This is a reprint of an article from the National Auto Auction Association www.naaa.com 

A Guide to Wholesale Vehicle Dealer Only Auctions

Chapter  1   About Auctions

An Overview: History, Benefits and Use

The auction industry is an elaborate network of businesses and individuals who work together to facilitate the exchange of used vehicles and used vehicle information.

History
Auctions are one of the oldest forms of transacting commercial exchanges. They date back to the times of Babylon and ancient Greece where art, land animals and crops were auctioned. In fact, the Roman Empire itself was auctioned.

There are many alternatives for remarketing cars, including using wholesalers, selling between dealers and selling direct to consumers. Each of these has a place in the remarketing system. Often, the auction environment is ideal because it provides a dynamic trading floor where open, live competitive bidding is fast-paced and true market value is determined with each vehicle that comes to the auction block.

Benefits of Auctions
There are many benefits provided to participants in the auction process, including:
• Market Liquidity. Auctions allow consignors to convert cars into cash quickly.
• Pricing Distinct from Volume.  Auctions can move large volumes of vehicles without  depressing prices.
• Critical Mass of Buyers and Sellers.  As auctions have become larger and more efficient, they have been able to bring together the needed number of vehicles and buyers to achieve market values for vehicles and ultimately establish a national used vehicle marketplace.
• Credible Pricing.  Auctions give the industry an objective view of what vehicles are worth in the marketplace.
• Internet Applications.  Auctions have embraced Internet technologies to increase efficiency and offer additional services to both buyers and sellers.
• Process Integrity.  Auctions have employed information technology and a strong code of ethics to help eliminate odometer rollbacks and title laundering. Standards for frame damage and condition reports have also become more consistent industry-wide.
• Reconditioning Value.  Most auctions have state-of-the-art reconditioning facilities that enable sellers to maximize total return on investment.
• Affordable Participation.  Auction fees, as a percentage of vehicle selling prices, have gone down during the past ten years.

Auction Attendance
Generally,  a person chooses to go to an auction that is nearby. However, there may be benefits in attending auctions in more than one place, even investigating auctions in different parts of the country. By going to different geographic locations, dealers may be more able to find certain makes or models that fit their inventory needs.

Auction Services Available
There are a number of services provided by auction operators. Besides the core business of facilitating the exchange of vehicles between buyers and sellers at the auction itself, other services include:

Use
Auctions add value to both the transaction process and to the vehicle itself.  To the transaction process, auctions provide a secure and neutral setting for the transfer of vehicle ownership at fair market prices. And to the vehicle, auctions contribute condition reporting, reconditioning, title work, etc.

Chapter 2  How An Auction Operates

Auction Profiles
Wholesale auctions exist to sell cars. Everything is focused on accomplishing that objective efficiently, rapidly and accurately. Auctions also exist to be neutral trading floors, offering security and integrity to participants.

More than 9 million cars are sold at auction every year. Auctions vary significantly in size, number of employees, acreage, services offered, facility configurations, as well as the volume and types of cars being sold. Auctions can have as few as a couple of lanes or as many as 25 or more. Some facilities are on sites of less than 50 acres, while others occupy hundreds of acres and incorporate multiple buildings and operations. Some operations function with a hundred or so employees while the larger ones can employ as many as a thousand people. Some facilities offer shops for reconditioning, mechanical and other repair services, as well as services to assist in transportation, financing, arbitration, inspections, titling and a host of other services.

Auction Overview
Activity at an auction takes place well before the sale day, starting with receiving consignments of vehicles from various sellers, including dealers, manufacturers, banks, rental car companies and other commercial businesses and government agencies. These activities are all coordinated between the seller or their representatives and the auction staff as part of the Pre-Sale Activities. On sale day, hundreds to thousands of cars will be processed and sold at the auctions. Once the sale of a car is agreed upon, there are a number of activities for the auction to facilitate to complete the transaction, and a number of services which are offered by the auction operation to assist in enhancing the exchange as part of the Post-Sale Activities. The diagram to the right summarizes the process, and the pages which follow provide more specifics on each.

Pre-Sale Activities

Consignment to Auctions
Auctions receive vehicles for consignment from dealers and commercial accounts 24 hours a day, 365 days a year. Vehicles are brought to the auctions by rail and transport trucks, but can also be driven by dealership employees or their representatives or sometimes even by arrangement with the auction. When a vehicle first arrives at the auction, its Vehicle Identification Number (VIN) is scanned by the vehicle check-in personnel at most auctions, using a handheld wireless computer. Professional auction inspectors are trained to recognize vehicles by country of origin or with VIN problems. Once the VIN is in the computer system, the system delivers a description of the car as a double-check for security and quality. At the same time, the vehicle can be digitally photographed for Internet sales or advertising. This consignment process verifies that the vehicle has arrived at the auction, identifies the year, make and model of the vehicle and records the vehicle’s current owner.

Vehicles will have “run numbers” assigned that indicate which lane, at what time, and in what sequence the vehicle will run through the specified sale. Vehicles will either be provided a run number for that day’s sale as part of the check-in process, or will be stocked into inventory at the auction for a sale at a later date.

There are differences in the processes for dealers and commercial accounts which consign cars to the auctions. Detailed explanations for both commercial and dealer consignment are outlined on the pages that follow.

Commercial Consignment Overview
Auction personnel work with factory, rental car, fleet and financial institution representatives, some of whom maintain offices at the auction, to coordinate the arrival of their vehicles to the site. Together these teams handle all the necessary paperwork and make a number of decisions in preparation for the sale, including when the vehicles will be sold, the sequence of the vehicles for the sale and what, if any, work needs to be done on the vehicles. The starting place for this analysis is assessing the condition of each vehicle.

Pre-Sale Activities
• Condition Reports
Following check-in of consigned vehicles for commercial consignors, an auction condition report writer completes a vehicle condition report upon arrival. Most condition reports are prepared on a handheld computer. Condition report writers are trained, certified professionals who have taken courses to properly and thoroughly identify a vehicle’s condition. Many vehicles arrive in top-notch condition, but on others the condition report might note that the vehicle has a flat tire, a dent on a quarter panel, a cracked windshield or more substantial body or mechanical issues. Condition reports list the recommended reconditioning work needed on a vehicle and the estimated cost of repair. The reports also grade vehicles on a common scale. Condition reports and vehicle photos can be posted online, which allows an auction account coordinator to discuss with the consignor or their representative each vehicle’s condition, as well as the suggested repairs. At that point, the commercial consignors may rely on auction account coordinators to give them an idea of what they might expect to receive for the vehicle if sold “as is,” and what added value could be gained by making various enhancements.

