DETROIT - General Motors Acceptance Corp. has crafted an Internet strategy to help it sell more auction-bound, off-lease vehicles to dealers.
GMAC's effort includes selling off-lease vehicles through cyber lots and online auctions. These vehicles are those that were purchased by neither the lessor nor the selling dealer at lease end. The 24-hour cyber lot started in May and the online auctions started in November, said Mike McHale, director of remarketing at GMAC.
At the end of December, the company had sold 2,648 vehicles on its cyber lots and 341 vehicles during online auctions.While the numbers are small, McHale expects sales to increase as dealers become more comfortable with buying off-lease vehicles online. Hale, who is responsible for selling GMAC off-lease vehicles to lessors and dealers, said 1999 new-vehicle leasing volume indicates that GMAC's lease portfolio will continue to increase.
In 1999, 400,000 GMAC vehicle leases ended. Fewer than 10 percent of those vehicles were purchased by the lessors; about 50 percent were bought by dealers at lease end; and the rest were sold at auction. McHale said more than 70 percent of lessors lease another vehicle when a lease expires.
He said GMAC hopes the Internet will entice dealers to buy more off-lease vehicles by giving them the option to purchase the vehicles without attending the auction.
KEEP THE IRON MOVING
'Right now in the traditional auction world, you hold inventory and offer it for sale at the typical factory auction every other week,' McHale said. 'So you're sitting on your assets 13 to 15 days between auctions. The Internet provides an opportunity for us to sell some of those vehicles.
'It (the Internet) will never replace the (physical) auction; the auction is very, very important to us. It sets values in the market.'
McHale said about 150 dealers from 41 states are purchasing more than 100 vehicles a week on GMAC's cyber lot. The site is managed by Manheim Online, which operates cyber lots for several manufacturers and financial institutions. The site can be reached through www.manheim.com.
The first two-hour online auction was held Nov. 12. Sixty-two dealers submitted 600 bids on 115 off-lease cars and trucks. When the sale ended, 37 dealers had purchased 97 of the vehicles.
Otto Belovich, owner of Cherry Capital Oldsmobile-Cadillac-Subaru in Traverse City, Mich., said he watched over the shoulder of his sales manager as the manager outbid other dealers for a red Chevrolet Corvette convertible during GMAC's Dec. 17 auction.
Belovich said the auction was easy, and he was pleased with the vehicle - and with the fact that GMAC was offering 60 days of free floorplanning in December. He said his sales manager's only complaint was that GMAC sometimes allows the bidding to go past the stated cutoff time.
Belovich said he thinks the online auction would work better if the vehicles were put up for bids one at a time and for a specified time - say five or 10 minutes.
He said that would nudge dealers to make up their minds and that GMAC would be able to offer more vehicles.
Still, he plans to continue participating in the online auctions.'I think they're onto something; if they expand it, they'll do well,' said Belovich, who retails about 50 used and 50 new vehicles a month.
John Whaley, used-car manager at Vic Kanever Chevrolet in Fenton, Mich., said he has purchased about 64 used vehicles through GMAC cyber lots and online auctions since June 24.
Whaley said his dealership is about 23 miles from where the vehicles are stored, giving him the advantage of being able to visit the lot.
While Whaley said the vehicle photos and descriptions that accompany the Internet sales are fairly accurate, he visits the lot about three times a week to see what new vehicles have come in and which ones he wants to bid on.
He says the Internet site helps him keep his inventory balanced.
'If you have five Blazers and you sell two of them, you can go online and replace them immediately,' he said.
Two online auctions were held in December, and others have been scheduled for January and February, McHale said.