After dealing with the unexpected snowfall in North Carolina, dealers and buyers alike had another storm to weather Monday morning — navigating the tough wholesale environment, ridden with unit scarcity and skyrocketing prices. 

At the Manheim North Carolina sale, the overall attitude was one of grim determination. Buyers and dealers alike are taking hits right and left due to high prices in the lanes, but the show must go on. And with no change in sight, all attendees had buckled down that cold morning to get down to business and stock the lots.

And though most dealers Auto Remarketing spoke to agreed that times were tough and 2012 is looking to be an even tougher wholesale environment than last year, they are all “preparing” for the reality of making a smaller profit and are on the lookout for opportunities to catch a break.

The “Reality” of High Wholesale Prices

And one particular dealer even went so far as to say he has resigned to high wholesale prices and knows profit margins are shrinking.

Mitch Rowland, of Coastal Auto Market in Sawnsboro, N.C., noted, “They (wholesale prices) are over $1,500 more than what is considered normal. You literally got to pay close to retail to buy something. You have to just resign to making less of a profit and move on.

"That is the reality of this market, but hey, we are hanging in there,” Rowland added.

And Chip Lee, of Carolina Auto Sales, who also buys for numerous other dealerships, said the margin between the price of new and used cars is continuing to shrink, making it hard for rooftops to stock their lots.

“I don’t know if they (dealers) are getting any opportunities right now. Prices are so high that we are all out of wack. There are no cheap cars on the market; the prices are through the roof. And if we don’t watch it, the late model cars are going to be matching up with new cars. There is no room for mistakes," he said.

"Anything less than the $13,000 range. Anything from the $7,000 to $13,000 range is going to be your highest market. We are all trying to buy the same thing,” Lee added, stressing that as prices go up, dealer competition is growing, as buyers vie for the few quality affordable units.

Japanese Cars “Hot” at Auction

And with wholesale prices affecting rooftops all over the country, some units are becoming even more difficult to find — but according to one dealer, these are the ones you “must” pay up for.

Kenneth Love, of Direct Auto Sales in Sharpsburg, N.C., says Japanese nameplates are becoming even harder to come by, and “that’s what the shoppers want.”

“We are a smaller dealership, so we are doing fine. But, there is no room for mistakes. And it is becoming harder to find the particular units we want and the customers want,” Love stressed.

He then went on to mention just which units his dealership is working hard to get on the lot: “Your Toyotas and your Nissans and your Hondas … you are always paying more for those. You get better mileage, and they last longer. You can get a car with 175 to 200 thousand miles on it and it will keep right on going. And customers know that. That’s just the way it is.

“I think we are in the time of the year where prices are high on these, and prices are just high in general,” he added.

The Outlook for the Spring Season

And since the reality of the wholesale market right now has some dealers looking for the light at the end of the tunnel, the later spring season could bring some relief.

One driver at the auction, David Harris, says he feels as if the later spring might see a “slide” in what he called “through-the-roof” prices. He interacts with dealers on a regular basis.

“You see, tax season is pushing these prices much higher than they should be. Of course, we are still in a tough environment, but come late spring and these should be back so somewhat normal," he noted.

"That said, last year’s prices were high as well, so they will go down, but dealers will still have to be careful,” Harris continued.

Manheim’s Chris Hill, who offers product demonstrations of the company’s digital tools through The Wholesale Institute, also offered his take on the current market.

As dealers flooded the Manheim booth set up for demonstrations of its free mobile app, Hill got a first-hand account of the overall attitude of dealers and what tools they are searching for to help them navigate this tough wholesale environment.

“I think that it’s never been more important for dealers and buyers to know the marketplace and have access to information that provides that just in time. So, if I had something that can tell me instantly what’s going on and if I can know the vehicle and my margins right then and there; I think that is huge.

“I think realizing and understanding that it (the Manheim app) is here to help is a big improvement and make their lives a little easier and make it easier for them to do business with us,” he continued.

These demonstrations were part of Manheim’s recently launched “One the Go” sessions,

At the time of the launch of the program earlier this month, Auto Remarketing reported that this extension of TWI  is designed to save dealers time by bringing training sessions on the company’s digital tools to the sale days at various Manheim auctions.

In other words, TWI “On the Go” aims to connect with dealers when they’re already at a Manheim auction buying or selling cars.

For more information, see the Auto Remarketing story here.