There are few marketplaces with the adrenalin-pumped
atmosphere as wholesale auto auctions – vehicles of every make,
age and condition being eye-balled by anxious bidders looking
for a bargain, either attending in person or watching online.
People bid for various reasons – for resale, to repair and recondition,
for export, to part out and for scrap value. The bidding is fast
and furious, and informed buyers across the country settle baseline
values for the used vehicle market.
Auctions are essential to recycling vehicles,
not just used cars and light trucks, but all types of commercial
vehicles and what are termed “toys” in the business – most anything
on wheels from used boats on trailers to motorcycles, motorhomes,
house trailers and the occasional lawn tractor.
There are two distinct types of auctions
– rolling and salvage. At rolling auctions, most used vehicles
drive through lanes, have clean titles and are sold for reuse.
Rolling auctions also sell vehicles with branded titles – salvage,
reconstructed, or theft recovery/stolen vehicles and these conditions
are announced at time of sale. Due to the small number of branded
vehicles at rolling auctions, not all vehicles are repairable
and have clean titles.
Rolling auctions
At salvage auctions, most vehicles are undrivable, have state-issued
salvage certificates and are largely sold for parts and recycling.
There is a confusion of terms between the two auction types,
however, rolling auctions also categorize vehicles as salvage,
but they are repairable ones with clean titles. Conversely, a
small percentage of salvage auction vehicles have clean titles.
Members of the National Auto Auction Association
(NAAA) represent rolling auction companies. These 317 members
comprise the largest association of brick-and-mortar auto auctions
in North America, which represented $81 billion of auction sales
in 2010. 14.1 million vehicles entered the NAAA auctions during
2010 resulting in 8.4 million units sold. “We are the pulse of
the wholesale market and vehicle prices are set by the auto auction
industry,” said Frank Hackett, executive director of NAAA.
“Auction volumes are off, but they are off
right along with the rest of the automotive industry,” Hackett
went on. “But our volumes have not been impacted as much as the
used car business. Part of the problem with our volume is the
shortage of cars. I think the Cash for Clunkers Program had some
impact on our industry. It took cars off the road that people
could afford to drive and impacted dealers that could have sold
those cars. Maybe it was good for the salvage industry, but the
program could have been better by not killing all of those engines.
There were many cars that the auctions could have handled – this
reduced our volume.”
According to NAAA, the demand for used vehicles
remained strong in 2010. Prices actually increased by 5.6 percent
during 2010 to an average sales price of $9,614, even though
gross volume was down 1.9 percent compared to 2009.
Vehicles are consigned to NAAA auctions from
several sources. Dealer-consigned vehicles represented the largest
number of vehicles sold with a 44.4 percent share, followed by
fleet lease at 43.7 percent and factory vehicles at 8.9 percent.
Only 3.1 percent come from other sources.
All 317 NAAA members also hold online auctions.
Of the $81 billion 2010 sales, $19 billion was attributed to
1.3 million vehicles sold via the internet. This is a significant
change in the auction industry over the past few years. In 2003,
electronic sales represented only about 1 percent of total industry
sales, but by 2010 it rose to nearly 16 percent and this robust
trend is likely to continue.
Over the past decade, computer technology
has revolutionized the auction business and vehicle consignors,
both for exchange of information within the industry and by using
Internet portals to make remote and proxy bidding more convenient.
Atlanta-based AutoIMS, a subscription database
tool, has emerged as a platform for commercial accounts, primarily
banks. Credit unions, rental car and leasing companies, fleet
managers and OEM financing also exchange information, manage
inventory, establish market prices, see digital images and obtain
vehicle condition reports from the company. Bidders no longer
have to reference paper documents, but can stand in auction lanes
using smart phones or tablets, or bid from cyberspace with fingertip
access to data on a unit coming up for bid.
“We do a lot of translation and communication
of data behind the scenes,” says Joe Miller, director of customer
service for AutoIMS. “While many of our consignors and auctions
use our website on a daily basis and use the web based tool,
much of the information they are exchanging we have set up and
facilitated to run as an electronic data interchange without
even using the website. We help our subscribers to set up the
automation of information for their unique enterprise systems.”
AutoIMS features LivePricing, which integrates
current vehicle pricing with condition reports and customizable,
adjustment formulas. Considerations such as auction grade, equipment
options, damage estimates, and condition reports with digital
images are pooled to facilitate and backup floor prices. A user
can review data on one screen and accept or adjust a recommended
price, send floor prices directly to one, or multiple auctions.
LivePricing also accumulates historical data to help identify
trends, such as percentage of floor price to net price. “For
example, a bank could go into AutoIMS and put in what they expect
the prices to be at auction and the bank representatives at auctions
on sale day would know what the bank wants for each vehicle,”
said Paul Lips, NAAA vice president and executive vice president
of operations and finance for ADESA, a chain of 70 North American
whole car auctions. AutoIMS is also used for managing vehicle
remarketing portfolios by simplifying inventory management by
providing a central platform to exchange vehicle data for auction
houses and consignors of all types, such as repo agents.
Even though electronic auctions have made
inroads over the past several years, Frank Hackett does not see
the role of traditional auction houses changing. “You have to
be a brick and mortar auction in order to belong to NAAA and
50 percent of a business must run through the lanes. During online
bidding you cannot touch, feel or smell the vehicle. In the lanes,
bidding allows you to view other cars in other lanes. There is
energy, excitement and body language you can’t experience online.”
