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What's Hotter than the Temperature

If prices are measured by book value on average, than you could say the market is about average. If you single out trucks, it quickly becomes a soft market. If you gauge small cars... try to guess what a Focus or Elantra will do! It may be mid-summer, and it has been hot... but not as hot as cars at auction!

The auction business itself, as a whole, is in a rapid state of change and that has had more effect on prices than we give credit to. The shortage of cars crossing the blocks are still out there, but are selling through different channels. Finance companies sell direct. Rental companies have mature wholesale channels outside the auctions. OVE, AutoTrader, Cars.com... all outside channels that have syphoned vehicles out of auction lanes as well. I believe that these are major reasons as to why the "remaining" cars at auction have jumped to the levels they have. It has been the push away from the physical auction from the major consignments sources that has increased values to today's levels. From an efficiency standpoint however, the bricks and mortar auction still works rather well because an organized UCM can effectively buy and sell his/her entire weeks wholesale business at a single auction. More and more however, I hear that it seems that the auctions concerns and needs come before the dealers needs. There is also the complaint about paying $400+ in buyers fees for the same car(s). There can be no doubt that auction fees are a huge reason buyers look to other channels to source vehicles, and combined with a decline in customer service (as it relates to what you are getting for the fees), it becomes a bit more clear as to why auction volume levels have been declining.

The fix for auctions seems easy: lower fees! But it is not just the costs the dealer is paying... its more about how you feel when you leave that auction that week. Did you get what you paid for? Are you appreciated there? If the auction is truely easy to use, fee-priced aggressively, and working as hard as it can in the dealers interests (80% conversion success)... than it can claw its way back to full lane status. If the auctions continue to assume their traditional stance and remain as rigid as they have become... then selection will stay low and what remains at auction may not suit your needs.

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