Issue Date: Car Dealer Insider July 1, 2010, Posted On: 7/1/2010
What's Working Dealer uses "silent auction" to squeeze used car inventory A sealed-bid silent auction helps a dealer cut his used car carrying costs dramatically.
A high-volume Alabama Chevy store retails 4,000 new and used vehicles annually, yet the used vehicle inventory is consistently at 30-days supply or less.
One way the dealership controls its investment in used cars is through the innovative use of a sealed bid, silent auction for wholesalers. Many dealers use the sealed bid approach for disposing of over-age or low-end, undesirable vehicles, but the Alabama dealer has added some innovative touches.
First, the auction is managed by a former dealership employee, a retired used car salesman. Once a week, wholesalers gather at the store and review a printout of cars available for bids. The wholesalers can inspect and test-drive any vehicles in which they have an interest. Bids are submitted and opened the next day, high bidder for each vehicle wins.
Not only does the system require that cars constantly be made ready for the auction, but it has also provided some other benefits. Foremost among these benefits is the time saving for the dealership's sales managers. No longer do they have to stop to work with wholesalers several times a day, now all the wholesalers get together in one place at the same time. That's a plus for the wholesalers, too. It's much more efficient for them to see all available cars at once rather than making multiple trips to the dealership during the week.
The sealed bids contain some winners and some losers for the store. By analyzing the bids for profit and loss every week, sales managers have also been able to refine their reconditioning process. The goal of the auction is to generate a small profit. Too many losses on certain vehicles usually indicates that too much was spent on reconditioning.
The integrity of the bidding process has been assured by taking it out of the hands of the sales managers. Bids are opened and reviewed by a group of employees who are not involved in the sales departments.