through an abundance of vehicle diagnostic checks. The post purchase inspection should cost between $75 and $100. These post purchase inspections are well worth the investment since they may be able to locate mechanical problems that you did not find during your pre auction inspection or your ride and drive. Many auctions allow you to back out of a deal if the post purchase inspection finds repair estimates that total over certain amounts such as $250 or say $500. Be sure to check what the post purchase inspection covers before bidding on the vehicle. This is a great form of insurance to make sure you don’t have a significant bill after your purchase.

Be very careful when buying any vehicle at a dealer only auction. The cars you are bidding on normally come from other dealer’s inventories and for some reason they have not sold on other dealer lots. You are buying most of these vehicles as is and you need to bid on them accordingly. They may have mechanical problems that may or may not be obvious. Remember, these vehicles have not sold on other dealer’s lots. You need to check them out as thoroughly as possible. When you return to your lot, you should always plan on spending 2 to 3 hundred dollars on each vehicle in order to bring it up to retail selling condition.

Good Luck!

Find out more about Dealer Auctions in the Dealer Training Manual. Learn about Dealer Training Manual Topics, read Dealer Testimonials, or order your Dealer Training and Compliance Manual here.

Dealer Auction Marketing Guide