Unlike retail auctions like eBay with date
certain bid deadlines, wholesale online auctions are held separately
as well as simultaneously with lane auctions. Lane auctions are
usually held on a weekly basis, some are held on weekends and
some have more per week.
Vehicles unsold at real-time auctions are
often posted on the Internet with “Buy Now” prices set to promote
fast sales and unload inventory.
The auction industry continues a trend towards
more full service facilities. Almost all NAAA members offer detailing,
body and mechanical repair, paint shops, transportation services
and dealer financing. The average NAAA auction operates an 8
lane facility on 76 acres and employs 137 people with an annual
payroll of $3.4 million.
Charlotte Pyle is vice president of two independently
owned auction companies in West Virginia, Capital City Auto Auction
and Mountain State Auto Auction. She is also NAAA president-elect.
Pyle said that electronics come into play at her operations –
“Insurance companies don’t necessarily deal with rolling auctions,
they deal with salvage auctions. I would say 95 percent of our
salvage vehicles are ones that dealers are going to take and
fix. We sell for large rental car companies so when they have
one that’s damaged or wrecked, we pick those up because we handle
the account. In the old days, we used to drive bidders around
the lot on a truck to view the salvage vehicles. Now with technology,
we go out and take pictures and run them on a camera on the indoor
lanes and online simultaneously.”
Pyle’s regular rolling auctions are held
weekly at one location on Monday and at the other on Friday.
Her auctions employ an internet platform called AuctionPipeline
that displays photos of vehicles on monitors at the auction and
for online bidders on the company website and on a number of
other online portals. “At my auctions we sell salvage vehicles
right before the regular rolling auction and that happens once
per month. For us, sales are much better in the lanes. We sell
on the Internet but have much higher achievements in the lanes.
On Monday, for example, we sold 69 percent of the cars. Cars
that are not sold at auction go on the Internet for two or three
days. Sometimes they are rerun at our auctions to different returning
dealers. We have a Monday sale and a Friday sale. So if I have
a client that did not sell their 20 units on Monday, I can take
those vehicles to my other auction within same week and hopefully
get a chance at a whole new buyer base. Our business has been
great. The volumes are lower but the selling percentages and
prices are higher.”
Salvage auctions
“There’s a big difference between wholesale
rolling auctions and salvage auctions,” said Jerry Sullivan,
executive vice president of QCSA Holdings, Inc. “If you look
at the two industries side by side it’s ironic. All along, the
salvage auction business has been a lot more sophisticated than
rolling auctions from a technology standpoint. The people who
drove our business were from the insurance claims industry. They
were very technologically savvy, out with systems, digital images
and selling over the Internet a lot quicker and early on.”
QCSA Holdings is one of the nation’s largest
independent salvage auction companies. It works with insurance
companies, automotive institutions and charities to remarket
total-loss, recovered theft, damaged, disabled, inoperable and
low end clean-title vehicles to an audience of global buyers.
With facilities in most every market in the
United States, QCSA has two targeted brands, Crashed Toys and
Salvage Direct, both heavily Internet dependent. Each brand offers
specialized processing and sales along distinct inventory lines.
Crashed Toys remarkets watercraft, power sports, motorcycles,
exotic and recreational vehicles while Salvage Direct remarkets
cars, trucks, SUVs, commercial vehicles and provides catastrophic
loss services.
“The Internet is the driving force of everything
we do and the majority of what we sell is online. Even our live
sales are also 100 percent online auctions,” said Sullivan. QCSA
currently serves more than 100,000 buyers in over 100 countries
with 2 web-based sales platforms that reach over 800,000 visitors
each month with nearly 7 million pages featuring 11,000 auction
lots per month. They post 12 to 16 photographs of each vehicle
on their websites, along with detailed descriptions.
“We are both online and live. We have a typical
auction format with an auctioneer and a live audience, plus an
online audience, but it takes place on an auction bus while we
drive through lanes of vehicles that can’t move because they
are either total losses or unsafe to drive. Only 2 or 3 of our
facilities offer live auctions – our other 40 or so locations
just sell on the Internet. Some of these are live Internet auctions
and others are static where bidding closes at a certain time,”
Sullivan explained.
Most of QCSA’s vehicles are sold to dismantlers
who remove salable parts and then turn them over for scrap. “We
are one of the primary sources of vehicles for recyclers. Approximately
46 percent of our vehicles go for dismantling and the balance
go for export, rebuilding and resale. Anytime there is a recession
people will fix rather than replace. There are fewer used cars
out there which means that the used car dealer is more willing
to buy a car that is lightly damaged, put it in his body shop,
fix it up and put it on his retail lot. If there were a ton of
undamaged cars in the aftermarket he would not bother. I always
encourage everybody in the recycling industry to work with salvage
auction companies that work with them. The more cooperative your
auction is with your needs as a recycler, the better value you
are going to get for your buck,” Sullivan concluded.
Here’s how Joe Miller at AutoIMS sees the
future of electronic data in the auction industry, “The last
15 years has seen an incredible amount of progress with information
being exchanged between systems to reduce labor costs and improve
data accuracy. Accuracy is the key to the future. As information
becomes more reliable, a greater number of vehicles are being
sold online to compliment the physical auction lanes. More images,
better arbitration policies, and certification programs give
comfort to dealers who buy cars online. Physical auctions still
play a key role in this new reality as they offer a location
to marshal vehicles, provide reconditioning and repairs, detailing,
title services, and high-quality inspections to facilitate sales.
Remote buyers and sellers see these services as a guarantee,
and physical auctions will continue to thrive and even direct
the ongoing digitization of remarketing data.”
