Wholesale car lots are becoming increasingly attractive for dealers. The reason is simple. They are the perfect way to either get rid of their old inventory or find a bargain and make a profit.
Wholesale car auctions are accessible only to those who possess a dealer’s license, and they resemble a typical public auction. However, there is a lot more than meets the eye of someone who is not familiar with the automotive trade. Today, we will dive deeper into the world of wholesale auto sales.
What Is the Reason Behind Wholesale Car Auctions’ Growing Popularity
In today’s world, technology dictates our lives, but it also enhances business as it reveals a number of new opportunities. Dealers have adopted online auctions as a huge part of their work. This is the main reason why wholesale car lot platforms are now a thing. Dealers like the fact that such platforms reduce their costs compared to typical old-school auctions without being too different from them.
Every dealer wants to have the best source to add stock to their inventory. Wholesale auctions allow them to find vehicles that are not available at conventional auto sales events where prices are different, and the competition is really big. The potential profit from a trade-in is bigger with wholesale auto sales.
Dealers are confident when buying a vehicle from a wholesale car auction. Auctioneers know that they need to offer the best deals if they want to stay in business. When dealers bid over the phone or online, they not only know that they need to give the best offer fast but also know that they will receive what they bargained for. An auctioneer’s reputation would be reduced to rubble if word spreads that they offer cars that do not match their description.
How Can You Buy a Car from a Wholesale Auto Sales Event
You actually don’t need a dealer’s license to buy a car from a wholesale car lot. All you need to do is find a dealer willing to bid on your behalf.
There’s a good chance for you to find nearly brand-new cars or even new ones at a wholesale car auction. Their prices would be significantly lower compared to buying the same make and model from a showroom, making the wholesale lot sales an attractive option.
Finding a dealer is not hard because many of them offer broker service. They could help anyone who wants to join the fun and bid on a car at a wholesale car auction.
If you decide to go this route, make sure you check the dealer’s background and their feedback. As we already mentioned, a good reputation is everything in this business. Every professional dealer will give you all the information and tips you could possibly need.
Regardless of the dealer broker service, you still must do your own research. Before bidding, make sure you are aware of the vehicle’s actual market value, so you could compare it to its wholesale price.
Don’t bid too much, or you’ll delete the benefits of entering a wholesale lot. A broker would surely not allow that. Overbidding is a common mistake you can simply avoid by setting a maximum bid.
How Does the Coronavirus Outbreak Affect Wholesale Car Auctions
The processes and trends related to wholesale auctions are not exactly on track since the beginning of 2020. The reason is obvious: the COVID-19 pandemic caused substantial damage to a lot of business sectors, including car sales.
The industry’s rules and price fluctuations became hard to predict in the last months, and it became tough even for the professionals to predict the market. One thing is for sure: dealers stopped buying cars for their inventory apart from those they know they need.
Nobody wants to have cars in stock that are hard to sell. The price levels might go down as we speak, or they could remain at the same level. Since dealers are used to monitoring the situation day by day, the unreliable information they have on their disposal today is no good to them. Buyers would be happy to notice better deals are waiting for them.
How Does Technology Enhance Wholesale Car Auctions
Despite the tough and unpredictable market environment today, there are still plenty of ways dealers use to guarantee they don’t run of business. Needless to say, wholesale lots offer easy access to a pool of cars that could be used by dealers to fill their inventory. The automated online platforms offer a number of features.
In case of a car that was just traded in, the dealer can get a quote on it instantly and decide to put it up for auction or not. When the dealer wants to buy a car, they preload their exact preferences and the system bids automatically, based on the vehicle’s detailed description. Of course, they set the automatic bid as a preference to be just over the estimated wholesale value of the particular vehicle.
You might wonder how wholesalers are able to accept a dealer’s old inventory and find a new buyer for it. There is no secret to that as it all comes down to calculating a vehicle’s correct value at the right time.
The other key ingredient is the network of dealer contacts the biggest wholesalers have at their disposal. Sometimes, the auctioned vehicles are directly transferred from one dealer to another via the wholesale lot platform.
The wholesale auto auction world is changing because of the ease of access to all kinds of information we take for granted today. One could easily use the information found online to make a good offer or to finish a negotiation successfully.
When online auctions were introduced, everyone involved greatly benefitted from technology. The time-consuming and costly process of physically bringing your car to auction and hoping that you could sell it to someone from the limited group of buyers present is something from the past.
The process is now completely different and dealers who are looking to get rid of old stock couldn’t be happier. The vehicles are not required to be at a particular location, and the potential buyers are not limited in any way to access the lot and bid on it.
