BOSTON -- For years, remarketers have wrestled with how to create uniform vehicle condition reports that auctions, buyers and sellers could agree on and understand. Too often, those reports were subjective and lacked key information.
AutoGrade is emerging as a viable solution, say many people who attended the National Auto Auction Association conference here last week.
Adopted by the nation's largest auction companies and endorsed by NAAA, AutoGrade is an electronic vehicle-condition reporting system that is being touted as a way to reduce human error and subjectivity when describing vehicle condition and damage.
AutoGrade grades vehicles from 0 to 5, with 5 being excellent condition.
Not every major remarketer uses the system or has plans to use it. But those that do believe it is as close as the industry has ever come to creating vehicle condition report consistency.
That's beneficial to dealers who want peace of mind when they buy vehicles online. It is also beneficial to sellers, many of whom are also dealers, who want to sell their vehicles for as much money as possible.
"Anything you can do to build confidence in vehicles [posted for sale] online, you should do it," Brad Bollman, vice president of remarketing solutions at General Motors Financial Co., told Automotive News. He said his company has used the AutoGrade system for "a couple of months" at auctions where it is available.
Manheim created AutoGrade and, through an arrangement with NAAA, makes it available to all NAAA member auctions at no cost. It has been adopted by ADESA and some large, independent auction houses. The association expects it to be implemented at all NAAA auctions over the next year.
The system requires the condition report writer to answer specific questions about a vehicle and submit the report electronically through Auto Auction Service Corp.'s AutoIMS inventory management system. The system returns a vehicle grade.
But SmartAuction, a widely used online remarketing platform, won't be using AutoGrade, said Steve Kapusta, vice president of dealership online services at Ally Financial Inc., which operates SmartAuction.
Kapusta said it is the accuracy of the vehicle grade that counts, not the algorithm used to get to the grade. SmartAuction's vendors do a good job grading its vehicles, he said. The company also monitors the vendors and vendors' individual inspectors. But no system is 100 percent accurate, he said.
What matters more, he said, is how the auction, online or physical, takes care of a buyer who finds the purchased car doesn't match what was promised in the condition report.
"If the inspection is wrong, then the question is what are you going to do about it?" Kapusta said. "If as a platform or as a seller you're willing to do the right thing, then all that other noise? It goes away."
He also noted that the increased use of numerous photos with a car sold online has reduced buyers' reliance on condition reports. In the early days of online auctions, bandwidth limitations didn't allow for the photos -- in many cases close to 20 per vehicle, sometimes more -- now offered.
Cam Hitchcock, CEO of American Auto Auction of Charleston, S.C., said dealers who buy vehicles at his auctions have told him that they want to search for vehicles online not only by make, model and model year but by grade. Some buyers, for instance, might know they are looking for 6-year-old cars with a grade of 3.7-4.1. His auction platform provider does not offer that feature currently but has promised that it will within about 60 days.
Added Darris McClure, president of American Auto Auction: "Instead of looking at 500 cars to find one he needs, [a dealer] may be able to narrow it down to look at 70 cars based on grade. But that hasn't been an option to independent auctions until now. We think it's going to provide a more effective marketplace for our customers."
Alliance Inspection Management, a Long Beach, Calif., vehicle inspection company, has its own vehicle-grading system, which is similar to Manheim's, said CEO Jim Yates. So Alliance reconfigured its inspection software to feed data to Manheim that will generate a grade on Manheim's ove.com site. That way, customers will see a grade for the vehicles Alliance posts for sale on the site.
"The system that Manheim put out there, I think, is becoming the standard in the wholesale world," Yates said. "It gives people an easy to understand ballpark" to use when considering an OVE vehicle.