Condition reports: Critical both in-lane & online

Matt, Arias, (center), instructs during NAAA’s Auction Standards Training at ADESA Charlottes. Arias is the co-chair of NAAA Auction Standards Committee .
CHICAGO and MANHEIM, Pa. - 

If you look at the cars sold via Auction Edge, more than 93 include a photograph.

Meanwhile, roughly 63 percent include a condition report.

That gap shown in these statistics — provided during an Auction Edge presentation at the Digital Managers Session of the Auction Academy near Chicago this summer — doesn’t necessarily mean, however, that the condition report isn’t vital.

“The importance to the buyer — it’s already there,” Auction Edge senior vice president Dan Diedrich said in a follow-up interview with Auto Remarketing.

Closing the gap between the percent of cars with pictures and the percent of cars with condition reports is, “a matter of the auction having the boots on the ground to actually do the work, and for that matter, the technology to efficiently do the inspection,” Diedrich said.

“Condition reports still just take a tremendous amount of time to do properly. And there are some really good products out there to help the auctions, and even the dealers, inspect their own vehicles, but I don’t know if anybody has gotten the silver bullet yet, in terms of the right technology to really do it quickly,” he continued.

“Everybody’s trying, we’re trying, but the big limiting factor is time, when it comes to getting the inspections done on that 90 percent number. You’re going to see the gap close; I don’t think you’re ever going to see a 93 or 94 percent condition report (rate), not from most auctions,” Diedrich added.

“There are some, they’re going to do them on every single car,” he continued. “But the time factor, for your average sale, I just don’t see it getting that high. I think you’re going to see 80, 85 (percent) of vehicles having CRs in the simulcast environment.

“In the online only — the upstream or non-simulcast venues — that’s where you’re going to see a higher percentage, because you don’t’ have the bidder in the lane keeping the bidder online honest. So the condition report is absolutely needed in those upstream venues.”

A 2013 white paper from Manheim also shares just how important those CRs can be.

The report, titled Condition Report Impact on Dealer Sales, indicates that CRs tend to affect three areas, those being, “Simulcast, the ability to attract buyers and arbitration rates.”

First looking at Manheim’s Simulcast product, the white paper indicates that reach of Simulcast, on average, is impacted positively by more than 22 percentage points for vehicles with electronic condition reports than those without.

The report shows that the degree of positive impact is even larger as the price tier climbs, with cars in the $20,000-and-up ballpark having an ECR-driven reach increase of 30 percentage points.

As for buyer exposure, Manheim’s report finds that if a vehicle has a CR, the buyer’s distance to auction is 35 miles higher for an in-lane purchase and 95 miles higher for a Simulcast purchase.

Looking at arbitration, the report notes that vehicles with CRs had an arbitration rate that was 7 percentage points lower than for those without a CR. The decline in arbitration rates was most noticeable in vehicles priced below $15,000.

(Note: Manheim said its report includes one full quarter of dealer sales; it excludes Total Resource Auctions, Specialty and OVE sales; and it is limited to U.S. auctions. The white paper was released in the second half of 2013. It was based off results from the first half of 2013.)

At the company’s Manheim Pennsylvania location, general manager Julie Picard says some dealers do opt for the “image-only” route with CRs, but she does see an equal amount of importance placed on condition reports and photos.

“I wish somehow we could pipe the smell through for them,” she said with a laugh, but added, “because that’s truthfully very important, as well.”

And when asked to talk about some of the most important considerations for the online wholesale buyer, Picard honed in on the precision of the condition reports. But that goes beyond the online bidder, as she would explain.

“They definitely want to make sure that our CRs are accurate. They totally rely on that,” Picard said. “And I think Manheim has done a really good job of staying focused in that area of our business, to continually try to enhance our condition reports and really make them be representative of what the car’s condition really is. So, we continue to work on that day in and day out.

“You know, I can’t even liken that just to online any more. Our in-lane dealers will print out CRs,” she added. “They use that for their homework at night; they use it to view the condition of the car. When they walk up to a car, they want to know that it’s represented in the fashion that it was on the CR, so they can make a quick decision or whether or not to buy and move on to their next purchase.”

That’s something Pat Simmons has noticed, as well. The DAA Northwest director of technology points out that most buyers, even those who end up buying the cars at the physical auction sale, start doing their homework online.

So, it’s important for those buyers to be able to know as much as possible about the car ahead of time.

Simmons said the auction likes condition reports on all vehicles, and acknowledges the challenges of doing so, but also the benefits that make this process worthwhile.

“It’s labor-intensive. That’s certainly a challenge,” he said.

Plus, Simmons mentioned, all the logistical steps involved. However, the benefit of putting CRs on vehicles is well worth it.

Having a CR adds value to the vehicle, increases confidence in the buyer and portrays a better picture of the car, Simmons said.

“And that is worth doing,” he said.

Worth it on many levels, in fact. Not only do CRs increase confidence for dealers and help them make quicker decisions, but they can also give sellers a leg up on the competition.

That’s something that ADESA Cincinnati-Dayton general manager Geoff Parker emphasized in a Q&A with Auto Remarketing in our Aug. 1 Power 300 issue.

We asked Parker how his auction emphasize to sellers the benefits of including these on the vehicles they sell.

“As part of our commitment to providing the best possible service to our customers, including our sellers, we make it a priority to highlight and explain the benefits of including an accurate and thorough condition report with each vehicle at every opportunity,” Parker said.

“From gathering insight from our buyers, we know that dealers find important value in condition reports — they increase confidence, and they save time, because dealers know going into the auction the exact condition and details of the cars they want to purchase, making the in-lane or online decisions faster and easier,” he continued. “In today’s mobile-driven world where buyers are scouring websites and apps prior to auction day to help guide their purchasing decisions, providing complete, accurate condition reports offers sellers a competitive edge.”

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