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Automotive Discussions Car People talking about the Car Business – This is the place where it happens |
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12-08-2015, 09:34 AM | #1 |
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Wholesaling New Cars between Dealers
I was surfing Automotive News the other day and the following two ads in the Classifieds Section caught my attention:
. . My first reaction was a bit of a surprise to see two Hyundai Dealers looking to unload excess inventory - I remember it wasn't too long ago that Hyundai Dealers were complaining about allocations and there were concerns that Hyundai was growing their Dealer Network too quickly and stripping product away from their established stores. . My second reaction was to wonder how common New Car Wholesaling is between dealers? While I know that dealer trades are common when a dealer has a customer who's looking for a specific vehicle, I'm not sure how common it is for a dealer to buy new car inventory from any source other than their OEM. . In my experience wholesale purchases of new cars were pretty rare.
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12-08-2015, 01:56 PM | #2 |
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As a Chevrolet Dealer, bought cars and trucks in BULK all the time. Due to the Gerrymandering the factory did with Primary Market Area, I always had to seek truckloads of vehicles. Fortunately, dealers on the other end of that type of gerrymandering were anxious to "realign" their inventories. Their theory being the regional factory will keep cramming the vehicles to them, so (the local factory rep) as not to "LOSE" plant allocations from their region or zone. The whole concept of "turn and earn" was ALWAYS BS. The more I turned, the more my "favorite son" competitor complained to his "sweetheart" factory rep, and my next earn was zero.
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12-09-2015, 08:44 AM | #3 | |
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The Hyundais...right, not too long ago they couldn't get enough inventory. |
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12-10-2015, 09:38 AM | #4 | |
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If I can ask, how much on average did you have to pay/unit over what you would have paid GM if the vehicle had been invoiced directly to you? Sadi another way, how much did the dealer with the excess inventory end up making by wholesaling new vehicles? |
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12-10-2015, 09:47 AM | #5 | ||
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Concerning your question, I'm not sure if MMC has a history of offering "bait" to their dealers to take excess inventory. If they do then it's entirely possible a MMC dealer agreed to take extra Mirages to get a hotter vehicle and now they're stuck with the Mirages. To the extent the dealer is willing to sell the Mirages for Invoice less Holdback less $1,000 there must have been some inducement to buy the vehicles from MMC in the first place. Quote:
I also wonder how effective an ad in Automotive News is when it comes to wholesaling new vehicles? I know there are some brokers who actively try to wholesale new vehicles between stores and I seem to recall there's even one of the major auctions that wanted to establish a dealer-only marketplace for new vehicles. |
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12-10-2015, 10:08 AM | #6 |
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I can't imagine that the Automotive News ads are too powerful here, but there's definitely business to be had in wholesaling between dealerships. During the Pontiac wind down 6 years ago I did all the work myself to call Pontiac dealerships everywhere east of the Mississippi to try to snag some more inventory. Many of the smaller Pontiac stores (or the ones that were Chevy-Pontiac dual but winding down both) gave up plenty of their inventory. Sometimes I wonder what I could have made if I took the Pontiac angle and just worked getting inventory to the dealerships that wanted to sell Pontiac until the last day allowed.
Because we had a continuing GMC franchise our final wind-down date for Pontiac was some time in mid-to-late 2010, so there was over a year where we could retail a Pontiac yet there was no production from the factory. I bought stuff by the truckload... the dealers who were not going to push Pontiac until the final day were quick to give up stuff, even oddball and rare stuff like a Pontiac G8 GXP or Solstice hardtop. |
12-11-2015, 05:37 AM | #7 | |
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Generally, with shipping , I was in the vehicles a little under invoice. BUT I HAD INVENTORY! |
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12-11-2015, 10:02 AM | #8 | |
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I can't imagine there are too many people who still read the classifieds in Automotive News but it does appear there's a need for a better marketplace for dealers to wholesale vehicles. Concerning the latter comment I remember getting a Private Message from one of our members suggesting that the forum set up a hidden section for dealers who wanted to buy/sell inventory. He commented that he frequently got calls from wholesalers but would prefer to deal directly with the dealer. At the time I dismissed the idea because the forum was too small and didn't have too much activity. (I still have the same concern today.) As before, I thought one of the major auctions was trying to make a market for new car wholesaling? Did the idea fail or is it just not that well known? |
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12-12-2015, 09:16 AM | #9 |
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I do remember something along the lines of a marketplace for new car wholesaling from one of the big auction players but I don't remember the specifics and whatever I heard must have been verbal as there is nothing in my email history about it.
