Updated September 27, 2020
“You don’t make money when you sell a vehicle. You make money when you buy it.”
Sound counter-intuitive? Maybe. But successful dealers know it’s 100% true.
That’s because buying the right vehicles for your market, at the right price, helps you sell cars faster while earning a higher gross-per-copy.
Last year, dealerships sold 42.7 million used cars. Many of those started at one of the hundreds of dealer auctions around the country. If you plan on making money on used car sales, it starts with understanding how to get the most out of auctions.
Winning at auctions is more than just finding the best prices. A solid auction strategy lets you leave with the best deals by avoiding extra costs and headaches.
Ready to build a better auction strategy for your dealership? Follow these 6 steps to make sure you’re ready to win.
How to prepare for an auction
1. Analyze your inventory
Begin by studying your own inventory and look for the following:
- Vehicles you’re running low on
- Vehicles in high demand
- Vehicles which net you the most profit
Next, study other local dealerships and pay attention to consumer trends on a national level. Look for the vehicles not on your lot that are selling well in your area or similar markets around the country.
Once you cross-reference all this data, the vehicles you want to add to your inventory will be right there at the intersection.
2. Learn the Rules of the Auction
Every dealer auction runs a little differently. Check the rules of the auction before it starts. Make sure you know the answers to the following questions:
- How does bidding work?
- What payment options are accepted?
- How do you collect the vehicle? Do you need to transport it on your own?
- What’s the auction’s policy for announcing damage, paint-work, and other details that may impact your appraisals?
Register for the auction at least one or two days beforehand. This is a good idea even if you’re bidding online. Also, some auctions offer membership perks if you register early.
Here are the rules or FAQs of some of the largest auctions companies:
3. Research the run lists
Check the run lists against your inventory strategy. Almost every auction publishes their run list prior to the event. While they aren’t 100% accurate before the day of the auction, they’re good enough to do your homework.
Do they have the cars you want to buy? Do these cars come with the popular trims and features your customers are looking for?
Use your go-to appraisal tool to get a good estimate for the retail and wholesale prices. Factor in reconditioning costs based on the information in the run lists. If you have a service department, it’s a good idea to talk to the mechanics. They may offer you additional insight.
4. Be there when the gates open
If you’re heading to a live auction, you want to be on their lot as early as you can.
Most dealer auctions open the gates a few hours before the bidding begins. This will give you plenty of time to review all of the cars you’re interested in and inspect them in full. You can check the condition of each vehicle, look for visible damage, and check window stickers for additional information (e.g. absent titles).
If you have a mobile appraisal tool, you can scan the VIN numbers to get the vehicle’s full data and history. This may or may not be different from what’s already published online. The more time you spend, the more you will know about each vehicle before bidding.
Your appraisal tool is especially important when attending online auctions because you’re relying on this data to make your decisions. You won’t have a chance to see the vehicle in person.
5. Know your Price Ceiling
Doing the appraisal early on will give you time to clean up your strategy and focus on the vehicles that are good business. The best cars will always have competition.
You get into the most trouble when you’ve got an eye on a good car and really want to get it to your lot. It’s easy to get emotional and spend way more money than you can afford.
Make sure you set a price ceiling for each vehicle and NEVER go higher.
If the wholesale price eats into your profit margin, you’re throwing away your own money. Make sure you factor in the vehicle’s condition, mileage, and history report. Also, account for reconditioning and advertising costs.
6. Don’t forget about transportation
Most live auctions don’t do transportation for the sold vehicles. Or if they do, you’ll probably get better prices elsewhere.
Make sure you have planned transport for all the cars you purchase. Auctions typically want you to take the vehicles out of their lot on the same day, so be ready to get them onto a truck and on the road.
Volatile markets can make you rich one day and have you selling at a loss the next. The faster these cars get into your lot, the faster you can start making money.
Source smarter with an online bidding tool
A strong auction strategy is all about preparation. Without access to in-depth inventory, market, and pricing data, it can be tough to set yourself up for success.
VinCue’s all-in-one dealership management platform lets you skip the guesswork with auction sourcing built right in. VinCue connects you to both major and regional auctions nationwide so that you can directly source, bid, and buy cars from without ever leaving your dashboard.
The best part: VinCue connects your inventory data with real-time market insights so you know exactly which cars to bid on. Plus, it helps you sell new inventory even quicker by letting you run ads the moment a car is purchased.
You’re Ready to Win!
Now that you’ve done your research, developed your inventory strategy, and have drawn the hard spending limits, you’re ready to take dealer auctions head-on.
Make sure you know the rules. Stick to your price ceiling and look out for warning signs and money traps.
All that said, just because you’re doing things smart doesn’t mean it’s all business. Auctions are exciting. Go and have fun. Make connections. Expand your network. There are more benefits in addition to immediate returns, especially if you’re doing what you love.