What’s this guide for?

This guide is written for used car dealers who are considering wholesaling online, currently using an online wholesale platform or are curious about how used car wholesale works.

 

What Every Dealer Should Know

 

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Traditional wholesaling has typically involved getting cars off the lot when they can’t be sold to retail buyers.  Wholesalers then sell the unit to another retailer for a profit. Wholesaling has been about moving unwanted vehicles off the lot to free up funds and minimize loss. This guide aims to help dealers understand the transition of wholesaling to online operations. We’ve kept it high level to promote broad understanding in a general audience.

Online Auto Wholesale

 

 

 

Essentially, online auto wholesaling takes the brick-and-mortar auction and puts it online. It does the same with your flesh-and-blood wholesaler. But the ubiquity of the internet means that the whole country is your market instead of just the local area, and your wholesaler is sourcing from every region. Dealers can now buy and sell to other dealers through online auctions while maintaining their relationship with their traditional wholesaler.

Why Online Wholesale?

 

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The used car industry is changing, as made apparent by the rise of such disruptors as Carvana and Vroom. Buyers expect retailers to deliver tailored offerings in all areas of commerce, including auto sales. Online wholesale allows dealers to meet customer demand more effectively while maintaining or even increasing the trust and rapport that buyers value from their local auto seller. Dealers who have added online auctions to their repertoire have seen increased sell-through rates and sent fewer vehicles to traditional auctions, while some have ditched the traditional auction altogether.

Key Features of Online Wholesale

 

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24/7 auctions: These platforms are not limited to fixed schedules but can carry auctions at any time, from anywhere in the country. You can buy anytime or have a vehicle launched online in a matter of minutes after handing over the keys.

 

An immense pool of vehicle offerings: Instead of just what’s on offer at the local auction or through a regional wholesaler, dealers can source the models that are hot in their market from dealers outside their market area who are motivated to move no-profit units. 

 

Enhanced pricing information: The volume of sales handled by these platforms gives them datasets that they pass on to the user. Users get easy access to info for researching and pricing vehicles.

 

Pre-auction run lists: Online auctions are quick, as short as 20 minutes, but also offer run lists before the auction so you can see what’s coming up and even place proxy bids.

 

Unbiased inspections by certified inspectors: The online platforms employ local inspectors that prepare in-depth reports you can rely on, because the business model depends on repeat use by buyers satisfied with their experience.

Benefits of Online Wholesale

 

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No “auction day”: With online wholesale, you don’t have to transport to the auction, spend time waiting for a bid you might not want, or the unit that sells too high for any front-end gross profit potential. With the auction online, you spend your time at the dealership.

 

Stable inventory: Online wholesale can smooth out inventory spikes or troughs by providing access to the right vehicle segments and types for the local market; and by shortening your refresh cycle from constant auctions to acquire stock and offload deadweight.

 

High sell-through rates: Rolling online auctions let you sell all the time, and not on the local auction’s schedule. You get another outlet to sell units to, again, a larger market.

 

More info, not less: It may seem counterintuitive initially, but many dealers report they actually get more data on a vehicle from an online platform than at a traditional auction. Each vehicle listed online has a detailed report prepared by a trained inspector.

 

Ease of selling/buying: Online platforms offer an integrated, end-to-end, streamlined process at the click of a button.

 

Transport: Depending on the size of your operation, this can be a full-time job. But not anymore. Most online wholesale platforms provide integrated or add-on transport options. Again, this streamlines the movement of units to where the profit is. You save time by eliminating another touch-point with a vehicle either coming or going. Letting the auction platform handle transport also significantly reduces a dealer’s exposure to scams or unscrupulous drivers.

 

Credit and Financing: Online wholesale platforms also offer several options for credit and financing. Even if you want to keep all your finances in one place with your existing floorplan lender, the built-in financing offerings are tempting to a dealer just trying out wholesaling for the first time to see if it can work for them. Alternatively, if you go all-in, online platform credit options allow for quick acquisitions of the units you need for your industry, cutting down approval processing times.

 

Accessibility: Getting around the brick-and-mortar auction is not easy for everyone. For those with significant disabilities, like the visually impaired, online auction platforms make wholesaling available to those who could never have participated before through screen-reading software and other accessibility apps. Not only that, online wholesale platforms can make auctions for any size independent dealer or BHPH because they have no contracts and no minimum volume requirements.