• Marketing
Critical to the success of any auction sale is attracting many buyers and sellers whose interests are complementary. All auctions bring this expertise to their customers. Auctions may employ telemarketers who call dealers locally or around the country to inform them of upcoming sales and promotions. In addition, the auction will send faxes, pre-sale lists or direct mail flyers to a targeted set of dealers who frequent the auction or who have made the auction aware of their buying needs. Advertisements are placed in automotive trade publications and announcements are put on the auction’s Web site. Posters adorn the auction lobby and displays are often created to attract interest in upcoming events. In many instances, sweepstakes or prizes are promoted to attract buyers.

Dealer Consignment Overview
Similar to commercial consignment, hundreds of dealer cars are consigned to auctions for each sale. To help facilitate the process, most auctions have dedicated Dealer Sale Managers and a staff of Dealer Sale Representatives to assure the experience is a favorable one for the consigning dealer. These dealer sale teams work with dealers and their representatives in a variety of ways, including:

• Assuring the dealer chooses the most appropriate placement for each vehicle being consigned.
• Assisting in setting realistic price expectations for each vehicle being sold.
• Establishing a pattern and reputation for the dealer as a credible and consistent seller.
• Finding the appropriate lanes and run times.
• Providing assistance to sellers and encouraging them to represent their vehicles at the time of sale.
• Developing plans to enhance the prospect for increasing sales rates over time.
• Assisting with any issues in the exchange process, including the required paperwork.

The Sale
Auctions bring together large numbers of buyers and sellers on sale day to facilitate the fair market trade of vehicles for fair market values. The auctions themselves never take ownership of vehicles, but rather receive fees for the services provided. The open, live, competitive bidding on sale day is extremely quick, and results are driven by buyers competing for the same vehicles.

Dealers, who are the only buyers at wholesale auctions, may have pre-registered to participate, while others may need to register the day of the sale. These dealers may be local or might have traveled long distances to make their purchases.

Auctions may run multiple “lanes” of vehicles at one event. Drivers who work at the auction bring cars through the lanes where the vehicle, the seller, potential buyers and the paperwork on the vehicle all meet with a professional auctioneer. The auction “lot personnel” coordinate to ensure that the right car is in the right place at the right time.

The auctioneer facilitates the sale of each vehicle, which on average takes about 60 seconds.

To keep participants updated at the auction, electronic monitors are often available to provide the status of various auction activities, such as arbitration outcomes, “if” bids and the status of vehicles in each of the lanes.

Front Office Administration
The auction employs numerous specialists on its staff, including payment clerks, title clerks and financing personnel – among others – to assure the sale runs smoothly and transactions are completed effectively. Payment clerks handle thousands of buying and selling transactions at each sale; title clerks will assure that the documentation and transfers for each of these transactions are managed; and auction financing personnel will often assist in what has become the underwriting of hundreds of millions of dollars worth of transactions at the auctions.

Arbitration Services
Dealers who have made a purchase but are concerned with some aspect of the sale or vehicle can seek arbitration. The auction is staffed with personnel dedicated to assisting in these situations.

Post-Sale Activities
Auction Fees
Most auctions use a sliding scale to set buyer and seller fees. These fees vary nationwide, but are usually related to the actual sale price of the vehicle.

Transportation Services
Dealers who do not have their own means for transporting their vehicle purchases can contact the auction to arrange for vehicle delivery. The same transportation services which are utilized for bringing consignment vehicles to the auctions for sale can be used for transporting purchased vehicles to the dealers’ lots.

Advertising and Marketing Services
Auction coordinators can help dealers advertise their purchases immediately. Before the vehicles leave the premises, dealers can arrange to have vehicles posted on AutoTrader.com (a retail online classified advertising and auction service) or advertised in one of a number of publications, from newspapers to specialized magazines showcasing vehicles to the public. Auctions can also help dealers place vehicles in CyberLots® or CyberAuctions where dealers can buy on bulletin boards or send bids to the auction operating the site. 

Chapter 3  Planning an Auction Visit

Choosing an NAAA Auction
Both buyers and sellers usually choose an auction based on their specific needs, which may include:

• Vehicle types being consigned                 • Geographical convenience
• Reputation of the auction operators         • Services offered at the auction

NAAA Auction Members
Auctions come in all sizes and shapes. The largest have more than 20 lanes, the smallest, one or two. Internationally, 360 auctions belong to the National Automobile Auction Association (NAAA). Members meet certain requirements and operate secure, neutral auction settings. A list of NAAA auctions can be found on this web site.

Auction Formats: Open and Closed Sales
There are basically two kinds of wholesale auctions:

Open:  An open sale means any registered dealer may attend. The majority of auctions are open. Open auctions usually offer a range of vehicles from various sources. However, an open sale may be specialized and concentrate on a single class of vehicle, such as special dealer consignments, off-lease, rental or fleet vehicles.

Closed:  A closed sale limits who may attend.  For example, a manufacturer may hold a sale that is only for its franchised dealers.

In certain circumstances, to meet government requirements, auctions open certain consignment sales to the public.

Auction Calendars
Most auctions schedule regular, recurring sales on the same day of the week (e.g., a regular “open” Tuesday sale and a biweekly “closed” factory sale, etc.). Special sales may be scheduled for other days of the week. Most sales are during the day, though night auctions do occur; weekend auctions are rare.

The calendars most often indicate what kind of vehicles (off-lease, dealer consignment, factory, etc.) will be offered for sale and may even include information on who will be consigning the vehicles and the number of units in the sale.

Many auctions advertise their calendars in trade publications and on auction web sites.

Auction Web Sites
Auction companies usually maintain Web sites that include information on:

• Travel directions and maps
• Registration information
• Sale-day lane schedules
• Pre- and post-sale inventory lists
• Market reports
• Internet inventory
• Events calendar
• Services
• Contact information
• Financing options
• Airport/hotel pickup

Auction Tours
Auctions welcome the opportunity to show customers how the auction works and are willing to provide a tour of the facilities, as well as spend time with an individual explaining the details of the operation, the bidding process and more.

