As sales of used cars become increasingly important to a dealership’s bottom line, retailers and their vendors are working to increase “velocity,” or the speed at which vehicles move through the auction process and are sold to customers.
“The longer they sit, the more they cost,” said Craig Cowling, general manager of Roadsport Honda and Roadsport Chrysler-Dodge-Jeep-Ram in Toronto. “The days of it taking seven to 10 days for it to be able to be sold — to be lot-ready, let’s say — you’ve missed the boat. What you want to do, if possible, is a two-day turnaround.”
A glut of used vehicles returning to the market and shrinking margins on sales of new vehicles, as well as the usual threat of vehicles depreciating as they sit on the lot waiting to be sold, are putting pressure on used-vehicle departments to sell inventory quickly.
Roadsport recently bought a new building that is used as a reconditioning centre for used vehicles. The dealership plans to hire an additional technician there to speed up the process, Cowling said.
“It’s funny because even 15 years ago, dealers weren’t really in the tire business, either, where now they realize it’s a necessary evil. You have to get in it, and it’s no different with used cars.
“Pre-owned was generally just there to almost support your new-car department, whereas a lot of places now, your new-car department is there to support your used-car department.”
BID AND BUY QUICKLY
Meanwhile, Canada-based digital auction platform TradeRev recently reduced its auction times to 45 minutes from an hour in an effort to boost velocity.
“I think it makes their lives easier by shortening the amount of time they need to be bidding,” TradeRev President Becca Polak told Automotive News Canada.
“We’re just trying to meet their needs and go to where our customers want to be, and that’s fast.”
In addition to shortening auction times, TradeRev reduced the closing period — when the top two bidders on a vehicle compete after an auction — to 15 minutes from an hour.
The largest North American auction groups — Cox Automotive’s Manheim and KAR Auction Services Inc.’s ADESA — in the past few years have had to grapple with the concept of velocity, as dealers in both Canada and the United States deal with high numbers of used vehicles returning to market. According to Canadian Black Book, between 30,000 and 40,000 off-lease vehicles were expected to return to the market each month through 2021, up from a previous norm of about 20,000.
The problem even extends to digital auction platforms such as KAR’s TradeRev and mobile auction services used at Manheim.
“Time is money, and you want to move,” KAR CEO Jim Hallett said. “That dealer might be waiting to clear this inventory so that he can buy that inventory, right? In many cases, he may be saying, ‘I need to know if I own it because if I don’t own it, I have a chance to get something else over here.’ ”
GETTING TO THE LOT FASTER
Polak said the logistics of transporting a vehicle are also crucial to speeding up the auction process for dealers. TradeRev has a goal of transporting a vehicle bought within 75 kilometres of a dealership within two days, but she said more can be done by using data.
“Obviously, at some point we’d like to tighten that up to maybe it’s even on their lot before they even bought the car,” Polak said. “We just know that’s the right car for you, so here you go.”
TradeRev partners with its fellow KAR entity ADESA on hauls of less than 100 kilometres, using ADESA’s network of about 1,000 drivers in Canada. ADESA Canada COO Trevor Henderson said the company recently hired about 300 drivers to increase its shipping capabilities.
“The network just doesn’t exist like it does in the U.S. So what we’ve been doing is investing a lot of capital and a lot of human resources, building our own logistics capabilities.”
Still, for all the emphasis dealers put on velocity, Cowling noted that quickening the used-vehicle auction and transaction process is only part of the equation for a successful dealer.
“You have to really concentrate on the back end, too: Your warranties, your GAP coverage, your insurance coverages,” he said. “That is a very important aspect because a lot of times, because of the declining gross profit in the front end, you do need to pick it up in the back end in the business office as well.”