Franchised new-vehicle dealers bought a third of their used vehicles from auctions in 2004, the National Automobile Dealers Association says. They got more than half from trade-ins. A decade earlier, NADA says, dealers got two-thirds of used vehicles from trade-ins and just one-fourth from auctions.
Auctions market themselves to dealers as full-service operations. The biggest auctions offer in-house financing, sprawling detail shops and online tracking of vehicles.
The Detroit Auto Auction in Carleton, Mich., is just minutes from an international airport. Its detail shop charges $80 to $250 to spruce up a used vehicle. The auction also boasts full-service paint and body shops and a 16-bay service area.
Dealers can check in at the auction by swiping a "smart" card at a computer terminal. When they aren't on the trading floor, they can eat in the auction's cafeteria or visit its barbershop, which offers shoeshines and neck and shoulder massages. For franchised new-vehicle dealers, the auction picks up the tab for some of the perks.
The auction also gives away a variety of prizes - from turkeys to camping equipment to cash - says Pam Sackey, the auction's assistant general manager.
But such prizes are secondary to Jack Van Stee, who buys used vehicles for Tony Betten & Sons Ford in Grand Rapids, Mich., and Tony Betten & Sons Lincoln-Mercury in Muskegon, Mich.
"I want to buy in confidence," Van Stee says of the auction. "Whatever you want, they take care of it."
The Detroit Auto Auction, like most other auctions, offers an in-house arbitration department to resolve disputes between the auction and its customers. Cases are normally settled within a week, Sackey says.
Used-car managers cite three factors to explain their choice of auctions: vehicle selection, processes to resolve grievances, and auction management's ability to meet their needs.
Karl Arvidson, used-car manager of Extreme Dodge-Hyundai in Jackson, Mich., spends three or four days each week on the road buying vehicles. He says he consults the Web sites of five or six auctions to set his schedule.
On a recent day, Arvidson was looking for mid-sized cars, convertibles and Dodge Caravans in the Detroit Auto Auction's dealer consignment and Chrysler group lanes. The next day, he would head to Arena Auto Auction in Bolingbrook, Ill., to check out minivans.
"I want the selection and guarantees," Arvidson says. The Detroit auction, he says, "takes very good care of me."
Manheim, of Atlanta, is the nation's largest auto auction company. It owns 85 auctions in North America.