A new alternative used-vehicle sourcing service is testing the market in Chicago. Swap Motors launched with an initial physical and virtual auction site in suburban Skokie.

Chief executive officer Alex Johnson described Swap Motors as a private-party inventory source, primarily for independent dealers.

Though originally launched in 2016 as a peer-to-peer site for consumers to list, sell and buy vehicles, Swap Motors quickly drew auto dealer interest.

“For dealers, this is another channel for sourcing inventory. To date, 350 Chicago-area dealers are registered users, using it at least once a month,” Johnson said.

Not only is Swap Motors a virtual sell-buy auction site, it also includes a physical footprint component. There, Swap Motors provides sellers and buyers with market-based estimates on where they should start their auction transaction. Sellers’ vehicles receive a multi-point inspection, photography and video for online listings.

Remote services offer the option of at-home or at-office inspection and photography services. Cars.com repurposes Swap Motors content on its listing site. 

“When the auction is concluded, the seller drops off that vehicle with us again for a second inspection and so dealers can pick them up — or we can arrange for delivery to the dealership,” Johnson said.

The company’s expansion includes four additional physical sites in suburban Chicago.

Swap Motors charges a flat $149 per transaction for the dealer and between $249 and $449 for the seller, based on the car's price. The process, from the seller signing up to getting payment for the vehicle, takes about seven days, with the company taking care of paperwork exchanges.

Johnson said 98 percent of inventory transacting on Swap Motors originates from metro Chicago, Northwest Indiana and Racine-Kenosha, Wisc., areas. Across seven quarters — just under two years — 200 vehicles have been negotiated across the platform, with most of this volume transacting in the last six months.

“We see an acceleration in volume,” Johnson said, predicting 300 to 400 vehicles transactions a month by this time next year.

“Our focus is independent dealers, because more than franchise dealerships they have a huge demand for sourcing and have to be innovative and leverage technology to be competitive. We knew Swap Motors would be in high demand with independent dealers, because our transaction fee is low compared to other sourcing channels,” he said.

Ed French, president of AutoProfit Automotive Consulting, told Auto Remarketing recently that demand for used cars is creating considerable difficulties for all dealers.

“The franchise dealers have a built-in trade network, but for the independents sourcing inventory, getting cars is getting tougher. It’s not necessarily that there are not enough cars, but not enough makes and models consumers want to buy,” French said.

“All dealers now have to source inventory from private parties,” he said.

Swap Motors presently has 90 vehicles in inventory on its platform. The average transaction amount on its auction site is $18,000.

“That number may be skewed when looking at transaction amounts from a mean perspective, because with our volume. even one expensive model that sells impacts that number. Our typical listing vehicle is a 2009 to 2012 model-year vehicle having an average auction transaction price between $12,000 and $15,000,” Johnson said.

Sam Dayaa is the general manager for International Car Center, an independent retailer in Lombard, Ill., who purchases about two units a month through Swap Motors. “I was surprised at how seamless the process is. It is very transparent, and it gives me rich details about vehicle condition, more than I get on other digital auction platforms, to guide my purchase decisions,” he said.

However, Swap Motor’s small inventory limits his use of the tool, Dayaa said. International Car Center sells 50 to 75 cars a month. He sources one or two units a month using the site. ADESA and Manheim fulfill the majority of his acquisition needs.

“I’m hoping they’ll [Swap Motors] be able to scale this,” Dayaa said.