With a growing number of cars sold and leased online, the volume of inventory that dealerships have to handle is getting more challenging. Not every car on dealers’ lots gets sold outright; many get financed or leased to customers. That means that some will be gone for a few years, but come back sooner or later.
On the other hand, dealerships that don’t have a regular returning stock need to maintain an inventory of pre-owned vehicles, especially during the current topsy-turvy market conditions. Why is that? The microchip shortage is driving up demand for used cars as impatient buyers are unwilling to sit on months-long waiting lists to get a brand-new vehicle.
So, what does a dealer do with boomeranging inventory? How does a dealer manage an increasingly large stock that isn’t supported by a slack local market? And where can other dealerships in need of pre-owned inventory find a steady supply? These are problems that are the focus of firms like ACV Auctions. Let’s explore how this full-service, wholesale automotive marketplace works.
Background: How Traditional Wholesale Car Auctions Work
ACV Auctions isn’t like eBay or a regular consumer car auction platform like Bring a Trailer ; it’s a dealer-only auction platform. ACV works like regular car auctions but operates solely for licensed dealers; members of the public are not able to use the website.
The volume of vehicles sold at dealer auctions is invariably much larger than that of public auctions because of the large batches of cars that are:
- Lease returns
- Fleet or rental vehicles up for sale
- Insurance write-offs or salvage vehicles
In other words, these vehicles need to change hands for one reason or another. This may include dealers who sell off excess inventory to other dealers with a higher demand for used cars. Lease vehicles, for instance, often come highly-optioned and in like-new condition. These offerings can fetch good prices in the current used car market.
Fleet and rental vehicles are other promising opportunities for dealerships seeking to add budget-oriented cars to the lot (although some rental car companies do go the direct route ). The bulk sale of these vehicles enables rental car companies and other operations to clear space for a new fleet without much fuss or hassle. Finance companies also get in on the action, selling returned leased cars and repossessions.
ACV Auctions: How Does It Work? How Does it Improve Car Auctions?
Car dealerships have to run a delicate balance between retail and wholesale as inventory can be incredibly fluid. Especially for businesses that sell and lease cars and may even offer rentals. These are dealerships with fluctuating and high-turnover stock that includes returning leased vehicles. Some may sell these new-ish cars as certified pre-owned vehicles, but having a resource to shift inventory en masse can be helpful. This is where platforms like ACV Auctions come in.
ACV Handles the Wholesale Side
ACV presents itself as a partner that helps dealerships handle the burdens of wholesale vehicles. As mentioned earlier, there are many factors at work, and ACV promotes itself as a transparent and trustworthy place to get the job done quickly and easily.
How ACV Auctions Works
The first step is for a dealership to register with the service by going through the approval process. As covered above, these dealership auctions are not open to the public, so not just anyone can freely join the ACV platform. Having said that, the process is free for licensed dealers qualified to operate on the platform.
Once registered, a dealer can browse the vehicle selection, bid on items, make selections, and purchase inventory. Following checkout, the ACV team will get in touch and help with the post-sales steps like shipping.
The selling process starts much the same, with free registration and verification. Once approved, a dealer gets assigned a territory manager. The team includes vehicle inspectors that come to the lot and produce detailed condition reports on the vehicles sold through ACV. A dealer then launches the auction when ready.
Once the auction goes live, ACV steps in to collect and ship the cars and handles payment to the selling dealer.
Pros and Cons of the ACV Auctions Platform
ACV Auctions strongly emphasizes openness and trust between buyers and sellers. All fees (from the seller and buyer sides) get disclosed upfront, so there are no surprises for any parties.
While ACV’s fees are typical, some auction companies do not disclose these extra costs until after the sale is over. ACV skips this unethical approach by revealing the details in advance.
Along with a sense of transparency comes ease of use for buyers and sellers. All parties know how much things are, when to pay fees, and what funds are coming and going. This is vital information, especially for cash-heavy operations like car retailing. At a glance, a seller knows what cash is coming in, and a buyer can identify its successful bids.
ACV describes itself as a “full-service dealer marketplace” and lives up to that expectation with a long list of services of pre-sale and post-sale services. ACV handles:
- Payments between buyers and sellers
- Title transfers
- In-depth inspections and condition reports of for-sale vehicles
- Engine recording
- Arbitration periods of up to 30 days
- Shipping and transportation
- An app with unique features designed to make viewing cars more reassuring and detailed (see below for more)
One reason some enterprises avoid auctions is not having enough manpower to deal with the complex nature of car auctions. Large dealerships have a dedicated auction team, but smaller operations can’t. ACV is a support network for any car retailer looking for a leg-up with dealer auction activities.
ACV offers a “Virtual Lift” tool through the website or app that provides a high-definition view of a vehicle’s undercarriage. This is in stark contrast to most other car listings that showcase everything but the underside. ACV makes it possible to see things up close and personal.
A dealership can cast its expert eye on the part of the car that ordinary buyers wouldn’t necessarily know about, confirming the condition as described. That’s good for customer peace of mind and brand reliability.
Finally, ACV Auctions is one wing of a much larger organization (ACV Auto) that has a long reach into the greater automotive industry. The parent company is widely known for producing detailed market reports, essential information that helps dealerships gain perspectives about trends and inventory management.
Of course, nothing is perfect. And ACV Auctions has a few areas that are open for improvement.
Some app users have reported that ACV has been slow to fix bugs and other problems. While most of the app’s functionality reviews are very positive, the delayed reaction time on fixes was a concern for some.
Missed Inspection Details
Some users reported that inspection reports are missing key details, issues that are only discovered when the affected vehicles get delivered to the buyer. ACV does provide a 30-day arbitration period and a solid after-sales customer service network to respond to problems.
Remember: “Auction” is an Anagram of “Caution”
When using ACV Auctions or any similar platform, it’s important to keep in mind there is always an inherent risk with the auction process. The most rigorous inspections and top-notch customer service can still miss things. Auction buyers should always exercise caution and best judgment to minimize the chance of an unpleasant surprise.
However, there’s no doubt that companies like ACV are contributing to a much better customer experience in the wider dealer auction sector.
About the Company
ACV Auctions is a technology-enabled wholesale marketplace for automotive dealerships, fleet companies, and rental car companies.
The company was founded in 2015 and is based in Buffalo, New York. It operates an online auction platform that allows dealerships and fleet companies to buy and sell vehicles in a fast and efficient manner.
ACV Auctions uses a proprietary mobile app that streamlines the vehicle inspection process, allowing sellers to get their vehicles inspected and listed on the platform within hours. The app also allows buyers to view detailed vehicle information, photos and videos, as well as place bids on vehicles they are interested in.
The company claims that its platform can help dealerships and fleet companies to sell vehicles at a faster pace, and to reach a wider range of buyers than traditional physical auctions. Additionally, it offers logistic support and financing services to their sellers and buyers.
ACV Auctions has grown rapidly since its inception, and it now operates in over 30 states across the United States. The company has raised over $100 million in venture capital funding and is considered as one of the most promising startups in the online wholesale market.