Liza Myers Borches, chief executive officer and president of Carter Myers Automotive in central Virginia, believes the way dealers wholesale used vehicles is “due for a change.”

That’s why her 13-store dealership group turned to ACV Auctions — an app-based, digital dealer-to-dealer marketplace that allows a dealer to offer individual vehicles for sale in real-time, 20-minute auctions right from the dealer’s lot — to help it more efficiently dispose of its older, higher-mileage and aged vehicles.

Borches hasn’t eliminated any used-car manager positions as a result of using ACV Auctions. But its technology has reduced the time her used-car managers spend with wholesalers and at auctions, and it gives them more time to focus on customers and other revenue producing activities.

She also said vehicles sell “pretty quickly” on ACV Auctions, the sell fees are similar to “slightly less” than traditional auction fees and her average per-vehicle gross is about $200 higher.

Borches said she typically wholesales about 2,400 to 2,800 vehicles annually and expects to wholesale about that many this year.

“We as dealers simply have to continue to find efficiencies in our processes so the expense we do have is focused on the customer,” Borches said.

“ACV, along with some of their competitors, helps us get more eyes on these wholesale units without putting in a significant amount of time, such as driving them to auctions, (representing) the vehicles, making sure they are properly described — ACV does all that for us.”

Impact on physical auctions

Just as ACV Auctions see an opportunity to be a part of the changing way dealers wholesale used vehicles, so do traditional auction titans Manheim, owned by Cox Automotive and ADESA, owned by KAR Auction Services. Both companies also offer their own respective digital on-demand wholesale marketplaces.

During KAR Auction Services’ quarterly conference call in February, CEO Jim Hallett said TradeRev, ADESA’s app-based, dealer-to-dealer auction platform, is gaining popularity among dealers. He also noted that the trend coupled with dealers growing penchant for retailing more of their trade-ins, is expected to reduce the supply of dealer consigned vehicles at physical auctions.

For example, though total volume at ADESA was up 9 percent in the fourth quarter of 2018 compared to the year-ago quarter, the mix of dealer consignment vehicles dropped to 40 percent, down from 44 percent, said KAR Auction Services documents that accompanied the conference call.

But in that same time period, TradeRev’s volume increased 63 percent.

This year, ADESA expects to expand TradeRev’s footprint from 128 markets in the U.S. and Canada to over 175. It also expects to sell over 200,000 units on the platform, up from approximately 120,000 vehicles in 2018, and approximately 60,000 in 2017.

Marketplace digital transformation

The entire automobile marketplace, including wholesale, is undergoing a “digital transformation,” Hallett said during the call.

“Clearly, dealers are looking to move trade-ins faster at the highest possible value, and the TradeRev technology enables dealers to do this within hours of the retail transaction instead of days or even weeks in the past,” he added.

“I believe the TradeRev platform can serve the needs of the dealers, and I’m absolutely committed to winning in this space.”

Anil Goyal, executive vice president of operations at Black Book, also expects the digital wholesale businesses to grow.

“It makes sense; you have the opportunity to have additional eyeballs on that vehicle while having that vehicle sit on your retail lot,” said Goyal. “You can pick and choose the vehicles you want to launch on these apps.

“We see better inspection capabilities; better imaging, which makes the buyer more comfortable.”

Comfort, transparency, trust

Making buyers comfortable through transparency makes selling vehicle faster and more efficient and is key at ACV Auctions and Manheim, said their respective executives.

It’s also why Manheim is a making a big investment in digital wholesaling with its Manheim Express mobile app.

Rolled out in 2018, Manheim Express allows dealers to list vehicles they want to sell in the Manheim Marketplace, or have a Manheim specialist visit their lots and do it for them, said Alison Spangler, senior director of off-site solutions at Manheim.

Built into the app is technology that makes it easy for whomever lists the vehicle for sale — either the used-car manager or a Manheim specialist — to do a walk around of the vehicle with their smartphone camera capturing a 360-degree image of the vehicle. That allows buyers to see the vehicle from all angles and zoom in and out on the image, Spangler said.

The app also enables sellers to take additional images and place “tags” on the vehicle so buyers can zoom in on specific features such as a tow packages or lifts on pickups. If there are  vehicle problems, they are listed at the top of the seller disclosure.

“Buyers really care about trust and transparency; they want to feel comfort about what they’re buying,” Spangler said. “If they can’t physically kick the tires, they want to digitally do that.”

At ACV Auctions, inspectors create condition reports which include details such as tire depth measurements, paint-meter verification as to whether the vehicle has been painted and 45 vehicle photos, said ACV Auctions’ CEO, George Chamoun.

Starting in mid-April, the company was to begin enhancing its condition reports with high definition audio of a vehicle’s engine while running, called AMP, Chamoun said.

ACV Auctions is also creating learnings that will enable it to detect engine problems based on engine sounds and expects to make that information available on condition reports in the future, he added.

“When you’re so focused on being the most trusted way to buy a car, you start to invest in things that brings the industry to a better place,” Chamoun said.

Rethinking retail, wholesale

As new-vehicle sales slow amid higher vehicle prices and interest rates, one school of thought embraced by some dealership groups is to reduce the number of vehicles they wholesale by retailing them in standalone used-car operations and/or under brands directed at budget-conscious consumers.

For example, Group 1 Automotive’s U.S. wholesale sales in the fourth quarter of 2018, dropped 16.6 percent to 6,832 units, while its used retail sales rose 12.7 percent to 27,887 units, according to a company press release outlining its fourth quarter 2018 earnings.

Group 1 said improvements in its same store used-unit retail sales were driven by the launch of its Val-U-Line used-car operation launched in the first quarter of 2018. Val-U-Line is Group 1’s brand for older model, higher-mileage, used vehicles “that would have otherwise been sent to the auction,” the company said in its Form 10K filed with the federal government.

“Selling those units at retail keep them from going to auction and allows us to yield more total gross profit via additional reconditioning work and finance and insurance income,” Group 1 wrote in its Form 10K.