ATLANTA and CARMEL, Ind. -

High-level executives from both ADESA and Manheim calculate that dealer consignment volume is nearly 60 percent of their business nowadays.

The combination of factors that led to that level is well-known by dealers and wholesalers — most notable being dwindling commercial consignment choking off supply that had kept the lanes full of vehicles for years.

“There’s always ebbs and flows in the mix of sources of used-car supply,” ADESA’s Tom Kontos began. “One year, we might see a lot more rental risk. Another year, we might see a lot more off-lease. Another year, we might see more dealer consignment.

“I will say that perhaps auctions lost sight of the importance of dealer consignment volume for a period of time, because they were getting so many cars from the institutional consignors that make up those groups I just described: rental, off lease commercial fleet, repos,” Kontos continued.

“Perhaps auctions have come back to recognize how important dealer consignment is,” he projected. “I would like to think that probably is a permanent change. But we probably did fall victim of being a little bit negligent of the dealer consignment segment of our business for a period of time when we were getting so many cars from the other sources.”

Manheim’s Tom Webb said that dealer consignment is definitely at a record high this year, coming off 2011 when the wholesale market established a record level of dealer consignment volume at more than 56 percent of all auction business.

With a significant rise in commercial consignment volume still likely several months away, ADESA and Manheim are pledging to maintain strong support of dealer consignment campaigns for the remainder of the year and beyond.

Manheim’s Take on Dealer Consignment Trends

Susie Heins, vice president of dealer sales at Manheim, admitted that dealer consignment volume at near 60 percent does have its ramifications.

“Where we’ve seen an erosion rate is on the conversion side, which is not surprising,” Heins said just before Labor Day. “It’s mid-year. We came off an incredible first quarter. After tax season, I think people expect the same money to be coming in for cars, and that’s led to some buyers being scared off, so the conversion rates dipped slightly.

“We’re anticipating those will bump back up as we get into September and going into the tradition months where dealers let the cars go as quickly as they can going into 2013. Overall, it’s been very strong,” she continued.

Whether dealers are buying units from the dealer consignment lanes or closed sales, Heins believes used-car managers just aren’t stocking as much in inventory as they did previously.

“I think they learned their lesson from 2008. We continue to see that, especially from the large dealer groups across the U.S. The franchise group seems to be pretty even as far as selling with us, but independents continue to struggle,” Heins indicated. “A lot of it is because they’re just not stocking as much and not taking in as many trades. Part of that might be just the business climate, the economy and that sort of thing.

“Both sectors are actually keeping cars much longer,” she continued. “We haven’t seen it (at) this many days on their lot in a really long time. A lot of customers are not standing by their own aging rules. They would rather retail the trade even if they took a wholesale loss. We continue to hear that, especially from the public groups, and a lot of the smaller independent dealers are following suit but just holding onto inventory hoping that it sells so they can get a customer.”

While dealer consignment lanes remain strong, Heins is also hopeful Manheim’s commercial consignment volume is ready for a strong bounce upward.

“We didn’t forecast the volume we’re getting today, so our volumes are actually up on the commercial side,” Heins highlighted. “We’re seeing some of the fleet sectors come back. We do know the rental car companies will start pushing more inventory as they normally do, getting rid of the seasonal stuff in the fall. Then we also have some very committed commercial consignors on the high end — BMW, Mercedes — highline sectors that will actually be having more inventory that will come to auction.

“Next year, we’re predicting the same volume we’ve had this year on the commercial side,” she continued. “It’s really going into 2014 that we see the big increases. Where those end up, whether they’re at brick and mortar or on the digital side, is anyone’s guess right now.”

And if dealers would rather use an iPad to find inventory rather than go to a physical sale, Joe George, senior vice president of product development at Manheim, insisted the company is ready to help managers with its mobile offering

“First and foremost, they can use our vehicle location tools to find particular vehicles that they’re interested in,” George pointed out. “They can create and save searches, which are going to be updating once a day to let them know new vehicles have entered the marketplace. They can also save up particular vehicles in their workbook. So, the net of that is, it’s really the full power of Manheim’s inventory is in their hands, anytime they need to do a search or see if a particular vehicle is available.

“The second main area is in having the power of Manheim Market Report accessible 24 hours a day, seven days a week on their mobile smart device. They can use the VIN barcode scan to pull up particular vehicles,” he went on to say. “And then finally, it’s GPS-enabled so that they can find our locations, if they’re going to one of our new locations.”

Editor's Note: To read more about current wholesale market trends and changes in the consignment industry, see the Sept. 15–30 issue of Auto Remarketing.