I think a hidden section on here would make sense if there was more activity. I don't working with the brokers who deal with new cars since I am usually on the selling side of the equation so it doesn't cost me anything. I sell 10 units though a broker for everyone 1 that I buy. Right now it seems that the CDTJ all have so much inventory that there's no much buying or selling going on, at least here in the Great Lakes BC. |
12-14-2015, 08:17 AM | #10 | |||
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Concerning broker fees, if I can ask, what does a broker typically charge to the purchasing dealer for finding suitable new car inventory? Additionally, about how far can a dealer search for new inventory before transportation costs become a deal breaker? Quote:
Ironically, I read that many Volkswagen Dealers are starving for inventory since they cannot sell any of their new cars equipped with the Diesel TDI engine. In that case there may not be much wholesaling either because all of the VW Dealers are hanging on to their inventory. |
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12-16-2015, 08:42 AM | #11 |
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As for the broker fees, most that I have done have taken a fee of $200 to $250 from the buying dealer, so I'm not out anything... as the seller I just give up all the holdback and move on with my day.
Some of the brokers will take all of the holdback and pay for the freight on their own out of the holdback while the buying dealer pays me invoice. I don't much like doing it this way from an accounting point of view, but I understand that the broker might want to try to make some cash on the transport too. I have a dealer in Colorado who regularly buys from me, and after freight and their fee to the broker the end up right around invoice in the cars... and they have purchased about 50 vehicles this year. However, usually my swap are within the midwest so even after all the dust settles they can be a few hundred below invoice. At times I have thought about going into that line of work on my own since it's something I know a lot about... and I have a lot of those relationships already built up too. |
12-16-2015, 11:13 AM | #12 | |
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I'm somewhat amazed that your volume of wholesale new car transactions is so high and that deals can be done so far away from your store. The broker fees are also interesting. If a broker could do enough volume that would be a pretty decent revenue stream for a business that has very little capital outlay and could be located anywhere in the world. (I can picture a broker doing deals on the sandy beaches of Waikiki enjoying a cool tropical drink. ) |
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12-16-2015, 03:40 PM | #13 |
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I have done quite a bit of wholesale new car this year... I only made more than net-net on a handful of the deals so far this year. I just went through all of my records and I have done the following transactions this year:
4 units to a dealer in Indiana 2 units to a dealer in Wisconsin 8 units to a dealer in Michigan 16 units to a dealer in Illinois 4 units to a dealer in North Carolina 10 units to a dealer in Arkansas 35 units to a dealer in Missouri 39 units to a dealer in Colorado ...so 118 total this year... those totals are the cumulative number of units to each store over the course of the year. I just realize that I have not wholesaled to more than one store in each state represented this year... kind of weird! As you see most of the deals have been within a relatively narrow scope geographically, but there's a few surprises. At the end of the day, it's not ideal since we will turn and earn allocation on the units, but sometimes I get to the point where I have nowhere to park anything. About half of the deals were broker assisted, the others were just me playing the nice guy. |
12-18-2015, 10:40 AM | #14 | |
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I'm surprised at both the volume of units you've done and the distance some of them have traveled. It's also interesting to learn that you only made more than net-net on a handful of units. As we discussed in another thread part of me wonders if Chrysler's desire to complete Project 2000/Project Alpha has made it hard for small and mid-size dealers to carry enough inventory to cover the complete CJDR product line. Additionally, with vehicle specific stair-step money, what's a dealer supposed to do if they are expected to sell 5 Jeep Cherokees but only have 3 in stock? Do you think many of the new vehicles you wholesaled were already sold units or do you think most of them were being purchased for inventory? Thanks again for the post - it has really been eye-opening for me. |
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12-18-2015, 01:42 PM | #15 |
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I would say all of the inventory (save for a few Wranglers) have been for inventory. With the current state of volume incentives I would imagine for the smaller stores that purchase inventory from me it is usually just to add units on the ground to make hitting VGP easier.
I'm not in it to make the $$$, but every now and then I have need to dump inventory just to free up space since we are probably about as tight on space as any similar sized store I have ever seen. With VGP focusing on Cherokee this month I am surprised I haven't been asked to dump any Cherokee inventory. Today you can add more to my list... we just did another 10 units to the Chicago, Illinois dealer mentioned above. |
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