Identification Cards

Dealers who complete the registration process (and their registered representatives) are issued a permanent identification card, shaped much like a credit card and called an Auction Access card. These cards grant access to dealers to buy and sell vehicles. Auction Access cards may be inserted into kiosks placed around the auction site to receive bidder badges and other information.

Auction Kiosks
Throughout most auctions are electronic kiosks. By inserting an Auction Access card into a kiosk, a dealer can obtain the following:
• Run List of Sale-Day Vehicles
• Run List of Upcoming Sale Days
• Buyers Summary
• Make and Model Summary
• Bidder Badge
• Driver Badge
• Gate Pass
• Block Summary
• “If” Sale Summary

Bidder Badges
A bidder badge is typically required for a dealer to bid at an auction. It is worn in plain view so the auctioneer can see it. To receive a bidder badge, a dealer can simply insert his or her Auction Access card into a kiosk at most auctions.

The badge displays:
• Auction sale week number
• Dealership name
• Name of dealer attending
• Bidder number


Run Lists
Auctions make available computerized lists of the vehicles running in each sale. These lists are segmented by the selling group, such as the commercial consignor, dealer consignment and such. These lists, often referred to as run lists or block summaries, can be obtained in person, from the auction kiosk or via fax or e-mail. In some cases, auctions maintain customized Internet sites for individual dealers and automatically post the sale lists to their private sites.

Run List data may vary, but the following typically will be indicated:
• Lane in which the vehicle will be for sale
• Vehicle run number (this is an auction-assigned number given to the vehicle or group of vehicles consigned by one source)
• Vehicle year, make, model and body style
• Vehicle color
• Vehicle mileage
• Vehicle equipment such as air-conditioning, power steering, etc.

Chapter 4  Buying a Vehicle at Auction

Sale Day Preparation
Dealers buy more than nine million vehicles at auction per year. The better a dealer has prepared for the sale, the better chance he or she has of having a profitable experience.

Pre-Sale Inspection
Dealers have the opportunity to inspect the vehicles that will be going through the lanes. The most successful dealers arrive early and roam the pre-sale lot to assess the condition of vehicles they might be interested in purchasing.

Sales Lot Parking Plans
Some auctions provide a sales lot parking plan which outlines where vehicles are located. Vehicles are typically parked in groups that correspond to the lanes in which they run. Parking lot plans are typically available at the front desk at the auction.

Windshield Markings
Each vehicle ready for auction is marked on the windshield. This marking, either printed or written by hand, is prepared when the vehicle is checked in.
The markings contain:
• Seller name
• Model year
• Run number
• Mileage information
• Lane assignment

In some cases, the condition of a vehicle is also marked on the windshield.

Run Lists
Each seller group’s individual vehicles are listed on a run list.
Run lists are available online or via fax, but the most complete listing can be obtained the day of the auction. Lists are generally available at the entry of the auction facility, and can also be printed out from kiosks around the facility.

Understanding Lane Activities
Many elements converge in the lanes of an auction, where the vehicles are auctioned from the “block” one at a time.

Block Area
The “block” is the elevated area where the seller, the auctioneer and some auction administrative staff conduct the sale. The auctioneer and the block clerk are “on the block” throughout each sale. As a seller’s car enters the lanes, that seller may also be on the block to represent their car to the bidders.

The Auctioneer
The auctioneer provides detailed information about the respective vehicle for sale, makes appropriate announcements about the vehicle, discusses with the seller their price expectations and calls for bidders from the lane. The auctioneer manages the bidding process and assures that interested buyers are acknowledged in the bidding. Once there are no more additional bidders on a vehicle, the auctioneer will complete the sale – or discuss alternatives with the seller if the car did not meet the seller’s minimum price (also known as the “floor price”) – and all of this is done in about 60 seconds.

Ringmen
At some auction locations, ringmen assist auctioneers in identifying bids and clarifying issues in the bidding process.

Block Clerk
The block clerk is the person who records the winning bid for each vehicle, the amount and the dealer who purchased the vehicle, as well as all other transaction details.

Floor Price
(Also known as “the low” or “the reserve”)
A seller can put a “floor price” on vehicles they are selling, which indicates to the auctioneer the lowest price the seller is asking for the vehicle. If the floor price is not met, the seller can reach an agreement with the auctioneer while on the block to lower the floor price and attempt to sell the vehicle while it is still in the lane. If the bidding fails to reach the agreed upon floor price, the vehicle can still be sold on an “if bid,” otherwise it will leave the lane as a no sale.

“If” Bids
“If” bids are usually facilitated by the auction company and state that a bidder agrees to buy a vehicle “if” the seller will accept the offer within a specified period of time. “If” bids are usually made on vehicles that did not meet sellers’ price expectations. On sale days, the auction has a department dedicated to facilitating “if” sales. 

“Title Absent”
When a vehicle is sold as “title absent,” the title is not available the day of sale. If this occurs, individual auction rules should be consulted.

Auction Monitors
At most locations, dealers can consult various auction monitors that have information on:
• Status of vehicles crossing auction blocks by their run numbers
• Status of “if” sales
• Status of vehicles in arbitration
• Status of post-sale inspections
• Special messages

What Do the Lights Mean?
The lights above the auctioneer are there to indicate the conditions under which that vehicle is being sold. It is the seller’s responsibility to make the proper announcement from the block and ensure that the appropriate lights are lit. It is the buyer’s responsibility to understand the announced condition and what the lights mean. Though lights differ by location, this is a summary of what might typically be found at an auction.

Green Light: Ride and Drive
Green is a statement by the seller that the vehicle is being sold free of any known major defects, including:
• Drive train
• Engine
• Transmission
• Rear end

It may also cover other items such as air-conditioning on vehicles of a particular age.

Yellow Light: Caution, Listen Up!
Yellow indicates a vehicle that is being sold under announced conditions. These conditions are announced prior to sale by the auctioneer for the seller. Buyers cannot arbitrate for announced conditions.

Red Light: What You See Is What You Get
The vehicle is sold “as is” and is not subject to arbitration.

Blue Light: Title Absent
Indicates a vehicle being sold without a title on the premises. It is usually announced from the auctioneer’s stand that this vehicle is “title absent” (or “title attached.”) If this vehicle is sold, the seller has a certain period of time to deliver the title to the buyer.

