Manheim auctions were on fire yesterday with Carvana and Carmax buying strong. If you had been living on another planet for the last 3 months, not aware of the world wide Covid-19 pandemic, you would have thought it was business as usual at Manheim Auction Orlando.
Lane 15 at Manheim Orlando was at full tilt Tuesday morning, as Carvana, Carmax, and Franchise Toyota dealers battle it out for the new found bargins in the wake of Covid-19. I think every buyer online and in the lane must have read Dale Pollak’s latest post, A Call to Return Retail -Back vehicle aquistion.
In a section of Dale’s post he talk’s about how dealers have been complaining about being able to find cars behind MMR values.
In the past several days, I’ve heard multiple dealers complain that they can’t find vehicles in the wholesale market, despite unprecedented levels of unsold supply. Inevitably, when I ask dealers to explain their trouble, I’ll find that they’ve been trying to purchase vehicles “back of MMR” without considering current retail prices.
Sourcing Cars at Auctions
If your trying to source cars at Manheim auctions, waiting until you find what you think is a bargain because it’s well behind MMR, you won’t buy a single car from what I observed yesterday. The only cars that weren’t selling well past MMR were the undesirable units with high days supply, bad Carfax report or yellow light announcements.
I took a few screen shots during the sale so you could see exactly what I was observing. This 2017 Toyota Highlander opened at $1500 above MMR and kept climbing to $20,600 before the autioneer dropped the hammer. Keep in mind the data to the right of this pic doesn’t have an actual appraisal and the rbook could possible be higher if your buying this car as a CPO unit. Keep in mind Carvana can’t CPO any car.
The point here is that the wholesale market has fallen much further than retail pricing and MMR has now adjusted to the massive decline. This was the exact point Dale Pollak was making in his latest post that I mentioned above. The average margin from wholesale to retail has increased to a whopping 12%.
Right Your Current Inventory and Take Advantage of The Opportunity
There’s really no way around the declines in your current inventory values. Lower your prices, take the hair cut and replace those units with fresh inventory that has much better margins to offset the loss your incurring.
I wanted to see if the same patterns were happening at other sales that were not a factory lane. We all know that at factory lanes and sales cars tend to bring higher prices. So I jumped over to Manheim Baltimore – Washington. Look at this 2015 Mazda6 with 68k miles, good Scarcity Index, low days supply, 4.5 CR. This car was sold at $1400 above MMR, but still has 3K margin with an adjusted rbook of $12,457.
When was the last time you saw a 30% margin on a 9K car?
It’s time to become a student of the market and start grabbing up some of these great deals.
Here’s another example at Manheim Baltimore – Washington. This 2019 Hellcat WB had everyones eye. Carmax, Carvana, and Koons Toyota in Tysons Corner was the winner at 59k. 11% margin from wholesale to adjusted rbook of 65K.
I’m not sure I would have jumped on this car at this price, but everyone else seemed to think it was a good deal. I know their rare, but with a 130 days supply and a low Scarcity index I’m not sure this is a good choice for a very volatile market. Even with an 11% margin. The original MSRP is only 70K.
Impulse Buying Will Kill Your Profits
If your not a patient buyer you will get caught up in the game that the auctions rely on. Impulse buying will kill profits and probably cost you your job eventually.
Learning to become a patient savy buyer takes practice and requires planning. There’s always evidence of this happening at every sale. Here’s an example below.
Manehim auctions heating up with Carvan a Carmax buying strong was never more apparent than in this example. Everyone from CDJR dealers, Carmax, Carvana, Lincoln Mercury and Toyota stores jumped on this car. Low Scarcity Index, high days supply and the bidding finally ended at 12k. Thats just way too much money for this car when Corrolla’s are a dime a dozen. After transport and recon there’s just not enough left on the bone.
There are bargains all over the country like this. Don’t be impulsive. Plan ahead and do your homework or your end up getting a comment from a desk manager like this.
Why did you just pay $2500 above MMR for a Corolla?
Planning ahead is the key. Knowing the data on the cars on your buy list is crucial to becoming an auction pro.
Pro Tip! If you know you have impulsive tendencies, use proxy bids more frequently.
P.S Make sure you subscribe to my email list so you can get every post directly in your email box.
Great Information Craig .
And So True ,If you not ahead of the curve your behind it.
Dealer Principals need to hear this.
Thanks Joe Auction buying is still strong but I’m still advising caution. There will be another dump in the wholesale market in the near future. I’m guessing late June-July.