Market Conditions Commentary
ARBITRAGE ANALYSIS PROMPTS MEGA DEALER TO CHANGE ITS SELLING PRACTICES (and than beg his wholesalers to come back because the Spring market evaported)
by Robert Hollenshead
May 15 2012 9:23AM

In the wholesale marketplace, every seller is aiming to maximize the value – or price – he receives for his vehicles. But in this selling environment, it’s sometimes difficult to know whether maximum value is being achieved for every vehicle sold, or whether situations exist where money is being left on the table. An arbitrage analysis can help a seller better understand what’s taking place in the marketplace – whether his vehicles are achieving top dollar or whether they are quickly reappearing in the wholesale selling environment and drawing significantly larger prices when they do. Such was the case for a large franchised dealership with operations in several states.

The owner suspected that there were problems stemming from its vehicle wholesaling practice.  Specifically, there were concerns relating to arbitrage – that is, whether vehicles the company was selling (in this case through wholesalers) were being flipped and resold in the wholesale market for significant financial gain.

Manheim Consulting conducted an arbitrage analysis, analyzing the company’s portfolio of vehicles to determine how many cars were bought and resold through the Manheim network within a 45-day window, and bringing significantly more money in the resale transaction – a strong sign of arbitrage. Additionally, Manheim Consulting reviewed the floor prices the dealership was setting for its vehicles and the company’s use of wholesalers.

From this analysis, Manheim Consulting identified numerous instances of arbitrage and concluded that the company was wholesaling its vehicles well below market value, as these vehicles were quickly reappearing in the auction system and drawing significantly higher prices.

As a result of Manheim Consulting’s findings and recommendations, the company made changes to its selling processes which have resulted in an increase in profitability.

HERE IS THE REST OF THE STORY: Separate from talking about wholesalers as if they are lower than industrial waste;  “Mega dealer got his balls knocked off when the Spring market ended and reality set in”.  They are back to selling 40%, and that won’t work for Mega dealer or anybody else. 

I am sure it’s just an oversight, but we forgot to mention correct and smart recon, and fees, and guarantees, and critical mass selling, and consistency, and 95% conversion 52 weeks a year, and getting out of bed 4AM and getting done whenever it’s done, but most importantly…cash the Mega dealer up (and any other dealer up) on the spot, for millions, many millions, every day, all year round (in my case $600,000,000 per year, on the spot, with no titles, or any respect to get those titles, cause they been paid…up front…missed that part of the story…I’m sure by accident (or don’t understand why the “Mega” dealer needs us more than he needs arbitrage, 30% selling vessel, or the minutia that semi-pros get in over their head when trying to act like a successful auction seller.  Not quite as simple as the analysts might want to make it seem surrounded with all their statistics, cool office, conventions, and funny conclusions that are then used to betray the auctions best, most loyal, consistent, customer…the wholesaler.

Did it ever occur to anyone that 7 out of 10 of the units they finally sell go to a “wholesaler” that find the correct market for those units?  Or did we think they just evaporated.

Is it a crime to misuse sale information against the customer that paid to sell their units at the auction?   By applying  a silly formula that skews data in a way that ignores costs, speed, skill and market conditions to advance certain units to the end user they self-mutilate the core auction player.  Could this be that difficult to understand?

And by the way, short of cheap trash, which Happy The Clown can sell in a barn yard for end money, the Mega dealer has proven time after time after time…for the five decades I have been doing this little game of wholesale, they can’t get it done.  They don’t have the skill, will, money, knowledge, tenacity, to get up early and go to bed late, fight all day every day in the street, do whatever it takes to get them there and ready, kiss everyone’s back side to buy, move, get ready, sell, title, kiss more butt after they are sold, get tortured with insane post-sale prevention, and come back with amnesia like it never happened.  Because without amnesia, only a select few animals would repeat this over and over in the face of this totally disrespectful, naïve, disservice and product(?) offering.   

If it isn’t illegal, it is absolutely immoral and a clear indication of the lack of respect (understanding) they have of their best customers.  I can list 100 examples of New Car dealers that tried and came back with their tail between their legs proclaiming that “that wholesale thing ain’t as simple as it looks”.  Really?  You’re joking.  Looks simple to the people doing arbitrage.  It must be simple.  If you think it is, come on out in the street, I’d like to have you be my competition.  I love fun.

Robert Hollenshead