Types of Consigned Vehicles

Dealer Vehicles
Dealer vehicles for sale at auction are primarily trade-ins and aged inventory. In some cases, a dealer will take a vehicle in trade that does not meet his dealership profile and will immediately offer that vehicle for sale at auction. Often, if a dealer cannot retail a vehicle in a period of time they will bring the vehicle to an auction for a quick sale.

The condition of dealer consigned vehicles varies greatly. Most are not reconditioned at the auction, but this may be changing as auctions demonstrate the value of reconditioning to the seller.

Fleet/Lease Vehicles

Off-Lease Units
Vehicles in this commercial category are consigned from manufacturer's captive financial arms, fleet/lease companies, banks and financial institutions. Vehicles are usually limited in the number of miles that can be put on the vehicle and are held to some kind of maintenance contract; these vehicles are often in good shape and, therefore, desirable.

Off-lease units tend to be older than rental company or factory vehicles, and often meet the needs of a dealer who is looking for noncurrent year units. Auctions offer leasing companies the fastest and most efficient method of remarketing large volumes of vehicles. Moreover, because of the quantity and the desirability of these units, lease vehicles are usually offered in dedicated lanes.

Rental (Non-Program or Risk) Units
Rental units are vehicles that a rental company did not receive under a factory program. Therefore, the rental company has the responsibility of remarketing the vehicles.

The vehicles are current year models. They have usually been in a regular maintenance program and tend to have been well kept. These vehicles also reflect the reputation and integrity of the rental company.

Repossessed Units
These vehicles are generated by manufacturers’ financial arms, leasing companies, banks and financial institutions. Repossessions fall into two categories – voluntary and involuntary. Auto auctions meet all the requirements the Federal Uniform Commercial Code describes as a “commercially responsible” method to sell repossessed vehicles.

Fleet Units
Fleet units are vehicles that come to auction from a company car fleet or from trucking companies. These units may be owned outright by the businesses or leased from fleet management companies.

Fleet vehicles tend to be more than two years old and in most cases, the cars, vans or trucks have minimal options but have been satisfactorily maintained. Many dealers feel comfortable purchasing these units at auction.

Auctions offer fleet consignors the quickest way to remarket large volumes of similar vehicles.

Factory (Program) Vehicles
Based on manufacturers’ marketing strategies, fleets of vehicles are sold to rental companies under various programs. Manufacturers’ programs with rental companies may call for the repurchasing and remarketing of these vehicles by the manufacturer in closed auction sales.

Program cars are all current model year units and most are still under factory warranty. Often the manufacturers sell these vehicles in closed auctions only to their franchised dealers. This gives the factory's dealers first pick at current model year, quality used vehicles. Program cars also give the dealer an opportunity to put a customer who cannot afford a brand new vehicle into a current year used vehicle and thus possibly save the sale for the brand.

Winning Bids
When an auctioneer accepts the winning bid, the bidding is over. The block clerk will record the winning bidder’s badge number. The buyer signs the invoice and receives a copy which may include a gate pass.

Services for Buyers – After a Purchase
There are a number of services provided to buyers at the auction after they have made purchases, including post-sale inspections, arbitration services, test-drive opportunities, purchase payments, title services, vehicle transportation and advertising their purchased vehicles.

Post-Sale Inspections
Dealers who have purchased vehicles may use post-sale inspection services. A team of auction mechanics inspects the vehicle for items such as the engine, air-conditioning, frame, brakes, odometer, transmission and the rear end. Typically these services are provided on sale day. Fees for this service are set by the individual auctions.

Arbitration
Arbitration is a valuable service provided by the auctions to protect the interests of both buyers and sellers to assure the vehicle in any transaction has been properly represented. An individual employed by the auction company, which is a neutral party in the buying and selling process, arbitrates any disputes. Arbitration time limits vary by auction. Certain conditions such as undisclosed frame damage, a repaired frame or rebuilt cars must be arbitrated within set time periods.

All NAAA auctions have a procedure for investigating, and hopefully resolving, issues between
buyers and sellers. Arbitration usually applies to vehicles that were announced and sold under the green light. Controversies can be resolved by the two parties coming to some kind of financial adjustment on the selling price or if the arbitration finds the buyer’s complaints accurate, and no monetary compromise can be reached, the sale may be canceled or unwound. Auction arbitration services are free to buyers and sellers.

Test Drives
At many auctions, if a buyer presents a valid driver’s license and his “sold” invoice to the arbitration department, they can test drive the purchased vehicle. Many auctions have test tracks for this purpose.

Purchase Payments
After completing purchases for the day, buyers go to the auction’s front office to finalize their transaction, which includes paying for purchases, transferring titles and receiving gate passes. Buyers can pay for vehicles in a number of ways, including certified checks, cashier’s checks, company checks, money orders, cash, wire transfers, drafts or with authorized floorplan financing. The final price of the vehicle will be the bid price for the vehicle, plus the buyer’s fee to the auction and fees for any other services the buyer has requested.

Services Title
Once payments for purchases have been made, title specialists at the auction will assist dealers in the administration of transferring necessary documents. These title specialists are available on all sale days and are capable of processing titles for all 50 states.

Gate Passes
After the transaction is completed, a gate pass will be provided by the auction front office to allow the purchased vehicles to be released from the auction premises.

Vehicle Transportation
Transporation of purchased vehicles can be arranged by the buyer in a variety of ways, including:
• Auction local delivery service
• Independent transporters
• Dealer employed drivers/transports.

Advertising
Auctions can assist dealers in placing classified ads for the vehicles they have purchased. Ads can run in various newspapers or specialized publications. 

Frequently Asked Questions

Q. How do I make my vehicle preferences known so the auction can inform me as to when they might be for sale?
A. Dealers can submit “profiles” to auction marketing departments, describing the types of vehicles they are interested in purchasing. Dealers can indicate the make, model, price range, condition and supply source for vehicles they would like to receive pre-sale notification on. This “Want List” can be submitted electronically, by mail, by fax, phone or in person to an auction’s marketing department.

Q. Can a dealer bid on a car before the sale begins?
A. No, unless it is offered on an Internet venue.

Q. Is there a minimum purchase requirement?
A. No. Dealers can purchase as few or as many vehicles as they need based on their credit limits.