Today, special apps have been developed. The customer-facing business strategy brought to the business-facing part of wholesaling vehicles is reshaping the industry once again. These apps have a ton of benefits, such as:
- Streamlining the complete process, making it easy to participate;
- Allowing dealers to save time while being more effective when buying or selling wholesale cars;
- Making the process transparent and offer lower fees, enhancing the business volume;
- Eliminating the need for a physical presence or a representative;
- Offering an almost endless inventory list.
While the traditional process of wholesaling vehicles relies on the above-mentioned relationships between a wholesaler and the dealers in their network, the new app-based solution offers that same network, if not bigger, with the touch of a button.
The app allows dealers to access an almost endless variety of wholesalers and dealers. This means that the traditional negotiation process is changed as well. Calling a number of details to find the one who needs your car and is willing to pay the asking price is also obsolete when using an app.
Of course, the traditional approach is not forgotten at all. Professional wholesalers and dealers know how to handle their business and they put their partnerships and skills to work daily.
Think of dealers as consumers. If they are given an easy solution to suit their needs, they will adopt it immediately. This is why apps became a thing in the first place. Knowing that a smartphone is enough for them to make a profit is a relief.
There are other ways in which technology has impacted wholesale car auctions as well. The online platforms supporting huge car databases, for example, are of great service to both dealers and independent buyers.
Using the CARFAX system would give you instant information about a particular vehicle’s damage and service history. Within seconds, you would know whether to bid or walk away. This was unthinkable before the Internet era.
Useful Tips for Buying Cars at Wholesale Auctions
Regardless of whether you are a dealer, intending to buy or sell a vehicle at a wholesale car auction, or you want to use the broker services of a dealer, there are things you should consider doing before even thinking about bidding.
Dealers usually know they can make a hefty profit after they resell a vehicle they acquire from a wholesale auction. Prices at these events are usually low and the advantages of the whole buying process are many – it is a transparent and safe, not to mention convenient and reliable.
The first thing any potential buyer should do before bidding is to read the full description. All the details matter, especially damage history, current condition, as well as the number of previous owners.
Dealers have the option to buy a warranty covering the first 14 days after purchase. This is a good way for the buyer to be sure they will get what they paid for. Even if the actual seller is present at the auction, you still buy their vehicle through the auction system.
Make sure you buy cars with a clean title. Salvage vehicles or “rebuilt salvage” titles are not an option if you want to maximize your profit. There are salvage auto auctions out there that have different clientele. These events have their own advantages, but they are different from wholesale auctions.
Further reading: The Pros and Cons of Buying a Salvage Car
Keep in mind that vehicles are auctioned for less than a minute, so you need to be quick. Experienced dealers are usually good bidders, and they could make the final bid on your behalf in case you appointed one as your broker.
If an online wholesale auto auction allows, you should register as a buyer. Most of the big wholesale auctions, however, are accessible only by dealers and require having the relevant license. As we already mentioned, you could use them as your broker. Having a license is a great way to access the lowest offers and other advantages.
You should always be aware of your actual desire to buy a certain car. Bidding is a good idea only when you assess its condition and take all the other small details into account, instead of focusing on a certain aspect you like about it. If you feel like you cannot determine the wholesale value of a vehicle, you can always use the Kelly Blue Book (KBB) for reference.
Next, make sure you stick to your budget. Never bid when emotional as it could result in an unpleasant loss. If you decide to use a specialized online wholesale auto auction, you could avoid placing a high bid by setting the maximum and seeing what happens next. Here is a reminder: the final price of the car includes fees and taxes, meaning that the cost of ownership must be evaluated.
Every bidder should take their time and read the wholesale car auction’s terms and conditions. To make the most of it, you need to know the schedule, the rules, the payment options, the fees you would owe if you place a winning bid, etc. Knowing everything about these things is always an advantage.
The Verdict – Are Wholesale Car Auctions Worth It
Wholesale auto sales is a changing industry. It becomes easily accessible even for non-professionals. Technology has reshaped this business for good: it is now a faster, straightforward process.
If you are prepared as well as you should be, great deals are waiting for you just around the corner. Or simply a click away!
Online wholesale auction platforms and specialized apps are the modern tools dealers use to stay up-to-date and to have an advantage when bidding.
The coronavirus outbreak made things unpredictable, the market fluctuations cannot be determined, and a wild guess just won’t do. Despite that, wholesale auctions are attracting more people every year, and the number of deals will rise in the near future for sure.
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