Online Auctions Make Gains

The 70-something fellow from a Ford dealership would show up every week to bid at the local Manheim auto auction. He'd bring a portable stool so he could sit and watch the cars go by.

When he stopped showing up, a concerned auction staffer called his dealership to check on him, recalls Sue Boehlke, a Manheim senior vice president. “He said, ‘Oh, I'm fine. But it's a long drive to the auction, and I'm now bidding on the Internet.’”

So much for the conventional wisdom that only young dealership people who grew up using computers are the ones daring enough to log on to cyber auctions and pass on the chance for old-fashioned tire kicking.

“Online auctions are skewed a bit towards young people, but surprisingly not as much as you'd think,” Boehlke says. “Dealers have been pressed for time and pressed for profit, and we've seen online auction activity increase.”

Manheim just passed a milestone by handling its 3 millionth online vehicle transaction since 1996. The Internet now accounts for almost 20% of the company's sales.

Manheim runs different types of Internet auctions. One is a simulcast that lets dealers either bid online or in person for the same cars going down the auction lanes.

Another is OVE.com, a 24/7 wholesale marketplace for vehicles that are not run through actual auction lanes. That includes closed brand-specific auctions, such as one featuring off-lease vehicles from Mercedes-Benz Financial, only for Mercedes dealers.

“We're moving away from the mindset that cars have to run down the auction lanes,” says Nick Peluso, Manheim's senior vice president-customer relations and strategies.

A new online venture is called Online Event Sales, each featuring program vehicles being sold by a particular group, such as auto makers, car-rental firms and banks. Chase Auto Finance was the first to sign up.

It's a weekly bid-fest restricted to one hour. That's to stimulate a sense of urgency. Regardless, Manheim learned in test runs that, regardless of an auction's duration, most bidding occurred in the last 15 minutes.

Bidders use online tools to seek out what they want by make, mileage and color — “not by watching vehicles move across the computer screen,” Peluso says.

The weekly Chase auctions feature up to 800 vehicles. That may seem like a lot for a 60-minute time limit. But bidding dealers typically preview the offerings, check condition reports “and have narrowed their interest down to a list of 10 cars or so by the time the sale starts,” Boehlke says.

Sellers like it because “you are drawing from an audience all over the country,” she says. Likewise, the attraction to bidders is access to a wider selection of vehicles than would be found at a local auction facility.

That doesn't mean New York dealers are buying cars in California or vice versa. But it's common for a dealer participating in an Internet auction to buy a car 300 to 600 miles (492 to 965 km) away. “It happens all the time,” Peluso says.

Adds Boehlke: “When you have a situation in which a BMW customer wants a particular model and trim level and only wants it in blue, that's when you see long-distance bidding.”

As online auctions gain popularity, no longer are Internet offerings relegated to “second-run” vehicles that failed to sell at physical auctions. “A lot of fresh inventory is being listed,” Peluso says.

The sheer convenience of Internet bidding is a big draw. So is the round-the-clock aspect of some formats, such as OVE.com.

There is bidding at traditional off times, such as midnight Saturday and 5 a.m. Monday, Boehlke says. “And we had a couple hundred sales on Christmas Day.”