In today’s competitive automotive market, American car dealers are constantly seeking ways to improve their used-vehicle inventory acquisition.

The disruptions caused by the COVID-19 pandemic have made it challenging to meet consumer demand, with shortages and inflated prices becoming common in traditional sourcing channels like physical auctions. With these obstacles, online auto auctions have emerged as a practical and innovative tool for dealers to maintain their stock efficiently and cost-effectively.

For dealers looking to stay competitive, knowing the best practices for using online auctions is key. This guide outlines strategic approaches and core benefits of using online auctions to optimize inventory acquisition and profitability.

By embracing the flexibility and reach of online platforms, dealers can access a larger pool of vehicles and potentially lower acquisition costs.

Key advantages of online auto auctions

Online auto auctions offer multiple benefits that can significantly improve a dealer’s sourcing strategy. Here are four core advantages of online auctions:

—  Online platforms can provide dealers with early access to vehicles that have yet to enter the general market. Many vehicles on online auctions are sourced directly from fleet consignors or private sellers, allowing dealers to purchase cars at competitive prices before they hit the open market. This edge helps dealers avoid inflated prices and secure exclusive inventory that competitors might not access as quickly.

Some online platforms allow dealers to set up customized watchlists and receive alerts when specific vehicles become available. This feature enables dealers to source rare or in-demand models with minimal effort. This targeted approach allows for strategic acquisitions, saving time and helping maintain a well-balanced inventory.

—  The risk of buying vehicles without a physical inspection is a common concern of those skeptical of online auctions. To allay this fear, some online auctions provide comprehensive inspection reports and warranties to assure dealers of vehicle quality. Dealers should prioritize platforms that offer built-in protections, such as allowing vehicles to be returned if they don’t meet specified standards, to reduce the risks associated with sight-unseen purchases.

—  Traditional auctions can create unpredictable costs, as bidding wars often push prices beyond initial expectations. But online auctions offering a “buy now” feature allow dealers to purchase vehicles immediately at a fixed price. This pricing transparency enables dealers to make well-informed, cost-effective decisions, bypassing the time-consuming process of bidding while staying within budget.

Best practices for dealers using online auto auctions

Maximizing the potential of online auctions requires a strategic approach. Here are some best practices dealers can follow to make the most of online platforms:

  1. Diversify inventory sources

While online auctions are valuable, it’s essential for dealers to use them as part of a broader sourcing strategy. Relying solely on online platforms may limit options or expose dealers to market volatility. Combining online auctions with trade-ins, fleet consignments, and traditional sources can help maintain a steady, diverse inventory.

  1. Use watchlists and alerts for hard-to-find vehicles

To streamline acquisitions, dealers should use platform tools like watchlists and alerts. These features allow dealers to automatically track vehicles that fit specific criteria, minimizing time spent searching for inventory manually. By setting alerts for rare models or high-demand vehicles, dealers can stay ahead of competitors in securing desired stock.

  1. Evaluate platform reputation and vehicle inspection standards

Not all online auction platforms offer the same level of quality or transparency. Dealers should evaluate platforms based on their reputation, inspection reports, and available buyer protections. Opting for reputable platforms with thorough inspection standards can significantly reduce the risks associated with online purchases.

  1. Establish a realistic budget for online purchases

While online auctions often reduce costs, setting a firm budget is critical. Dealers should avoid impulsive bidding and focus on vehicles that fall within a predetermined price range, considering shipping and any additional fees. This practice can prevent overspending and help dealers acquire vehicles that align with their financial goals.

  1. Take advantage of financing and transportation options

When available, dealers should leverage integrated financing and logistics options provided by online auction platforms. By using these services, dealers can streamline the acquisition process, minimize operational delays, and ensure faster delivery of purchased vehicles.

A strategic tool for long-term success

As the automotive market evolves, the flexibility offered by online auctions can help dealers adapt to changing inventory needs and economic pressures. By incorporating online platforms into their sourcing strategies, dealers can supplement their existing methods with a solution that offers cost-effectiveness, scalability, and convenience.

The benefits of using online auctions extend beyond simple inventory acquisition; they provide a modern, efficient approach that can reduce overhead, improve profitability, and help dealers stay agile in a competitive environment. For dealers who aim to optimize their operations and respond quickly to market shifts, incorporating best practices in online auctions is an essential step toward long-term success.

 

Phil Battista is president of dealership technologies at J.D. Power. Through the J.D. Power Marketplace, more than 11,000 dealerships can get immediate free access to more than 30,000 front-line-ready vehicles, many of which are exclusively available on the platform. For more information, visit https://www.jdpower.com/business/marketplace.