A new initiative lets dealers run their vehicles through World Omni Financial Corp.'s fleet lanes at 22 auto auctions around the country.
For the seller, life in the auction lane is often better if it's a fleet/lease lane, says Andrew M. Mahoney, a World Omni vice president who runs and co-developed the effort called Auction Advantage.
Selling in a fleet-lease lane opposed to a regular dealer lane offers several advantages, including a 70% first-run chance of selling versus 40%, higher consignments, an online inventory management system and earlier auction times when buyers “still have money to spend,” he says.
He adds, “Dealer gets to leverage the benefits of a big-fleet consigner without actually being one.”
World Omni at auction sold 50,000 vehicles from its lease portfolio last year. Mahoney expects Auction Advantage dealer participants to add 8,000-9,000 vehicles to that this year and about 15,000 in 2005 as the program ramps up.
Dealers pay a sliding scale fee based on what the car sells for. Typically, the fee is about $100. The benefits offset that, says Mahoney.
He sees it as a win-win-win for dealers, auctions and World Omni along with its colleague company, CenterOne Financial Services.
Why might a car do better in one lane over another? There are various reasons, psychological and otherwise, according to Mahoney.
He explains, “Dealers will say, ‘I don't understand why I stand in your lane and pay a higher price for your car where three lanes over the identical car may be running in a dealer lane. I know there's no difference between those cars but psychologically I'm willing to pay more for yours and so is everyone else.’
“They know we're there to sell. We got another 10,000 vehicles coming in the next few months. We know about where the market is. Buyers want to go to a lane where if they bid a fair price, we're going to sell. In a dealer lane, if you put more in a trade to make a new-car deal up front, the wholesale market is not going to take that into consideration.”
Selling in World Omni lanes requires full disclosure and calculating minimum bids using a web application that computes pricing based on Black Book value, vehicle options and market conditions.
“We're professional remarketers and we want to be fair,” says Mahoney. “It's not worth making a few hundred extra dollars to jeopardize the reputation we've built up over the years.”
So far, 350 dealers have signed up and 200 are selling cars through the program.
It's particularly effective for small franchise dealers in a big market who might otherwise lack clout at the local auction, says Mahoney. It's also beneficial to dealers who own 3-6 stores and are looking to standardize processes at all of them.
“If you are going to sell it 70% of time versus 40% and you don't have to touch it, move it, wash it three weeks in a row, it becomes a win even though you may earn a per-unit fee less than you would through the dealer lanes,” Mahoney says.
But he warns it isn't for everybody. “This isn't a panacea for retailing out of problems in the auction lanes.”
Auto auctions were receptive when the idea was first pitched to them, he says.
“They said, ‘Let's try it.’ Initially we said we didn't want buyers to know it's a dealer car. They said they didn't think that's fair to the buyer. So we came up with putting an Auto Advantage sticker in the windshield. It indicates it's different only because the owner is different. The process is still the same.”