Q. What should a dealer do if he wants to purchase a vehicle that went through the lane as a no sale?
A. The dealer should communicate to the dealer representative, ringman or other auction official in the lane to facilitate a potential purchase.

Q. How does a dealer establish floor plan financing with the auction?
A. Most auction chains have in-house financing departments that can help independent dealers arrange for credit. Most franchised dealers use their manufacturers’ captive finance companies to establish a line of credit with auctions.

Q. What’s the difference between auction certification and post-sale inspection?
A. Auction certification is requested by the consignor and takes place before the sale. Post-sale inspection takes place after the sale and is requested by the buying dealer.

Q. Can a dealer buy a car at auction and resell it at auction the same day?
A. Yes. The dealer will have to re-register the vehicle.

Q. Do all auctions use electronic registration?
A. Most do, but some auctions do not yet have this technology in place.

Q. How long in advance does a dealer need to register for an auction?
A. The sooner the better, but dealers can register at any time – even on sale day.

Q. How do I register one of my employees or a representative who can bid for me?
A. Dealer principals can authorize representatives to bid for their organization at the time of registration or via a Letter of Authorization. Authorized representatives must have a valid driver’s license.

 Chapter 5  Selling A Vehicle At Auction

Consigning  a Vehicle
Sellers who represent their vehicles accurately, sell consistently and set realistic prices, earn the buyers’ trust and enjoy more success at auctions.

Inventory Into Cash
Nothing is more important to a consignor’s success than turning inventory. Auctions are the best way for consignors to turn slower-moving inventory into cash.

Consignment to Auctions
Consignments to auctions are from varied potential sellers, including dealers, manufacturers, banks, rental car companies, leasing companies, government agencies, company car fleets and other commercial institutions.

Registration
A consignor can register vehicles into the sale day inventory in several ways:
• Vehicles can be registered by telephone, fax, or e-mail with the auction’s sales and/or vehicle registration department.
• Vehicles can be registered electronically using an auction’s online service, where available.
• Vehicles can be delivered to the auction site.

Required Information
To consign a vehicle, the consignor must provide a full description of the vehicle, including the VIN (see VIN, pages 80-81.) For best results, the consignor should have the title at the auction prior to the sale.

Maximizing a Vehicle’s Value
There are several ways sellers can enhance the value of vehicles they are trying to sell. These include reconditioning, certification, and effectively representing the vehicles on the block.

Reconditioning
Most auctions are equipped with reconditioning operations, including:
• Paint Services
• Dent Removal
• Body Work
• Detailing
• Glass Replacement
• Upholstery Cleaning, Replacement or Repair
• Tire Replacement
• Airbrushing
• Parts
• Presentation of a Condition Report (which can be  used to discuss recommended reconditioning services to consignors and buyers)

Auction Certification
Many auction companies offer consignors a vehicle certification program. The program allows the seller to choose a level of certification.

Condition Reporting
Consignors opting for condition reports will receive the evaluations, which can be utilized in the sale process to assist the seller in determining a fair value for the vehicle.

Seller on the Block
When vehicles are personally represented by a seller, there is a positive sense created in the lanes that the seller is standing behind their vehicles. If consignors cannot attend an auction where they are selling vehicles, the auction’s dealer sale representative can be asked to stand in on the block. It is helpful if the sellers establish a realistic floor price on their vehicles so the dealer representative knows the minimum price a seller will take.

Pricing Consigned Vehicles
For effective results in the auction process, it is critical for a seller to set a realistic floor price. Several factors come into play in determining appropriate price expectations, including the vehicle’s condition and color, and the demand for the particular product at that time. Once the seller’s expectations are determined, a seller may set a “floor price” for the vehicle. During the auction, the floor price is a key determinant on whether the vehicle will be sold, or become an “if” sale or a no sale.

Condition
First impressions really do matter. Buyers will take into account the condition of the paint, tires, interior and other aspects of a vehicle. Other items to consider are the make, model, year and odometer reading of the vehicle that is being sold, along with the general condition of the vehicle. Also important are the number and type of add-on features.

Color
Premium colors will usually bring a premium price. Popular color vehicles can sell for $1,000 higher than the same vehicle with a less popular color.

Demand
Volume levels can affect pricing. An excessive amount of a certain make or model can lower prices, while a scarcity can raise the bids. Many consignors check the run list and confer with the auctioneer for assistance. To determine market demand at previous sales and the resulting prices, market reports from the auction can be obtained from auction staff.

Floor Prices
The majority of vehicles go through the lanes with a floor price – the asking price of the vehicle. To eliminate the floor price or change the floor price, the consignor should contact the auctioneer or auction dealer representative. Auctioneers prefer to have an established floor price, as it helps focus the bidding process. If the bidding does not reach the floor price, the seller standing on the block can indicate to the auctioneer that they will take the last bid and forgo the floor price.

No Sales
No sales occur when the bidding in the lane does not reach the floor price of the seller. While consignors have the option of no-selling their vehicles, usually the vehicles will not appreciate in value, and it is worth their considering the costs of holding inventory longer and possibly selling later for even less. Usually a vehicle brings the best value the first time across the block.

If a consignor has any vehicles that have not sold, they can ask to put them through the lanes again that day, store the vehicle until the next sale, offer it for sale online or arrange for the vehicle to leave the auction site.

“If” Sales
“If” sales occur when the floor price of the seller has not been met, but a potential buyer wants to make an offer on the unit after the car has left the lanes. In these circumstances, a buyer advises the auction staff of their bid, which will be relayed to the seller.

Services for Sellers – After a Sale
Following a sale, the auction seeks to assure the completion of the transaction is a beneficial one for the seller. In this effort, auctions provide title guarantees, payment guarantees, and serve as an objective arbitrator, if required.

Title Guarantees
Trained auction staff will facilitate the transfer of the title to the buyer.

Payment Guarantees
The auction is a neutral trading floor that guarantees the consignor will get their money from the winning bidder. The auction pays the consignor for their vehicles when the title is turned in, even if the buyer has not yet paid. The consignor is not responsible for collecting the money, nor do they have the risk of bad checks.

Arbitration
Arbitration protects both the seller and buyer. Buyers can request arbitration. However, if a buyer’s complaint is not open to arbitration, the buyer still owns the vehicle and the seller does not have to take time dealing with the complaint or negotiate with the buyer.

