Managing the arrival of new product
Adrian Rushmore, managing editor of Glass’s Guide, said it means manufacturers’ stock-holding of late-used cars is much greater that it’s been historically.
“They have a responsibility, often unwritten, to offer cars to the franchised dealers before they go to the wider world. That’s the role of the closed auction.”
One of the key drivers behind staging a closed auction is to manage the arrival of a new product on to the used market.
Tim Hudson, MD of auction firm Aston Barclay, said: “It makes for a soft landing in front of the most appreciative audience and allows the dealer to enhance the franchise.
"This is particularly important at the moment because the used business is at least as crucial as the new one. It can also protect the product from the open market, because the audience is sympathetic to it, needs it and has invested in it.”
Hudson said dealers attending a closed auction would be considering every car going under the hammer as a retail proposition.
“CAP and Glass’s are only guides, and dealers will have in their minds the prices they are going to put cars on the forecourt at when they’re bidding.
"It’s a competitive environment and bidding can be at least as intense with competing franchised dealers as it is with the public,” he said.
Manheim shifts 30,000 cars a year through closed auctions for the likes of Volkswagen.
The remarketer’s commercial director Chris Cush said they’re staged in the knowledge that a franchised dealer – or specially selected trade buyer – will bid higher for a newly launched vehicle than may be the case at an open auction.
“A Mercedes-Benz sale we ran in Leeds in September saw 143 vehicles offered for sale,” said Cush.
“It attracted almost the entire franchised dealer network, generated £3 million, and overall values were 111% of CAP Clean and 108% Glass’s Guide.”
Some closed auctions can also turn into what the industry dubs ‘repatriation sales’. A BCA spokesman explained: “These are another possible avenue of stock for dealers and are where the manufacturer invites other vehicle owner/operators to enter stock into their closed sales programmes.
"This would typically be fleet and leasing companies, and it can extend the age and mileage range of the stock on offer.”
Popular with franchised dealers
Closed auctions are generally popular with franchised dealers. Chris Roberts is MD of Thurlby Motors, with four sites – three Vauxhall and one Nissan – in Lincolnshire.
He uses closed auctions because he knows what he will be getting.
“It’s the choice of high quality product direct from the best source.
"You can see in advance what’s going through and the chances of getting the cars you want are higher because it’s a restricted audience.”
But not every dealer has the choice. Nigel Wright works for Turner Motor Group in East Anglia, and is responsible for sourcing used stock for its sites in Cambridge and Bury St Edmunds.
He physically attends a minimum of four auctions every week and buys 15-20 cars.
“I only get a handful at closed auctions every year because Toyota, Lexus and Hyundai – the brands we represent – rarely hold them.”
The internet has had a powerful effect on all types of retailing and vehicle remarketing is no different. Vendors generally offer online bidding at physical closed auctions for those who can’t attend in person. BCA has Live Online.
Manheim’s technology is called Simulcast; at a Mazda sale in January there were 51 buyers, 27 of whom were not actually present.
The attraction of purely online closed sales is obvious for both manufacturers and retailers and in theory every dealer in the country can take part from their own showroom.
Most volume brands conduct them regularly and Nigel Wright said that included Toyota. “But with only around 20 cars a week going through, not every dealer is going to win and the competition tends to push prices up.
Next week I need some non-franchise cars for our Lexus dealership in Cambridge so I will go to open auctions.”