Auction 'bidness' changing

If you want to see metal move, hear metal move, there’s no better place than the busy lanes of a dealer wholesale auction.

Increasingly, however, metal is moving swiftly and silently in online auctions that bypass the physical sales long at the heart of the used car market.

While these so-called “digital sales” still represent only a fraction of dealer-to-dealer transactions, they’re already having a levelling effect on prices. And because they can eliminate the guesswork on values, they’re even changing the nature of the trade-in process by giving vendors tools to make deals they might otherwise have rejected and move those trades immediately.

The key benefit to an auction launched from smartphone or computer?

“Real-time information,” responds Matt Francis, pre-owned vehicle manger at Downey Ford in Saint John, N.B.

“For instance, this morning I used it (for a Volkswagen offered in trade) and by the time I got back in the showroom I already had one offer from a dealer.”

Better yet, the offer was higher than what the Ford store would have been able to put into an off-brand. It helped close the deal, Francis says.

Heading the online auction field is the TradeRev application developed in Toronto by Mark Endras, a computer science graduate whose family operates several car dealerships.

Endras began coding TradeRev in his free time in 2009 and two years later launched the first version of the app, which backs sales with such services as electronic fund transfers, shipping quotes and inspection and arbitration.

In 2014, auction heavyweight ADESA, part of KAR Auction Services, paid US$30 million for a 50 per cent stake in Endras’s company. With ADESA’s support, TradeRev expanded to the United States in 2015 and to Britain this year.

Endras says he believed from the start that the advantages of programs like TradeRev go beyond convenience.

“We have always thought that real-time market pricing -- supply meeting demand just in time -- would change the fundamentals of the automotive market.”

Another Canadian offering is Selectbidder, founded in Moncton, N.B., by brothers Sean and Stuart Liptay of Great Northern Auction Co. and embraced by Downey Ford and other Maritimes dealers.

Selectbidder too is making inroads in the U.S., signing deals with independent auctions scrambling to offer an online alternative to their physical lanes.

Global wholesale leader Manheim Auctions, meantime, is responding with a barrage of in-house products, including simulcasts of its in-lane auctions that allow long-distance bidding and multiple internet-based programs.

Says Manheim’s Canadian marketing director, Jack Sulymka: “The auction has truly become a place of business 24 hours a day, seven days a week, because it meets the changing needs of our clients.”

While the online share of the market is expected to continue to grow, few think it will ever eliminate the bustling bricks-and-mortar auctions.

“At a live auction, versus being anonymous on a computer screen, you can get some people pretty excited when a car’s live in a lane, so I do think there’s going to be a place for an auction for a long time,” says Matt Francis.

Still, bidders who go by gut instinct are taking on bigger risks, warns Manheim’s North American president, Janet Bernard. In the company’s 2016 Used Car Market Report, she observes that the “increased price transparency” created by online tools for dealers and consumers is narrowing the range of returns on individual transactions.

“Lacking ‘home-run’ (high-gross) deals, dealers can now ill afford the outsized losses associated with buying the wrong car at the wrong price,” Bernard writes.

A different note of caution comes from the executive director of the Used Car Dealers Association of Ontario.

The ease of buying or selling a car on your phone, says Warren Barnard, “still has to be tempered by the fact that at some point somebody has to actually look at the thing and sit in it and drive it to make sure that it runs, and make sure it hasn’t had accidents and that everything that a customer needs to know about that car is going to be disclosed to them.”

— With files from Mark Atkinson