Used car auctions were online during COVID. Many have not returned.

If you buy a used car from a dealership, it may have ended up there as a trade-in. But it has about a 50 percent chance of getting there via wholesale auction, according to industry tracker Cox Automotive.

Cox reports that more than 10 million used vehicles were auctioned last year, and — for a long time — the only way dealers could buy at an auction was to go to one in person.

But like so much else in this economy, used car auctions changed completely nearly four years ago when the pandemic began, and many of the changes have stuck.

Buying at an auction meant a lot of long days with early starts, as Scott Pollitt learned when he loaded his family’s used car lot near Des Moines, Iowa, in the 1990s.

“You get up at 3 a.m., get to the airport, hope your plane is on time,” Polite recalls.

He would fly across the country—Buffalo, Orlando, Salt Lake City—from where he and other used car dealers would usually be shuttled up by the auction company.

“They will transport you to the auction, you can get there before [it starts] and inspect the vehicles,” he said.

There were all kinds of cars, from newer lease models to ex-rentals and junkers. They ran through what were known as “lanes” – each with its own auctioneer, at about one car per minute. This allowed Politte and other dealers to touch, smell and inspect each vehicle. Then they bid with subtle gestures.

“Wink your eye, or nod your head, or just raise your hand,” Pollitt said.

All of this took place in a building that looked like a huge auto shop, with anywhere from two to 20 or more lanes. “It’s full of carbon monoxide fumes and very loud auctioneers,” he said.

But despite the noise, smoke and long days of travel, there were benefits. On the one hand, Politte can take advantage of regional price variations. Then the dealership sold a lot of Lincoln Town Cars to him, and as he toured various auctions, he noticed something:

“The Buffalo, New York and Minneapolis, Minnesota markets had $4,000 more incentives on a new city car at that time than any other market in the country.”

This meant that these city cars were cheaper when they came up for auction. So, he would make the trek to these towns—the snow often held back some of his competition—buy Town Cars cheap and then sell them at a discount while making a profit.

But his travels didn’t always work out that way.

“There were many times when we went home without buying a vehicle, which meant the whole day was wasted,” he said.

But even then there were some value in display.

“If you’re physically standing in the lane with hundreds of other dealers, there’s a lot of conversation about the industry,” said Joe Wilson, chief operating officer of CarMax, which sells direct to consumers and hosts wholesale auctions.

“You sort of get a sense of what the market is like? What do people sell really well? What do people not sell really well?’

These conversations are still possible in some auctions. And their structure – including the loud, chattering sound of their auctioneers – is still much the same. What’s different now is that many traders are hearing this auctioneer’s chatter, which is being broadcast via online simulcast.

Such is the case with the auctions organized by the Manheim company, which is owned by Cox Automotive and auctions millions of cars each year.

By 2020, about half of the vehicles at the Mannheim auctions were sold to dealers who stood by their lanes, as Scott Pollitt did. But then that changed abruptly.

“If we think back to COVID, there was a real tipping point in our industry,” said Jennifer Heiser, vice president of Manheim.

Heiser said everything of the company’s auctions moved online when the pandemic hit. CarMax did the same and never came back. But with the loosening of restrictions Mannheim let the dealers back into the auctions. Some came back — you can see them walking around in the simulcast video — but many didn’t. Now, Heizer said, more than 70 percent of the vehicles that go through the Manheim auctions are sold online.

“Dealers realized that they no longer had to … spend all day, you know, going and looking and bidding on cars,” Heiser said.

And they realized they could be in many places at once.

“Today I was in Dallas, today I was in central Florida and today I was in Chicago,” said Jesse Lorre, owner of a used electric vehicle dealership in New Hampshire. He tried a private auction once and didn’t really like it. When bidding online, he can view the vehicle’s history report and compare it to other vehicles on the market.

“So I have a lot more data and information at my fingertips when I’m sitting in my office shopping for cars on these digital platforms,” ​​Lohr said.

But so did everyone else who bid online, and that wiped out a lot of the regional price variation that dealers were finding. So it is much harder to find a cheap Lincoln Town Car in Buffalo. Although for Scott Pollitt’s Iowa team, that’s not necessarily a bad thing.

“Now our guys are getting involved, if things are too high, they’re giving up,” Pollitt said. “They will sign up for another auction and be able to continue working their current job.”

Plus, they don’t have to catch an early flight out of Des Moines.

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