Real Deal: Simulcast Remarketing
(photo credit: my iphone)
In an era of lenders and manufacturers loosing more zero’s than our calulators can display, here’s a postive note. Simulcast Remarketing via both Adesa and Manheim Auto Auctions. Good for the sellers, terrible for the arbitragures. “Factory” lanes are those which Ford/Ford Motor Credit, GMAC, Toyota Finacial, Chrysler Financial (RIP), and their peers remarket their inventory to dealers. This inventory comes from three main sourcese: Repos, lease returns, and the backside of a rent car contract. Other units mixed in these sale lanes under the factory brand name would brass hat rides (factory employee demos), test units (where they buy competitors car, disassemble it for reverse engineering purposes and then resell it), new cars damaged at factory, lemon law buy backs, and display units. These types of inventory are what compose a factory sale lane. There are ‘open’ and ‘closed’ factory sale lanes. ‘Closed; factory sales are welcomed only to that brand or franchises dealer body to participate in. ‘Open’ factory sales are for all dealers, and composed of the culls that were not nice enough to participate in the closed sale.
Manhiem Auctions introduced two landmark dealer tools that changed the market place forever. I. MMR (Manhiem Market Report) 2. Simulcast bidding. MMR is another post in itself for another day. Simulcast bidding leveled the playing field across the country.
I used to login to www.weather.com and look for the worst snowstorms in the country. Then log onto www.manheim.com and look at the list of factory cars in the blizzard areas. If the WX and the run list made a butterfly pattern (daytrading term) then off to DFW airport I would go. We would buy cars covered in snow 3,000 back of the Dallas market. Omaha, Salt Lake, Denver, New Jersey, Chicago, Detroit, Philly, and Columbus were the most fertile snow season hunting grounds.
Earlier in this decade the factories were lazy. They would sell 50 mustang convertibles covered in snow at the Denver auto auction from the previous summers rental car market returns. Detroit would auction off 50 Lincoln Town cars (heavy rear wheel drives) in a territory that heavy rear wheel drives werent feasible for road conditions. On the flipside, 4×4 suburbans were cheaper in Dallas Texas than Denver, and we would load those 18 wheelers with dollar sign speculation heading North West. In Many cases loading transports both directions, playing the spread between the low lands and the great lakes.
Most good wholesalers made more money than your average new car dealer playing automobile arbitrage. The factories didn’t know what their used cars were worth, so they SOLD them for what they brought. Now many of the factory sale cars have ‘lows’ or ‘reserve’ prices. The owners of these cars figured out that trucks bring more in Texas than Michigan, so they began to play the game themselves. Just because you buy a Ford Explorer at the DFW Auto Auction from Ford doesn’t mean it’s not on a Michigan title anymore.
Watching these markets level out across the country over the past several years is most directly related to the online Simulcast. Now the dealer in Santa Fe, NM can just log onto Houston Auto Auction from his rocky mountain office. The Honda dealer in Seattle can be literally in the lanes in Phx in seconds with a manhiem login. The days of dealer storm chasing is not over, the spread is still there, but now you can do it from your bathrobe, and the airfare is a hell of alot cheaper.
The frusterating part is when you do make the trip to the auction, you outbid everyone in the lane on a particular unit, just to look up on the flat screen and have some SOB from Flordia run your bid another 1,000 bucks becuase he’s sitting in his slippers online and doesnt see the damage on the other side of the unit you are bidding on.
Simulcast buying is an art. You must be detail oriented, and you MUST read the condition reports. You are buying cars you cannot use that 6th sense that most dealers have. You are buying a picture and a piece of paper. If the car has that rusty, great lakes, auction funk..you’ll never know until it unloads off the transport at your lot.
With that being said, bricks and mortar auctions will always preside. There is nothing that replaces ‘being there’ in person. I cannot tell you how many times I thought I ‘ripped’ a car on simulcast, just to be gravely dissapointed when it arrived in Texas. In a down market buying on simulcast is much safer than in a up market. If it’s a hot market, and you outbid the 200 people watchign that car in person, they probably saw something that your computer failed to show you.