From franchised dealerships and collision centers to independent stores and now auctions, AutoCanada has been on the acquisition path this year.

Its latest purchase marked the publicly traded dealer group’s first foray into the wholesale industry. AutoCanada recently announced its purchase of  North Toronto Auction.

The auction is a fee-based used-vehicle auction business, serving dealers and consumers alike, located in Innisfil, Ontario. AutoCanada has big expectations for the acquisition, noting in the news release that NTA generates yearly in excess of $4.5 million in annual revenue, and  will operate within AutoCanada’s  used digital retail division.

For more information and specifics on the recent transaction, see the Auto Remarketing Canada article that covered the recent news in detail.

This news is part of a broader trend the industry is seeing: a push by traditionally retail facing companies entering the wholesale market, and vice versa. 

Steve Greenfield, CEO and founder of Automotive Ventures, spoke with Auto Remarketing Canada about the latest AutoCanada/NTA deal, as well as the overall blurring lines between retail and wholesale in the automotive industry.

First, we looked back to a flood of recent Auto Remarketing stories that illustrate this market movement. Let’s set the stage:

Rewind to when Carvana’s announced its plans to acquire the U.S. auction business of ADESA earlier this year.

Greenfield looked back at that move with a mixed response. First, Wall Street had a brief “obsession” with Carvana and its model, but as of late the brand has fallen from grace a bit.

That said, “The jury is out on how things are going to play out for Carvana. I've talked to a bunch of people who have said that they will no longer use ADESA because Carvana owns their auction business,” said Greenfield.

“I don't know how that's going to impact their business overall, but there's going to be some impact for sure,” 

CarGurus also wrapped up its purchase of a majority stake in CarOffer in January 2021. The purchase gave CarGurus the ability to offer dealers additional wholesale capabilities, leading to a digital solution by which dealers can sell and acquire retail and wholesale vehicles.

Also last year, AutoWeb purchased used-vehicle acquisition platform CarZeus, which  is designed to buy cars directly from consumers and then wholesale those vehicles.

Also of note is CDK Global’s launch of an online wholesale marketplace called CDK CarSource, that is designed to connect dealers to used-car inventories from other dealers across the country.

Another example of the continuing blurring of wholesale and retail lines was Cars.com’s purchase of the Accu-Trade group , in an effort to “give technology back to the local dealership” through more efficient ways to source used-car inventory.

Now, with the latest AutoCanada acquisition, this market trend doesn’t show any signs of slowing down. In fact, the trend seemed to be moving north to Canada.

These approaches, rising in popularity, help retailers find new sources for used-car inventory.

“We look at good use cases, right? … and Canada gets the luxury of looking at the U.S. and seeing how the U.S. market has evolved in this respect and is ahead of the northern market … So, Canadian companies can selectively choose their strategy around what has played out in the U.S.,” Greenfield said

The trend was already in the works earlier in the 2000s in the U.S. For example, CarMax, the largest retailer of used vehicles in the U.S., has owned its own auction company for over a decade.

And the financials for these types of moves into wholesale certainly reap significant benefits.

“The average dealer sizes up the consumer's car when they come in to sell a car, and they only really aggressively bid on the ones that they can retail … they don’t want to buy every car, and then have the headache of having to wholesale the ones that they don't need,” Greenfield said.

“So, an option of a dealership group having the advantage of an associated auction means that they can be more aggressive on the trades.” 

They can buy everything, so to speak.

“They can literally tell consumers, ‘We buy every car.’ And they selectively keep the ones that they want and wholesale very efficiently the other ones,” Greenfield said.

Since COVID, as dealers became more profitable, auction companies have been ratcheting up their buy and sell  fees, Greenfield said.

So for dealers, the auction platform — either from a buying standpoint or selling standpoint — is getting more expensive.

“This is driving dealers to find creative ways to work around these options and buy cars directly from consumers,” said Greenfield, who went as  far as to say auction fees are “prohibitively expensive.” 

To be able to buy an auction and negate the recent inflation in buy and sell fees — that’s likely not too hard of a sell.

Greenfield put himself in the proverbial head spot at AutoCanada and said, if he was running the company, “I would be looking at the dynamics in the U.S., with CarMax owning auctions and now Carvana owning auctions — and Lithia with their voracious appetite to buy stores.”

He explained that in Canada, the population is very concentrated in specific areas, not dispersed like in the U.S.

“So, it's a numbers game. And like Lithia, I'd be buying strategic stores in those  populous areas (in Canada) … And then I think the auction is probably a natural extension of this smart policy,” Greenfield said.

Greenfield stressed the independence that CarMax has achieved with its in-house auctions, as well as the benefits Carvana could materialize with the recent ADESA deal.

Remember, throughout 2021 and 2022, dealers have suffered from low inventories for both used and new vehicles — as well as astronomically high prices for used vehicles at auction and beyond.

“Dealers have been willing to try anything over the last two years, because there's been this huge shortage of used cars in the market. And they've been really expensive as a result. So, dealers have been forced to become very creative when it comes to sourcing these cars,” Greenfield said.

In fact, there’s an even larger trend at play here that includes the moves in the wholesale market for dealer groups in both Canada and the U.S.

In the midst of a difficult environment for automotive dealers, diversification is king.

AutoCanada, beyond its latest move in the wholesale environment, the dealer group has also recently been in the news for acquisitions of franchised dealerships, independent stores and a collision center.

Greenfield said success in today’s market often comes from “prudent diversification.”

And for body shops and collision centers in general, as cars and body work, become more complex, “It can be a great diversification of their income,” Greenfield said.

And take into account, as complexity spikes, repair costs are going to get higher, as well.

Although there are some dealers looking to leave the body shop business because of car technology, according to Greenfield, many are also interested in reaping the benefit of the evolving body-shop business.

It will certainly be interesting as we track the quickly changing retail and wholesale environment as diversification and high-risk market factors (such as high prices and low inventory) show which dealer models prove most successful.

At the time of publication, NTA leadership had declined to comment. AutoCanada leadership was contacted to comment, with no response.