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Old 04-11-2014, 02:54 AM   #16
Jeff Duvall
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Let's see what prices do if we have a couple more years of 16 million + new car sales, or rather the manufacturers building cars for that many sales....or more, and then forcing them into the market.
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Old 04-11-2014, 12:07 PM   #17
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Originally Posted by DealerEx View Post
I think a lot of the problem is the proliferation of higher end BHPH operations. The buyers for them are really not concerned with the price they pay, as long as they know it is something they can sell easily. For example, last week I was looking at a really nice 2003 Dodge 1500 regular cab with 113k on it. wasn't a loaded up SLT, cruise & tilt but no PW/PDL, but it had factory 20" wheels and tires, and it was clean and shiny red paint. NADA ave. trade is $3450...clean trade $4225 and retail $6425. It sold at the auction for $6300 to a large, multi location BHPH dealer. If you paid that price and sold it for $7500, you'd have to get about $4000 down to get it financed at a bank or CU after TT&L. The BHPH store will put it out there for $9000 and get it because their customers don't care about the price as long as they can get it financed.
That's a great example of the impact BHPH can have on auction prices.
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Old 04-11-2014, 12:13 PM   #18
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Originally Posted by 79LilRedExpress View Post
Another problem of late is retail customers, in the dealership, during auction runs.
What I mean is a dealer will invite a "good" customer to his office during a simulcast, have an agreement in place to mark up the purchase price that he, the dealer, pays by X number of dollars and watch as the dealer buys the car.
The customer perceives a good deal, the dealer has an easy sale, probably pays little or no commission and slams the customer on the back end.

This process will in fact artificially raise the MMR values and drive wholesale values of used vehicles up even higher.

Years ago if we took a retail buyer to the auction we could be barred from sale. But I guess its ok now if its on line.
That's an interesting observation.

I remember there was one auction company several years ago that was being sued by a group of dealers because the auction didn't take measures to prevent retail customers from attending wholesale auctions and buying cars through a dealer.

While I can see how an auction company can prevent retail buyers from attending a physical auction it's a whole new problem when you think about on-line auction access. I wonder how widespread this practice is?
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Old 04-11-2014, 08:31 PM   #19
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Originally Posted by Jeff Duvall View Post
Let's see what prices do if we have a couple more years of 16 million + new car sales, or rather the manufacturers building cars for that many sales....or more, and then forcing them into the market.
That's an excellent observation. We should see a much higher number of new car trades coming into the market in the next few years. There were a ton of low end trade-ins taken off the market in 2008 with the government scrapping program, and that went hand in hand with a huge drop in the new car sales rate in 2008-2010 that reduced the number of clean, late model, low mileage trade-ins coming back on the market by at least 30 %. I also think that credit crunch in 08/09 contributed to the rapid growth of the upper end BHPH operations due to a large influx of former new car buyers that experienced credit problems during those years. The advent of lower cost GPS tracking and disabling units also made the prospect of selling more expensive late model vehicles in a BHPH model much more attractive to dealers that had never done it before.
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Old 04-14-2014, 11:31 AM   #20
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Yup, it's buy here pay here. Book will not go up because of them.
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Could you elaborate on why you don't think retail book prices will normalize even considering the BHPH decreasing inventory?
I was wondering about that comment too.
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Old 04-14-2014, 11:42 AM   #21
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Originally Posted by DealerEx View Post
That's an excellent observation. We should see a much higher number of new car trades coming into the market in the next few years. There were a ton of low end trade-ins taken off the market in 2008 with the government scrapping program, and that went hand in hand with a huge drop in the new car sales rate in 2008-2010 that reduced the number of clean, late model, low mileage trade-ins coming back on the market by at least 30 %.
I think the market is still feeling the impact of the Government's "Cash for Clunkers" program on the lower end of the market. I'm often amazed at wholesale prices for vehicles that are 10+ years old or have in excess of 200,000 miles. It's a definite function of supply and demand.

Another variable that's impacting today's auction volume is the collapse of leasing in 2009.

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The advent of lower cost GPS tracking and disabling units also made the prospect of selling more expensive late model vehicles in a BHPH model much more attractive to dealers that had never done it before.
I totally agree.

