Sure, new-car sales were dismal and used-car sales to consumers declined last year. But 2009 was a good year for the auction industry.
Auction companies sold a record percentage of the used vehicles offered at auction lanes and online. And although industrywide profit data are unavailable, rising average auction sales prices meant higher commissions, bolstering profits.
Of the 14.6 million vehicles offered for sale at National Auto Auction Association member auctions last year, dealers purchased 8.9 million, or 61 percent, the group says. That compares with dealers' purchasing 9.5 million, or 55 percent, of the 17.1 million vehicles offered for sale in 2008.
Many unsold vehicles are sent through the auction again, later, at a lower minimum bid. Others are sent back to their owners.
The percentage of vehicles sold at auction -- called the conversion rate -- was the highest ever going back to 1997, the earliest year such data are available, the association says.
Although unit sales at auctions are down, revenues "are not down near as much because of the supply issue," said Dave Angelicchio, an owner of the Pittsburgh Independent Auto Auction in New Stanton, Pa. He stepped down as president of the auction association Sept. 9.
"With demand outstripping supply, we're converting a higher percentage of vehicles at the auctions than ever before," he said. "Last year was a record year in terms of sales percentage."
In addition, the average sales price for a vehicle sold at an association auction rose 3 percent from 2008 to $9,026 in 2009, the third-highest price in a decade.
Earnings at ADESA Inc. show that a terrible economy that devastated the rest of the auto industry didn't necessarily mean terrible profits for auctions. ADESA says it holds about 21 percent of the wholesale auto auction market, making it the nation's second-largest auction company.
Operating revenues for ADESA's publicly held parent, KAR Auction Services Inc., slipped 3 percent to $1.08 billion in 2009 as the number of vehicles sold eased less than 1 percent. But net income soared 80 percent to $94.4 million.
The company traded on its strong 2009 earnings to issue an initial public offering in December.
ADESA sold 67 percent of the vehicles it offered for sale last year, up from 61 percent in 2008.
ADESA generates revenues primarily from auction fees paid by buyers and sellers based on a tiered structure. Those fees typically increase with the sale prices of vehicles, so the rising prices paid for scarce used vehicles also fattened the auction company's profits.