Selling vehicles on the Internet goes against the tenets of the auction industry. Traditionally built on sprawling sites where dealers kick the tires and lift the hoods of hundreds of vehicles, auctions are the source of one-third of the used vehicles sold by franchised dealers, according to the National Automobile Dealers Association.
But as technology grows more sophisticated, dealers grow more Internet-savvy and sellers look for more ways to cut costs, the remarketing industry has devised many new electronic channels to buy and sell used vehicles.
Generally, dealers pay nothing to use an online channel beyond normal fees they would pay if they purchased a vehicle at a physical auction. All vehicles for sale online are accompanied by photos and condition reports.
Many dealers prefer buying vehicles owned by the factory because the vehicles tend to be late models, have low mileage and be in good condition. They also like the fact that every manufacturer that offers vehicles online will buy back the vehicle if there is a problem.
Auction companies also offer arbitration services to settle disputes between buyers and sellers.
Some captive finance companies, such as GMAC, have created their own channels to sell directly to dealers. Those channels save them the cost of transporting vehicles to auctions and auction fees.
GMAC sold just over 341,000 vehicles on SmartAuction in 2005 and a total of 1.5 million since it started in 2002. Vehicles sold on SmartAuction never go to a traditional auction site.
Auction companies are devising more sophisticated remarketing products to keep up with the demands of their customers.
Auction Broadcasting Co. LLC, of Indianapolis, has a system that aggregates the used-vehicle inventory of institutional sellers, such as automakers and independent auction companies. The system then sorts and offers for sale specific vehicles to specific dealerships based on their sales histories.
Copart Inc., of Fairfield, Calif., is known in the industry as a salvage auction company. But after developing technology to sell salvage vehicles online, the company discovered that the technology works for selling nonsalvage vehicles online, too.
Copart is marketing its VB2 network, short for "virtual bidding, second generation," to independent auction companies.
Forty-five independent auto auctions, each of which sells from 8,000 to 30,000 vehicles annually, are selling vehicles on VB2 in addition to their traditional auction sales, CEO Willis Johnson says.