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What can cripple conversion rates at auction? Delayed-title vehicles, according to a new industry study.

According to a new white paper from Manheim, having a physical title on site at the time of sale is crucial to conversion rates.

In fact, the study found having a physical title on hand can actually double vehicle conversion rates at auction.

Manheim also discovered titles can benefit online sales via Simulcast and OVE.com, as well.

“Roughly 35 percent of all vehicles at auction are sold without the presence of a physical title, and this can negatively affect customer profitability,” shared Ally Pomeroy, customer consultant.  “While we observed significant differences between commercial and dealer sellers when it comes to having physical titles at auction, this study focused on dealers because the majority of vehicles with delayed titles are sold by dealers.”

Title Delays Equal Lost Profit

The white paper not only outlined the benefits of having titles on sale day, but it also highlighted the significant “costs of title delays" for buyers and dealers.

The average delayed title will take up to a week to arrive. Though this may seem like a brief amount of time, those are sales days lost to a dealer that has to wait to receive the title to sell the car off the lot.

Manheim broke it down like this:

The current prime interest rate is 3.25 percent, which equates to dealers spending 89 cents per day on every vehicle with a value of $10,000.

Manheim pointed out If the dealer buys 1,000 cars a year from the auction and each title is delayed one day: that’s an additional $890 cost to the dealer.

If the titles are delayed one week it’s an additional $6,232, the white paper pointed out.

And think about this: According to the Manheim data, 10 percent of the overall delayed titles can take up to a month or more to arrive in dealers’ hands.

The bottom line: delayed titles have the potential to waste dealers and buyers’ money.

Titles Push Conversion Rates

Having physical titles at auction doesn’t just help dealers, but it also serves to push auction conversion rates.

Of course, vehicles with titles on site are going to be more attractive to buyers and dealers.

Manheim offered this comparison:

According to Manheim data, the average conversion rate for dealer vehicles with a title on hand is 86.2 percent, as opposed to 42 percent conversion on delayed-title vehicles.

Interestingly, the study also found that the newest, lower mileage vehicles have the lowest conversion rates without a title present, while the older, higher-mileage vehicles feel less of an effect.

“These findings may be due to a dealer’s tendency to have reconditioning work done on older vehicles to get them ready to retail,” Pomeroy said.  “Because they are already expecting delays and extra holding costs due to reconditioning time, the title delay is less of a concern.”

Auction Online Activity Boosts

The study also found that the benefits of title-ready vehicles permeates the digital space, as well.

According to Manheim data, 18.5 percent of whole cars with physical titles present sold online via Simulcast or OVE in 2014, compared to 17.7 percent of vehicles with delayed titles.

“Buyer confidence is crucial during an online transaction, and the risk of a long-delayed title is enough to deter some dealers,” the white paper stated.

The study results point to the benefits for buyers, sellers, and the auctions — both brick-and-mortar and online — of title-ready vehicles in the lanes.

“The cost of money when waiting for a title to arrive can escalate quickly, causing the buyer to lose profits if they decide to take the chance on the vehicle at all,” the white paper states. “High conversion rates associated with ready-title cars help the seller’s results as well as keep re-run costs for the auction low. A physical title also gives confidence to online buyers, expanding the pool of dealers doing business.”