Frequently Asked Questions

Q. Does a consignor need to consign a minimum number of vehicles?
A. No.

Q. How does a consignor correct information that is wrong on the invoice?
A. Prior to the invoice being printed, corrections can be made by contacting auction personnel. After the invoice is printed, the consignor can correct facts by contacting their dealer sale representative.

Q. What if a consignor does not have a title for a certain vehicle?
A. Vehicles that do not have the title at the auction run in the lanes with a blue light, meaning “title absent.” The seller has a limited amount of time  to submit the title to the auction for processing. Many times there is an additional fee for absent titles.

Q. What if a buyer is from another state?
A. Auction title specialists are aware of the title requirements in all 50 states and can handle the transaction.

Q. If a vehicle doesn’t sell, is there a fee charged?
A. Generally, fees vary depending on auction policies.

Q. Should a dealer expect to sell everything he consigns?
A. Yes. As long as the dealer has set a reasonable floor price, the vehicles should sell.

Chapter 6 – Evaluating A Vehicle

Characteristics of the Vehicle
Many factors need to be considered when determining the value of a vehicle. Condition, mileage, options, color and market conditions are among the most important.

Condition
Vehicle condition usually trumps all other factors in determining the price a vehicle will bring. That’s why many sellers do extensive reconditioning on their vehicles before they enter the lanes. A vehicle that has been washed and detailed, had its dings, scratches and dents repaired, and has been cleaned inside will bring a higher price.

Mileage
Vehicle mileage is precisely quantifiable, and is key in determining the value of a vehicle.

Options
The same used car can be sold for hundreds to thousands more dollars depending on the options and equipment. Items such as V6 vs. V8, 4-wheel drive vs. 2-wheel drive and hard top vs. convertible, can impact the value of a vehicle.

Color
Conservative, mainstream colors usually fare well at auctions. Good-color vehicles can sell for $1,000 higher than the same vehicle with a less desirable color. According to the National Association of Fleet Resale Dealers, good colors are typically silver, white, red and tan while the difficult colors are typically purple, yellow and black. Of course, different models are affected differently. The bright yellow “cute-ute” can be an eye-catcher, while that same color on a traditional luxury car can be a tough sell.

Characteristics of the Market

Historical Look at Price Swings By Market Class
While broad movements in market pricing may be quantified, there are individual models within each class that move in the opposite direction. While price movement does reflect pure demand there is often much more than this single factor at play.

Compact Vehicles: Average auction sale prices for compact cars have remained relatively flat since 1998 but in 2002 (need info). Average mileage on these units at the time of sale, however has increased over 10%; therefore, the flat (and recently declining) sale price hides what in fact was a modestly strong market for these units. Compact cars also exhibit a wider seasonal swing in prices than do mid-sized cars. These swings are directly related to the consignment and purchase activity of dealers who are most desirous of these units during the spring selling season and the early tax-refund season discussed above.

Mid-Sized Vehicles: Due to the large number of competitive units in this category, seasonal price fluctuations are much smaller than in other markets.

Luxury: Over the past years, the luxury class has exhibited the greatest price stability. Large increases in household wealth, plus a strong tendency for buyers to move upscale, has provided a solid floor for these cars. Moreover, buyers of these cars are
less affected by economic downturns.

Sporty: This class of car, like the convertibles that are an important part of the segment, thrive on
the spring market. With the retail “spring market” coming earlier and earlier in the calendar year, dealers have become more aggressive buyers of these units earlier in the year.

Vans: Both minivans and full-size vans have been one of the weaker segments of the used vehicle market since late 1999. This is directly related to the record sums of incentive money that was applied to the new vehicle side of this segment.

SUVs: Since l998, SUV prices have been relatively flat. The used SUVs coming back to auction most recently consist of a much more upscale mix of units – vehicles that sold new at top dollar. Accordingly, the flat average used SUV price hides what in fact has been a disappointing market.

Pickups: Used pickups have shown stronger prices than any other market segment. Here again, a changing mix of units overstates the strength of the market. Many of the used pickup units coming back more recently are upscale models with four doors and luxury packages.

Seasonality
Used unit sales peak in summer months, often being twice as high as in the winter. This might be because used vehicle prices decline most rapidly around the time of new model introductions. Statistically speaking in the aggregate, November and December are the weakest months for used vehicle prices. March is the strongest. Since l995, February and March prices, however, have shown some strengthening, while September and October prices have weakened. This could well be because of an earlier flow of individual income tax refunds which serve to accelerate the arrival of traditionally higher spring pricing, due to electronic tax refunds.

Regional Differences
Different parts of the country tend to have differing vehicle inventories. The weather, income levels, gasoline prices and other factors can all influence the number of certain makes and models -- and even the abundance or absence of certain colors and features.
 

Overall Volume
The sheer number of vehicles available can affect the final price a buyer will pay. Over the last six years, 99 million new cars and light trucks were sold; that means an ever-increasing volume of new cars for buyers to choose from. The result is that both new and used vehicle marketplaces are becoming high-volume/low-price arenas.

However, within this volume expansion environment, buyers are finding that the number of off-lease vehicles will be declining. In 2001, the number of lease originations fell 22%, and then again in 2002, it dropped another 9%. Moreover, more realistic  residuals are tempting more lessees to buy at the end of term.

Model Introductions
Manufacturers have become more flexible and have introduced new models in shorter cycles. As a result, new models will have shorter life cycles and the number of niche vehicles will multiply. All this means that buyers need to be more knowledgeable than ever before and evaluate a vehicle in the context of rapidly changing model lineups.

Sticker Price Comparisons
New cars are being sold with lavish incentives, so it is a mistake to gauge a used vehicle's value against the sticker price. Rather, one should consider the actual transaction price. Used vehicles' ability to maintain some percentage of the original transaction price is little changed.

