There’s a debate going on with managers representing cars at auction. It concerns the battle over sell rate (also known as sell through) vs wholesale profitability and its impact on buyers. It has been described by industry insiders as the great problem with the modern used car managers pay-plan, in that lane managers are focusing on selling at individual vehicle profit actual wholesale value.
“Nothing is going to change from week to week if the car is priced over its true wholesale value and the dealer is no selling the car. Other than wholesalers will stop coming to your event or attending your lane when your run numbers come up.” Said one buyer from Binghamton NY.
The question that industry insiders are debating is: What is the impact on the wholesaler bidding on the car every time we NO-SALE a car at our auctions? Especially when the car hits its true wholesale value (TWV). Will wholesalers want to bid again at your lane or bid sale? Will they see the pattern and avoid you like the plague?
What if they are high bidder on several cars and you NO-SALE them all? Will they just stop bidding all together? I believe so.
“Why am I not winning these cars?” asked one bidder after a very successful bid sale in NJ last week. “I am in all the way but the seller keeps NO-SALE-ing. Its really frustrating.” Our customer service center gets calls like this all the time “What happened? Did they sell the car?” when we tell them the car was NO-SALE’d the next question is “How many cars did the dealer NO-SALE?”
In our training we discuss the “health of your buyer network” are we treating wholesalers with respect, are we responding to their concerns and above all are they winning cars.
“The word gets out fast.” Said a used car manager from Scottsdale, AZ, “if you are only selling your crap or NO-SALE-ing cars, the little network of buyers will black ball that dealers into submission.”
The dealers in the 100% sell rate corner, say that buyers come from all over the country to bid because they know they are not wasting their time. They proudly post the results on their wholesale websites. Why? Because buyers want to know they are not wasting their time.
“There is nothing worse then bidding on car after car, only to have the dealer no-sale them. But then they back door sell the same cars to their friends for a $100 more. I call that, the Last Time Buyer Program for me. I’ll never come back to that dealer again.”
You only have to look at the attendance of rental and captive finance repo auctions to understand that high sell rate works. Everyone knows the banks don’t have the time or the incentive to NO-SALE any of their vehicles.
“I live in the rental lane because I know if I am the high bidder, I will usually get the car.” Said one buyer from PA
Sell rate is a chicken or egg problem. If you have high sell rate, lots of buyers will show. Low sell rate allows you to control the profit. Both ways work at first, just with the latter you are stuck with more cars and will eventually be forced to take the loss.
“I am actually afraid to come back from auction showing a loss, that’s why I NO-SALE so many” said a used car manager from a top 100 dealer group. “Eventually I will have to take the hit but its less painful if I lump it together once a quarter or so.”
Some analysts suggest that pay-plans designed before the “price to market” or “velocity” selling approach existed is the issue with low turn-out and sell through rates.
Dealers who have adjusted their pay-plans to sell to market instead of selling from cost up have benefited overall because they no longer put up with poor appraisals back at the store.
I get it, every so often we will miss appraise a car but for the most part wholesale losses are the result of poor appraisal practices. It makes no sense to ruin the reputation of your dealership by applying old school rep-ing techniques to the modern wholesaler. So, NO-SALE-ing a car that is on the money just because your appraiser messed up, will result in higher losses in the end.
My vote is to sell the car if it reaches its true wholesale value. Then retrain the managers who are miss appraising the cars back at your stores.