 

Third-Order Effects

 

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More Trade-Ins, More Sales

When you can reach a wider market with cars you can’t turn on the lot, that means you can accept more trade-ins. The unit that you couldn’t take yesterday because it’s not a seller in your area, you can now sell online. That means more trade-in offers to customers coming in off the street. If your competitors haven’t caught on, you have the edge with the customer who is counting on value from their trade-in.

 

Increased Turn Times

Lenders like to see inventory move. Low turn-over of inventory can cause a potential lending partner to pass on your floorplan or limit the possibilities an existing lending partner will consider when you want to expand options. With online wholesale, you don’t have to wait until the next auction, only to take a chance on a sale or bringing a unit back to the lot to sit until the next sale. Increased, steady throughput keeps lenders happy and improves the chances of a positive outlook on expanding.

 

Top Online Wholesale Companies

 

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While there are more and more auto wholesale sites going up on the internet, we want to profile some of the big names so you have an idea of what’s on offer.

 

Backlot Cars  

In late 2020, this startup platform’s success resulted in a $425 million sale to KAR Auction Services.

      • Offers exclusively new car trades
      • Mechanics pre-inspect all units in inventory
      • Buyer fees starting at $100
      • Secure payment, title transfer, and 5-day guarantee are included
      • Transportation is available as an optional service
      • Financing is offered through BacklotCar’s “Float” program

ACV

Another top online auction site, ACV offers everything an independent or BHPH dealer needs to break into the world of online wholesale. ACV has some features and services that set it apart.

      • Simplified buyer fees between $50 and $350 per unit
      • When selling, their inspectors come to your lot--just hand them the keys, and ACV does the rest
      • ACV’s trademarked Audio Motor Profile (AMP) lets you listen to a unit’s engine before you guy, so you’re never surprised on delivery
      • Virtual Lift™ provides a high-def look under the vehicle without leaving your desk

Manheim

This site claims to be “the world’s largest wholesale auto marketplace.”

      • 81 physical locations where you can buy in person or remotely by simulcast
      • Digital Buyer Protection coverage backs up Manheim’s condition report by covering undocumented damage through an arbitration process
      • OVE allows online inventory shopping and online listings for sales
      • Manheim Express offers inventory for sale that can be picked up from dealerships directly and the ability to use your phone to list units immediately
      • Premium inventory is offered through private store events from high-end brands

Regardless of which site you pick, when looking for an online wholesaling platform, make sure it has:

        • An easy-to-use interface:  Face it, if it’s not easy to use, you’re not going to use it
        • Robust filters:  An online wholesaler is only effective if it gets you the inventory you need, so an effective search tool is a must
        • Quality inspection reports:  Reports must be thorough, documenting not just the good but also the bad
        • Support:  This is of paramount importance. Does the platform have a local representative you can turn to?  Do they have a dedicated auction rep that is accessible and available?  Is tech support available 24/7 and robust enough to get you fixed right away, so you don’t miss the sale you need?
        • Guarantees:  What assurances does the platform give the buyer? How long are you protected if you get a lemon?
        • Arbitration services:  If a deal doesn’t go down the way you expected, the platform you choose should provide protection through neutral arbitration
        • Title service:  Title transfers should be handled smoothly by your online platform
        • A straight-forward fee structure:  Look out for complex pricing schemes, hidden costs, and add-on fees

While the above features are primarily targeted at the buyer, they are just as important to the seller. If the platform isn’t attractive to buyers, you only limit your opportunities for sales to other dealers. The wholesaler that works best for you is probably the one that other dealers will want to use.

 

Integrations Equal Efficiency

 

 

There are also online solutions that can complement your online wholesale platform to maximize efficiency.  Enhanced inventory tools harness market data to make sure you pay the right price to reach your profit goals.  Here’s a quick profile of one company, vAuto, that offers enhanced inventory tools:

 

vAuto

This company touts its “Live Market View” through its Stockwave product. Stockwave has many intriguing features, including:

      • Provides wholesale data to give you accurate and timely vehicle values
      • Stockwave works both with online and traditional auctions
      • vAuto also offers a proprietary used car inventory management software, Provision, that integrates with Stockwave. Market data from Provision integrates additional features that augment Stockwave by matching customers with the car they want, the car they can finance, at the best price the market will bear
      • Each Provision user is paired with a dedicated “Performance Manager”
      • iRecon is another software offering that assists dealers with reconditioning. These tools offer integration across business lines with streamlined support from one source.
      • User testimonials report excellent increases in front-end gross and time saved

 

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