There was a story in the news here locally where the police were able to recover a stolen vehicle that was at a highway rest stop because they contacted the selling dealer and advised him that the vehicle had been stolen. The vehicle had a GPS tracking device and the dealer was able to disable the vehicle and tell the police where it was. When the police arrived at the rest stop they found the vehicle with the hood up and a Good Samaritan trying to help the car thief get the car started.
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Old 04-14-2014, 11:45 AM   #22
lsx only
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auto max and bhph dealers do not help auction prices one bit
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Old 04-14-2014, 12:23 PM   #23
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Originally Posted by XDCX View Post
I think the market is still feeling the impact of the Government's "Cash for Clunkers" program on the lower end of the market. I'm often amazed at wholesale prices for vehicles that are 10+ years old or have in excess of 200,000 miles. It's a definite function of supply and demand.

Another variable that's impacting today's auction volume is the collapse of leasing in 2009.



I totally agree.

There was a story in the news here locally where the police were able to recover a stolen vehicle that was at a highway rest stop because they contacted the selling dealer and advised him that the vehicle had been stolen. The vehicle had a GPS tracking device and the dealer was able to disable the vehicle and tell the police where it was. When the police arrived at the rest stop they found the vehicle with the hood up and a Good Samaritan trying to help the car thief get the car started.
Definitely the 2008 2009 collapse in leasing. 3 years later there were none to be found, and it all started with fuel prices.Trucks and SUVs coming off lease were killing the banks who did the only thing they could think of-pull the plug on leasing.
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Old 04-14-2014, 04:04 PM   #24
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Definitely the 2008 2009 collapse in leasing. 3 years later there were none to be found, and it all started with fuel prices.Trucks and SUVs coming off lease were killing the banks who did the only thing they could think of-pull the plug on leasing.
Absolutely a big factor. My wife has always driven a Grand Cherokee since Jeep introduced them in 1993. After I sold out in 2005, I continued to pick her up a "almost new" one every year at one of the Factory Sale's. Usually one that one of the Zone people had used, but if no,t one coming in off a 12 month lease that Chrysler was really pushing up until the credit crunch hit in 2008. I started looking for her a replacement at start of 2013, and there were very few of the new body styles coming thru the auctions and almost none with what she wanted... (4x4 w/low range transfer case--that eliminated the V6 models in 2011-2013 and leather interior--which eliminated most of the Laredo pkgs). Finally wound up ordering a new 2014 in August to get what she wanted for about $6k more than a 2012-13 model with less than 20k miles.
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Old 04-27-2014, 12:56 PM   #25
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One month later and the situation has only gotten worse. Every indy dealer I chat with is in the same boat. Low inventory with no way to replace it, and sales are suffering because of it.

We are also noticing people seem to have alot less money to put down on cars than usual for tax season. All have had their worst tax season in years.

I am so happy I keep my own personal overhead low (cheap house, no debt), but If things keep tracking like they have the last 3 months, I'll be lucky to clear 30k this year. Not worth it to continue operating given all the time, effort, and constant abuse you have to take to own a car lot.

I'm still going to make some cuts. Dropping gym membership, turning in my DVR boxes and opting for basic cable/netflix, washing the lot cars myself, generating my own information stickers for the car windows. Bag/home lunches. I'm also selling cars from my personal collection so I have the cash to make it through the year should things really take a dip.

To generate more income and to keep my mechanic busy, I'm opening up some more retail repair work to customers.

Traveling far for vehicles is also on the agenda. I'm debating whether to try Houston, Chicago, or Minneapolis. Denver, Kansas City, Oklahoma and Dallas are all in the same boat. Low supply, sky high prices. I'm also completely giving up on cheap cars. Nobody can rub 2 pennies together anymore, let alone come up with $2995.00. All I get on those is phone calls asking what the down payment would be.

I'm excited to get a car locally at auction that will clear me $500 now.
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Old 04-28-2014, 08:59 AM   #26
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One month later and the situation has only gotten worse. Every indy dealer I chat with is in the same boat. Low inventory with no way to replace it, and sales are suffering because of it.
Thanks for the update but sorry to hear it's mostly bad news.

Most of our members here have a new car franchise and that's why I really appreciate hearing how business is doing from your perspective as an independent used car dealer. Perhaps in the vein of "the grass is always greener on the other side of the fence" I've often thought a used car dealership had many advantages over a new car dealership because they didn't have to meet the demands of their OEM but your thread has opened my eyes to some of the unique challenges the independent used car dealers face.


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We are also noticing people seem to have alot less money to put down on cars than usual for tax season. All have had their worst tax season in years.
That's an interesting comment - I'd be curious to hear if any of our other members have noticed the same thing.

I know when I was closely following the auction activity at Copart that their management saw increased sales activity early in each calendar year as their dealers increased their inventory in anticipation of "tax season." When I created a survey here for our members asking about the impact of "tax season" the response indicated it was mostly a non-event for new car dealers.

