Upstart platforms, peer-to-peer sites squeeze auctions
A key factor in the shift to other platforms and strategies? Buying used vehicles at auction costs a lot more.
Wholesale used-vehicle prices increased throughout 2021 and remain elevated this year.
In May, prices were up 9.7 percent from the year-ago period, according to the Manheim Used-Vehicle Value Index.
Because many auction companies set fees by pricing tiers, those higher prices have led to higher fees.
And dealers want to sidestep those costs. Many have realized it can be difficult to make a profit if they are aggressively outbidding other dealers for vehicles.
“The auction is the last place that we go to try to look for a used car because it is so expensive,” said Allen Turner, owner of his namesake dealership group based in Pensacola, Fla. “The auction fees that the auction places are charging have gone up just like everything else, so you have to weigh what does it cost to buy a vehicle and get that vehicle back here to the dealership.”
Dealers are increasingly securing used-vehicle inventory via trade-ins and direct purchases from consumers.
“All the public dealers, all the used-only car companies like Carvana and CarMax and all the privates we talked to — they’re all really trying to invest and lean into buying from consumers right now as a way to avoid the higher wholesale auction prices,” Imbro said.
Dealers have more online options than they used to for listing and selling vehicles and thus avoid lugging them to auction sites.
For instance, many are posting vehicles on platforms run by evolving retail technology companies such as Cars.com, which started as an automotive classifieds website, or CarGurus, a listings website for new and used vehicles.