NADA chief likes the auction action and the profits

Some dealers shy away from auctions as a source for their used-vehicle inventories.

Not Robert Maguire, a New Jersey dealer who is chairman of the National Automobile Dealers Association.

His busy schedule these days prevent him from attending auctions personally. He sends his staff, but wishes he could go himself.

“I miss not going to auctions,” he tells the 2001 Conference of Automotive Remarketing in Las Vegas. “I miss the camaraderie and swapping stories with other dealers. What can I say, I like auctions.”

But it's not just for sentimental reasons that he prefers auctions over other ways of obtaining used-vehicle inventory.

“Let's face it, dealers are tested by people dishonestly trying to take advantage of us when we buy used vehicles,” he says. “But auctions have an honest reputation.”

He adds, “I just can't believe any dealers with any business sense doesn't understand the value of auctions. And what's truly mind-boggling is the money auctions have put into their facilities lately. It tells me as a dealer that this is my ‘manufacturer’ of used cars.”

NADA predicts franchised dealers will sell 16 million used vehicles this year. Fifty-two percent of dealers expect improvement in used-car sales over the next six months.

Unlike some new-car franchised dealers, who indeed consider themselves first and foremost new-car dealers, Mr. Maguire is an ardent seller of used vehicles.

He says, “Remarketing used cars is a topic near and dear to me … It's never been an afterthought at my dealership.”

While his new-car inventory is essentially the same as any other GM dealer stocking the same brands, “my used-car inventory is unique to my dealership,” he says. “I have more control over it.”

Mr. Maguire floor-plans used cars as well as new.

“I never bought into the idea that if someone floor-planned used as well as new vehicles, it was a dealer in trouble,” he says. “But I certainly don't want to keep those used cars in stock for more than 90 days.”

He focuses on 3-6-year-old cars in front line condition. He doesn't want to assume the wear-and-tear risks associated with vehicles older than that.

Dealers on average saw 11% gross profit margins on used vehicles last year. That will be hard to repeat, says Mr. Maguire.

Still, he expects used vehicles will contribute more profit than new vehicles this year as manufacturers continue to heap incentives on just about anything that isn't a hot seller.

“It's getting more difficult to move manufacturers' products,” says Mr. Maguire. “Incentives do it, but at a cost. We don't see as much gross profit on new as used.”