It is inevitable this time of the year but this is worse than normal. This past week is the worst week we have
experienced in recent memory which the gas crisis of 1972, 1979, the bank
crisis of 1991, 2001, 9/11 2001 and the bank crisis of 2008. In each of the past instances there was still
a market for a good car. What we have
now is free-fall. It really doesn't
matter what you have there is nobody interested. There is no base line. There is nobody in the lanes. It is dead.
The model seems as if time has passed it by. I sold at the lowest conversion all year,
85%. MMR is wrong by thousands in most cases especially with cars over $20,000 and units that don't VIN decode which is more than ever before.I felt like I was in jail Thursday
and Friday. I now know what it is like
to be a dentist as I was pulling teeth both days trying to get them sold.
After four decades wholesaling cars, buying off the street and
primarily selling at the auction under the hammer, I can honestly say it feels
as though the business model is done. We
have up to $30,000,000 tied up in inventory, transport, recon, pay fees at the sale, and get
subjected to a post-sale process that is irrational and beg the dealers we pay
up front for the cars for titles. Since
we pay them up front for the cars, they really don’t care when they get titles
so we are left out to dry waiting to cash them in. The process costs too much, has too many superimposed
obstacles, and there is less activity in the lanes than I ever remember. Dealers can’t afford to pay the fees and keep
coming back for more. Once a guy buys a
car at the auction, pays the sale fee, post sales it, transports it and does
his retail recon, he is welded into the bitch to the point he will blow $3,000
if he doesn't retail it.
The real killer is the fact that there would always be a crowd
following in a real car in the lane regardless of time of year, time of day,
day of week or any other set of circumstances.
It is no longer the case. I have
recently had a pile of one of a kind impossible to find creamers that get to
the block in broad daylight on a perfect number to find absolutely nobody in
the lane to bid. As long as I have been
doing this, selling hundreds of thousands of cars, this is the first time that
this is the case. The auctions that sell
a $20,000 average price unit is now converting under 40% for dealers which is dysfunctional. Folks that buy into this as something that is
sustainable don’t know how to count, it will not work for the buyer and the
seller.
This in conjunction with the management systems dealers are
now following in regards to selling anything for whatever they can get for it “retail”
(many cases less than wholesale) in order not to wholesale cars. This has had a horrific effect on the
auctions as the only thing that makes it way to the auction is absolute
industrial waste. Have you looked at the
presale inventory at auctions around the country? It looks like industrial waste or a rental car. The lanes have a desirability index of minus
298. There is little to no motivation to
come, look, and participate trying to buy cars and then get hit with a sledge
hammer cost of acquisition. It is not
sustainable and we are now witnessing the incremental death of the most
beautiful, fun, exciting, business I know of; hustling cars at an auction.
I have a prediction that I have thought about for a long
time and I truly believe we will see a shift in this direction. It is a hybrid, subscription based, hyper CR
based simulcast live auction, employing an auctioneer, that will not require the buyer to put his
boots in the lane. I will be starting
this model prior to the end of this calendar year. We have everything we need to fire away and
we will be pulling the trigger. The
auction has actually forced us into this mode due to the fact that they refuse
to give us numbers. As crazy as it
seems, and nobody believes it but it is true, we are unable to get
numbers. After years of begging and
falling on deaf ears and with no rational logic I am unable to get
numbers. This has forced us to consider
history, include what is spectacular about the hammer, the emotion, the will to
buy and sell in a competitive environment, and execute on the spot, to create a
new model.
If we are going to survive in the new environment we have to
make the move. I have invested millions
in the development of the products we are sitting on and I really believe all
dealers will love it. This model is
based in a subscription, no buyer fees.
We use the fundamental logic, will, and ability to arrange all units
logically, eliminate time burning, eliminate game playing, eliminate hunting
for a needle in a hay stack, eliminate after-sale circle jerk, eliminate the lack of communication, and have
the intestinal fortitude to sell everything to ensure the participants know
that they will never be subject to a Turkish Bazaar of endless silly negotiation.
The listing services, buy it now (for $2,000 over market)
model has been well vetted over the past number of years and is proven to be time/energy
eating monster that can never convert more than a fraction of the listed
inventory. This combined with an
absolute reality, the buyer and the seller can never feel like they got actual
market value in a none-competitive bidding environment. You never really know what would have happened
with a hammer and an auctioneer. This
hybrid will always use an auctioneer and create the emergency to defecate or
get off the pot in broad daylight and know you bought it for the value that the
live open market has determined.
I really believe this model will change the industry as we
know it. It maintains all the positive
aspects as to why we love it and eliminates all the cost and illogical insanity
that has been superimposed on us. Professionals
with skin in the game will be the benefactors.