Evaluation Tips
Conditions to Look For... May Indicate
Below are a series of appraisal considerations that can be helpful when evaluating a vehicle:

Interior
Exceptionally dirty or worn
Commercial or  carpool usage
Clean rear seat
Commercial usage
Broken seat
Collision damage

Odometer Gauge
Not registering
May be disconnected
Low mileage compared to condition
Odometer reset
High mileage compared to condition
Good care, highway driving
Clicks while driving
Bad cable
Federal sticker on door
Odometer repaired

Gauges
Low oil pressure
Bad engine or pump
Low charge
Bad voltage regulator
Lights not working
Faulty gauge; or disconnected to hide trouble

Trim
Missing Minor or major collision
Repairable damage
Minor collision
Irreparable damage
Major collision
Discolored
Previous body damage

Hood
Improper operation
Body or frame twisted
Paint mismatch
Repainted vehicle/ possible collision

Doors
Binding
Sprung body
Collision damage
Rough road damage

Windows
Window operation
Sprung mechanism
Binding
Worn mechanism
Slipping
Slipped off the track

ires
Smooth
Poor maintenance
Cupped
Tow in or tow out
Worn edges
Alignment
Mismatched
Poor maintenance

Glass
Broken
May be covered by insurance
Cracked 
Chipped 
Scratched 
Discolored 

Trunk Area
Missing spare tire
Worn spare tire
High mileage
Mismatched spare
Commercial usage

Lights
Lens
Cracked
Repaired vehicle or wiring problem
Missing
Repaired vehicle
Lamps 
Not working
Bad switches

Bumper
Severe damage
Frame damage
Mismatched paint
Previous damage
Peeling
Previous damage

Rockers
Rust on scuff plates or door sills
Surface rust, flood vehicle

Radio
Does not play
Fuse, bad wire, faulty connection
Static
Faulty wiring
One speaker plays

Sheet Metal
Few dents and scratches
Wavy panels
Prior repairs

Paint
Over-all fading
Poor maintenance
Patches of uneven fading
Previous painting
Chips
Scratches
Peeling
Previous painting
Evidence of repair

Radiator
Rust or “wet” streaks
Clogging from “anti-leak”
Damage
Collision
Oil scum in coolant
Cracked block
Rust by water pump
Faulty water pump or bad gasket

Transmission
Low fluid level
Leakage of seals on pan
Burnt smell
Bad transmission
Water in fluid
Flood damage

Engine
Rough idle
Leaky valve
Loud whistle or roar
Bad exhaust manifold, muffler or tailpipe
Slow ticking sound
Valve train problem
Fast ticking sound
Lower engine problem
Engine runs with clutch engaged with brake on
Worn clutch
White smoke when first starting
Blown head gasket
Blue smoke
Worn pistons, rings or valve guides
Black smoke
Rich gas mixture
“Blow-by”
Burnt valves or rings

Oil
Water bubbles or streaky
Cracked block
Brown oil
Blown head gasket
Sludge
Engine wear
Dirty oil
Poor maintenance

Engine Compartment
Signs of recent repair work
Previous mechanical repairs
Paint over spray
Collision damage
Heavy battery corrosion
Faulty voltage regulator
Cracked wiring
Poor maintenance

Mechanical
Steering wheel binds when turning
Bad steering rack
Oil drips
Bad gaskets
Grinding noise when starting
Worn starter gear or flywheel teeth
Hard start
Battery or needs minor engine overhaul
Clattering sounds at slow idle
Badly worn engine, loose piston, piston pins
Grinding at front of engine
Worn timing gears or water pump
Vibration
Bent drive shaft or loose universals
Engine vibration
Broken motor supports
Jumps out of gear
Worn transmission gears or linkage
Wanders on level road
Front end out of line or bent frame
Brake pedal sinks to floor
Leaks in system
Brakes drift on braking
Worn front-end brakes
Emergency brakes will not hold vehicle
Worn rear brakes
Brakes – “metal to metal”
Worn linings, scored rotors

Frequently Asked Questions
Q. Can a dealer bring his mechanic to the auction?
A. Yes. Guests of auction bidders can inspect the vehicles before they run through the lanes. Rules with regard to visitors vary. Check with auction management.

Q. Can a buyer inspect a vehicle prior to sale?
A. Buyers are welcome to come to the auction site any time before the sale event to inspect vehicles that are to be auctioned. Many dealers do this the day before the sale.

Q. Does the auction offer classes on evaluating vehicles?
A. Yes. Contact your local auction, the National Auto Auction Association or the National Automobile Dealers Association for details.

Chapter 7  Auction Technology

Auction Technology Overview
Today’s auction environment makes use of technology in myriad ways. From mainframes to portable computers, from handheld terminals to the Internet.

Technology advances provide auction personnel and customers quick, accurate and more convenient ways to conduct business. In addition, aggregated information from some of these systems provides critical decision making tools for auction participants. Technologies can include applications at the auctions, Internet sites and other technology services.

Technology at the Auctions
Auctions invest heavily in hardware, software and
systems to provide the most effective transaction environment. Some of these areas include:

• Mainframes – Each auction has mainframe computers that track the millions of transactions that take place within an auction, which include all the information related to the vehicle, titles, prices, vehicle history, and much more. Auction chains typically network their various auction operations to improve customer service and expand marketing opportunities for consignors and buyers.

• Auction Access – Auction Access is a national dealer database which allows dealers to register once at participating NAAA auction facilities, enabling them to receive a card which gives them access to all other participating Auction Access auctions in the U.S. (see Identification Cards, page 36)

• Kiosks – Kiosks are used by registered dealers with auction-supplied identification cards, called Auction Access, which allow them to receive bidder badges, run lists, block summaries and other valuable information about the sale, including vehicle searches.

• Auction Monitors – At many auctions, auction monitors are available to allow customers to track the status of vehicles running through the lanes, as well as information about titles, arbitration and post sales inspections without leaving the lanes. Messages for auction participants can also be
displayed on these monitors.

• Portable Terminals – Portable terminals (PTs) are handheld computers that allow auction personnel to record information about vehicles from any place on the auction lot. The information from the Portable Terminals is transmitted wirelessly
to the mainframe computers and update records there in real time. This process allows customers to ask auction personnel with a Portable Terminal about any aspect of a vehicle, anywhere on the auction premises, without having to log on to a personal computer.

• Electronic Blocks – Electronic Blocks, also referred to as “Paperless Blocks,” are used by block clerks and other auction personnel to enter buyer information and print the invoices for vehicles that have sold. This system allows the seller, who may be on the block, to modify announcements about the vehicle while the car is in the lane. Block Clerks can also enter “if” sales at the block, enabling them to be available instantaneously to auction Front Office personnel to assist in streamlining a potential “if” sale. In addition, by entering the buyer information in the computer directly, the buyer and seller can both expect faster service in checking out at the front office.

