Action at the Auto Auction

Darryl Noble has seen many changes in the 22 years he has been attending Manheim's Nashville Auto Auction. He laughs when he remembers his first time there. It was so smoky from everyone smoking, you couldn't breathe, he says. And the facilities were very small I think only four lanes. And it was hot and dirty. No more. Manheim just rebuilt the Nashville auction. It's now a modern, airy, user-friendly

Darryl Noble has seen many changes in the 22 years he has been attending Manheim's Nashville — Auto Auction. He laughs when he remembers his first time there.

“It was so smoky from everyone smoking, you couldn't breathe,” he says. “And the facilities were very small — I think only four lanes. And it was hot and dirty.”

No more. Manheim just rebuilt the Nashville auction. It's now a modern, airy, user-friendly facility.

Auto auctions began to take form in the late 1930s, growing out of the livestock and tobacco auctions that were prevalent in the South in the early part of last century.

For years, car auctions were the domain of independent car dealers, and were ignored by the franchised dealers. Auction companies didn't put much money into those facilities and didn't provide many services to dealers.

That's no longer the case, says Noble, a truck dealer in Lebanon, TN, who in recent years has seen increased competition from the franchise dealers who attend the auctions to sell excess stock and buy inventory for their used-car lots.

The trend is occurring on a national level. Eight years ago, 25% of the used vehicles retailed by franchised dealers were obtained at an auction, according to the National Automobile Dealers Association. Last year, that rose to 35%.

The number of dealers who visit an auction weekly increased to 66% last year. Franchised dealers discovered that profit from used-car sales is about 50% more than what they get from new-car sales. Thus the modern-day interest in auctions.

The used-car industry has become more important to entire automotive industry with the growth of leasing in the 90's.

As leasing contracts matured, auto makers, banks and leasing companies saw auctions as an avenue to turn those vehicles back into the market.

Because of the manufacturer-certified programs, dealers have access to used vehicles in much better condition. Today, the used car market is a $376 billion industry.

Auctions, as a result, have focused on improving their facilities and adding new services to attract franchise car dealers.

“The auction business has changed a lot,” says Noble. “Now it's all about image and attracting the franchise guys.”

Manheim Auction's 50-year-old Nashville facility opened a new state-of-the-art operation on 286 acres this year.

The lots can hold 5,600 vehicles. The 14 lanes can push through over 1,000 vehicles a day. It's on pace to handle 200,000 vehicles this year — a record for the place.

A unique feature is the graveyard that came with the property. “We've put it to good use — it's where we put dealers who misrepresent the vehicles they're selling,” Mark Greb, general sales manager, says kidding, but not smiling.

The lanes are clean and airy, with big fans blowing to keep the dealers cool as they bid on vehicles rapidly passing through the auction lanes.

There is a cafeteria with televisions placed throughout the dining area. On auction days, the dealers can get free haircuts and massages. Golf tournaments and tickets to sporting events are also part of the perks for dealers.

Nashville's 500 employees help dealers with administration details. Those include paperwork, financing and arranging transportation of vehicles.

To help dealers in the auction lanes, Manheim provides a list of all of the vehicles with lane assignments and run order.

“In the old days, we used to have to run from lane to lane because we had no idea what vehicles would be where,” recalls Noble. “The auction certainly has made it a lot easier for the dealer to do business.”

The auction action can look overwhelming. Vehicles every few seconds drive through the lane. The auctioneer is spewing what sounds like gibberish to the untrained ear.

Two to three ringmen work each lane trying to build excitement and get dealers to bid.

Dealers are milling about with that casual, offhand look of experts, not wanting to give the competition any information. But the competitive atmosphere, the fast pace and the din make it hard for dealers to hide their adrenaline levels.

Nashville encourages its employees to interact with the dealers to help eliminate some of the confusing aspects of the auction.

“Dealers like working with the same people in the lanes,” says Tim DeBerry, former general manager of the Nashville site. (He has since become general manager for Manheim's Colorado facility.)

Dave Spurgeon visits four auctions a week, buying vehicles for several franchise dealers. He considers Nashville his home auction. “I know the guys real well here and that helps. You take care of the auctioneer, and he'll take care of you.”

Often, Spurgeon will make a bid just to get the price up if he sees the auctioneer is having trouble. “A lot of times we just communicate with eye contact.”

But he uses an entirely different tactic if he sees a vehicle he wants. He'll walk past the auctioneer and bid secretly.

“Somebody sees me bid, they're going to bid,” he says.

Auction hints from the experts

Dealers share some of their auction strategies.

Those include:

  • Visit an auction at least once a month to see what's happening in your market place. Reading a market report isn't going to tell you what's happening.

  • Know the marketplace weekly. Knowing what you can sell retail and what you can resell at the auction if you can't retail it, can keep you out of trouble.

  • Don't buy a lot of crazy stuff — it'll end up sitting on your lot losing money.

  • Be educated. Know what's happening in the new car business. For example, you might not want to buy vehicles that are too new. The 0% financing on new cars these days means two-year-old vehicles won't sell as easily.

  • Stay away from the big sales days. The telemarketers have become very skillful at getting dealers from all over the country to show up. Those dealers from California end up driving the prices up.

  • If you see a franchise dealer dumping 2000 and 2001 vehicles of a certain make and model at the auction, you can guess that some hefty incentives may be on the way.

TAGS: Dealers Retail
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