Readying for Big Breakthrough

Many cautious dealers rode the brakes when online auto auctions made the scene about six years ago.

They were not so amateurish as to feel the need to kick the tires, but conventional-minded professional car buyers disliked the idea of bidding tens of thousands of dollars without being right there at the auto auctions.

Older dealers in particular, who didn't grow up using the Internet, found it unsettling to bid for cars seen only on a computer screen.

But that's changing and dealer participation in Internet car auctions is growing, says Jim McKnight, head of Manheim's Internet auction operations.

He predicts online car auctions will skyrocket in coming years as dealership ownership and management transfers to younger people who have been Internet users since childhood.

“The next generation of dealers is going to demand online auctions,” McKnight says. “So we are ahead of the curve.”

He draws an analogy showing how reluctant dealers can change their mind quickly.

“In 1999 and 2000, AutoTrader had a lot of people searching for cars online, but a lot of dealers didn't realize it at first,” he says. “Once they understood what was happening, it was like a jet taking off.”

Manheim CEO Dean Eisner says about 12% of Manheim vehicle transactions are online, “compared with being in the single digits a few years ago.” Manheim.com gets nearly 3 million visits a month.

Manheim runs different types of Internet auctions. One is a simulcast version allowing dealers either to bid online or in person for the same cars being shown at auction.

Another Manhem.com option is OVE.com. It is a 24/7 online wholesale marketplace for vehicles that are not run through actual auction lanes.

“A big use of OVE.com is for just-in-time inventory,” McKnight says. “If a dealer has a customer who wants a particular used car, he can go to OVE and get it.”

Manheim recently formed a partnership with the National Automobile Dealers Assn. It gives NADA's 20 Group members access to OVE.com for closed car buying and selling among themselves. They also can be part of the larger market of regular OVE.com users.

Helping to break down resistance to online auctions are members of a Manheim field force that answer questions, handle problems and “go to dealerships to walk people through it,” McKnight says.

Also allaying fears is a Manheim buy-back program for cases in which a vehicle turned out to have problems that weren't known during online bidding from afar.

“Buying a $40,000 vehicle on OVE today is more secure than buying a salt and pepper shaker set on an online auction web site,” McKnight says. “If there's a problem with the vehicle, I'll give you your money back.”

Establishing such trust is essential, Eisner says. “We can build technology all day, but that's not what primarily allows transactions to place. Instead, it is the need to trust those providing the service.”