Dealer Auction Software: Purchasing, Fees, Loans

dealer auction software

All car dealers sell used cars. Even if they sell mostly new cars, they trade for most of their sales and eventually they need to sell the used cars they got through trades. Even though they could sell it in auctions exclusively and not offer a public used car lot this is extremely rare since it is more profitable to sell them in other avenues. In any case, dealers purchase cars through a few key channels which require different management: auctions, trades, from manufacturer.

In order to buy at cars at auctions you typically need to pay a fee. These fees should be tracked. Some of the big auction organizers are: Adesa, Manheim and Brashers. There are also government auctions and online auctions. Online auctions can be challenging. Manheim provides video feed if you would like to participate in these auctions online. Most of these companies also have a finance arm that provides on-site inventory loans. Most of these inventory loans also require a fee. So, most car dealers pay two fees at auctions: for buying and for the inventory loan (floor planning). This can get expensive quite fast. Carsinia tracks these costs at vehicle entry time. They also get added in vehicle cost and profit calculations.

Trades are much more profitable because of these fees (and transportation costs) but are more difficult to sell. Most of the time, as you trade cars, the quality diminishes and it gets harder and harder to sell trades. If you can get two trades in a chain, you probably have good sales people. Nevertheless, eventually you end up with a clunker that you have to sell at an auction, if not at a junkyard.

Buying from manufacturer is much cleaner. You also get the holdback from the manufacturer. Quoting from Edmunds.com: Dealer holdback is a percentage of either the MSRP or invoice price of a new vehicle (depending on the manufacturer) that is repaid to the dealer by the manufacturer. The holdback is designed to supplement the dealer's cash flow and indirectly reduce "variable sales expenses" (code words for sales commissions) by artificially elevating the dealership's paper cost.

Holdbacks add up to the profits. Most manufacturers also have a finance arm that helps with floor planning as well.

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