Due to a severe used car shortage, sourcing vehicles at auctions has become the lifeblood of any used car department. Rarely will the vehicles that are traded in at your dealership be adequate enough to fill your lot. Either the trade-ins will be too rough, have too many miles, or just be the wrong mix of vehicles. Unfortunately a used car manager has no control over what kind of inventory they take in on trade, so proper auction management is essential in any successful used car operation.
Where does good auction management come from? It comes from excellent preparation.
“Chance favors only the prepared mind.”- Louis Pasteur
Excellent preparation is the key to making money at any auction.
When purchasing used cars, get to the auction as early as possible. For some, this will mean arriving a day before the sale, for others this will mean arriving as early as possible on the day of the sale. Arriving early is even more important if you are a wholesaler. You will need extra time to call potential buyers before making your purchases. Arriving early gives a person plenty of time to inspect the cars they are interested in and take note of any damage.
Typically, you start with your “needs list”. Which vehicles do you need to buy? Do you need a specific vehicle for a particular customer? Start by pulling the run list and search for the vehicles you need. Once you have compiled your list you can inspect the vehicles you selected to assure their cosmetic and mechanical quality.
Doing your auction preparation early also allows you the opportunity to gather extensive pricing information using various Internet sources. We are all familiar with the Manheim Auction online database of prices. This is a wonderful source of historical pricing information and should be used to complement and verify your thinking as often as possible. When you are trying to calculate used car valuations, there is no better starting place than a list of what vehicles actually sold for in recent auctions. This information is extremely valuable.
Once your research is completed, now comes the tough part, deciding what you will pay for a vehicle.
However you determine how much you will pay for a car, come up with a top amount you will pay. Then, write it down. Always keep the top dollar amount you will pay for a vehicle in a place where it is easily accessible. Auctions can become confusing sometimes, even for professionals. You might lose the auctioneer’s rhythm or notice something on the vehicle that would change its value, or you might get into a bidding war with another dealer. If you have your pricing information written down, it will take some of the emotions out of the bidding process and save you from making simple mistakes.
Once you have a top dollar amount, stick to it. Do not pay over your top amount. This can be a difficult thing to do in the heat-of-the-moment at an auction. Sometimes we get wrapped up in the excitement and overpay for a vehicle. A good buyer knows how to buy a car; a great buyer knows how to NOT buy a car. In other words, a great buyer knows when to walk away. If you are unsure of the price you should pay, walk away. If you are unsure of the vehicle’s quality, walk away. If you are unsure about anything, walk away. Opportunities are easier to make up than losses. Besides, there will be another auction tomorrow and the following day. There will always be another opportunity to buy a vehicle. There is no need to over pay.
Auctions will often move very fast. Proper prep work will help you avoid costly mistakes that happen when a person is rushed. Excellent preparation leads to fewer mistakes and more profit whether the auction is live or an used car auction online.
Things to keep in mind about auction preparation
• Arrive Early, Arrive Early, Arrive Early
• Determine a top dollar amount you will pay for each vehicle
• Do NOT pay above this top dollar amount
• Opportunities are easier to make up than losses