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Originally Posted by adastra View Post
I am so happy I keep my own personal overhead low (cheap house, no debt), but If things keep tracking like they have the last 3 months, I'll be lucky to clear 30k this year. Not worth it to continue operating given all the time, effort, and constant abuse you have to take to own a car lot.
I would totally agree. Unless you can sense that you're building your business and you'll be able to substantially increase your future earnings than I'd agree that owning your own used car lot isn't worth the work/hassle/risk for $30K/year.

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Traveling far for vehicles is also on the agenda. I'm debating whether to try Houston, Chicago, or Minneapolis. Denver, Kansas City, Oklahoma and Dallas are all in the same boat. Low supply, sky high prices.
That could be a viable solution for your operation.

We had a thread on the forum a year or so ago where there was a survey asking how far dealers would travel to buy a used car and as I recall there were several dealers who indicated they go far beyond their market to buy used cars.

There's no question that there's a variation of wholesale used vehicle prices based on the market and there are opportunities for dealers who try to take advantage of these pricing differentials.

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Originally Posted by adastra View Post
I'm also completely giving up on cheap cars. Nobody can rub 2 pennies together anymore, let alone come up with $2995.00. All I get on those is phone calls asking what the down payment would be.
Very interesting comment.

I always assumed that the lowest end of the used car market would have an ample supply of buyers but given the limited amount of cash that people have to spend apparently that's not the case.

To the extend the growth of BHPH has impacted wholesale auction prices, I wonder if they've had an impact here too, where customers know they can buy a car with little cash down and assume that all dealers are willing to extend terms like the BHPH operations do?
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Old 04-28-2014, 10:42 AM   #27
steve_biegler
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I think the internet has made it much harder to find any pockets of favorable pricing. Back in the day Billings was a great place for Chrysler auctions because getting them back was so expensive people would stay away. We were on the way back to Mpls or Chicago so our shipping was dirt cheap. Now with the lack of inventory people will pay up regardless the expense to get them home. They stay at the office and bid online.
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Old 05-17-2014, 05:18 PM   #28
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Update:

I have finally found a reliable source of inventory in Texas. Other than the 8 hour drive I am extremely happy. The inventory I'm getting is fantastic. If the second half of the month is half as good as the first, I'll have a record month.

The low supply high has created a large number of frustrated buyers who cannot find anything good for a reasonable price. Many customers have been shopping for months with no luck until they buy from me.

We'll see if I can keep it up, but it is nice to report good things happening.
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Old 05-19-2014, 11:05 AM   #29
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Update:

I have finally found a reliable source of inventory in Texas. Other than the 8 hour drive I am extremely happy. The inventory I'm getting is fantastic. If the second half of the month is half as good as the first, I'll have a record month.

The low supply high has created a large number of frustrated buyers who cannot find anything good for a reasonable price. Many customers have been shopping for months with no luck until they buy from me.

We'll see if I can keep it up, but it is nice to report good things happening.
Thanks for the update - it's always nice to hear some good news.

I'm betting that most of your local competitors are not willing/able to work that hard to secure inventory and I'm hoping your source in Texas will continue to produce good inventory for your dealership.

As you mentioned, the fact that inventory is tight and wholesale prices in your market are high may mean there are a lot of retail buyers who are looking for the types of vehicles you're bringing in from Texas.

Thanks again for the update and best of luck going forward.
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Old 05-19-2014, 12:13 PM   #30
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The local auction changed hands about 6 months ago and it looks like they are about to make some cuts to staff since they are not running the numbers they expected.

New car franchises are hanging on to everything they take on trade. This is something that was unimaginable when I was working for new dealerships before 2010. Even with the junkers, they are selling with a bare minimum of reconditioning, and they only hit the auctions if remain unsold for 60-90 days.

By junkers, I mean cars that are more than 10 years old with 150k and up. Really anything that moves. The new Subaru store next to me looks to have about 3 to 1 used to new, with at least 50 $10,000 or under cheapos. Not quite the same ratio for the Hyundai, Ford, and Toyota stores, but still a much higher ratio than normal.

My detailer has a massive backlog of cars from the new Toyota store because they are trying to resell all of it. 70 or so cars just from that one store. Thankfully he always makes sure the small guys like me get worked in fast.


Thankfully for me most of their asking prices are ridiculous so its easy for me to compete. I also pick the best ones and recondition them to a higher standard.

I really hope the honey hole keeps delivering.
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