The importance of the Internet continues to assure there are opportunities for simplifying the process of gaining meaningful information and transacting business. There are a wide range of Internet sites that benefit auction buyers, sellers, and other remarketing industry professionals. More specifically, the
Internet allows the auctions to provide services to commercial and dealer customers the access to information they need to transact business on a real time basis, and at their convenience. A sample of these sites are outlined on the pages to follow.

• CyberLots®/CyberAuctions – CyberLots® allow consignors to post listings of vehicles, including photographs and other detailed information on the vehicle, on dedicated Web pages for sale at a designated price to potential buyers. Similarly, CyberAuctions allow for these listings to be bid on by potential buyers with some time sensitivity. 

• Simulcast – Simulcasts offer buyers and sellers an opportunity to remotely participate in live auctions (taking place at select auction facilities). Potential buyers can purchase vehicles over the Internet while watching and listening to the physical auction. Sellers have the opportunity to represent their vehicles online, when they may not be able to attend the auction in person.

• Auction Web Sites – Local auction Web sites can provide timely information about the auction, including their sale days, vehicle consignment types and volumes, personnel, and directions to the location. Most auction Web sites provide a
calendar of events, as well as market reports on pricing from previous sales. (see Related Materials, Chapter 10)

• Auction Industry Web Sites – There are a number of Web sites available to people interested in the remarketing industry which can provide critical marketing, regulatory and industry information.

• Retail Advertising Sites – Dealers that want to advertise their vehicles to large numbers of consumers can utilize sites such as AutoTrader.com. These sites cater to consumers and dealers to primarily advertise new and used vehicles to the retail public. Auctions often facilitate the process of uploading data to these sites.

There are other technologies that are provided to the remarketing business which enhance the experience of customers who will be using the auction process, including dealer management systems and inventory management.

• Dealer Management Systems – Dealer management systems provide dealers a system to manage the accounting, inventory, marketing, pricing and other facets of their business. Franchised dealers typically use a dealer management system supported by their respective manufacturers. Independent dealers have some alternatives for dealer management systems, such as Tracker.

• Inventory Management Systems – An inventory management system is designed to primarily assist commercial consignors with the management of their inventory, and allow for electronic transfer of data about vehicles that will be consigned to auctions.

Q. Besides the ability to buy and sell vehicles, what other services do auctions offer online?
A. One of the most important things auctions make available to customers online is information. Whether it’s access to market reports with detailed sales histories that can help dealers determine the value of vehicles, or management software that helps dealers run their businesses more efficiently, the information auctions make available online is relied on by dealers, consignors and remarketing professionals daily.

• Auction Monitors – At many auctions, auction monitors are available to allow customers to track the status of vehicles running through the lanes, as well as information about titles, arbitration and post-sale inspections without leaving the lanes. Messages for auction participants can also be
displayed on these monitors.

• Portable Terminals – Portable Terminals are handheld computers that allow auction personnel to record information about vehicles from any place on the auction lot. The information from the Portable Terminals is transmitted wirelessly
to the mainframe computers to update records there in real time. This process allows customers to ask auction personnel with a Portable Terminal about any aspect of a vehicle, anywhere on the auction premises, without having to log on to a personal computer.

• Electronic Blocks – Electronic Blocks, also referred to as “Paperless Blocks,” are used by block clerks and other auction personnel to enter buyer information and print the invoices for vehicles that have sold. This system allows the seller, who may be on the block, to modify announcements about the vehicle while the car is in the lane. Block Clerks can also enter “if” sales at the block, enabling them to be available instantaneously to auction Front Office personnel to assist in streamlining a potential “if” sale. In addition, by entering the buyer information directly in the computer, the buyer and seller can both expect faster service in checking out at the front office.
 

The Internet
The importance of the Internet continues to assure there are opportunities for simplifying the process of gaining meaningful information and transacting business. There is a wide range of Internet sites that benefit auction buyers, sellers, and other remarketing industry professionals. More specifically, the
Internet allows the auctions to provide services to commercial and dealer customers; access to information they need to transact business is on a real time basis, and at their convenience. Samples of these sites are outlined on the pages that follow.

• CyberLots®/CyberAuctions – CyberLots® allow consignors to post listings of vehicles, including photographs and other detailed information on the vehicle, on dedicated Web pages for sale at a designated price to potential buyers. Similarly, CyberAuctions allow for these listings to be bid on by potential buyers with some time sensitivity. 

• Simulcast – Simulcasts offer buyers and sellers an opportunity to remotely participate in live auctions (taking place at select auction facilities). Potential buyers can purchase vehicles over the Internet while watching and listening to the physical auction. Sellers have the opportunity to represent their vehicles online, when they may not be able to attend the auction in person.

• Auction Web Sites – Local auction Web sites can provide timely information about the auction, including their sale days, vehicle consignment types and volumes, personnel, and directions to the location. Most auction Web sites provide a
calendar of events, as well as market reports on pricing from previous sales. (see Related Materials, Chapter 10)

• Auction Industry Web Sites – There are a number of Web sites available to people interested in the remarketing industry which can provide critical marketing, regulatory and industry information.

• Retail Advertising Sites – Dealers who want to advertise their vehicles to large numbers of consumers can utilize sites such as AutoTrader.com. These sites cater to consumers and dealers to primarily advertise new and used vehicles to the retail public. Auctions often facilitate the process of uploading data to these sites.

Other Technology Services
There are other technologies that are provided to the remarketing business which enhance the experience of customers who will be using the auction process, including dealer management systems and inventory management.

• Dealer Management Systems – Dealer management systems provide dealers a system to manage the accounting, inventory, marketing, pricing and other facets of their business. Franchised dealers typically use a dealer management system supported by their respective manufacturers. Independent dealers have some alternatives for dealer management systems, such as Tracker.

• Inventory Management Systems – An inventory management system is designed to primarily assist commercial consignors with the management of their inventory, and allow for electronic transfer of data about vehicles that will be consigned to auctions.

Frequently Asked Questions
Q. Besides the ability to buy and sell vehicles, what other services do auctions offer online?
A. One of the most important things auctions make available to customers online is information. Whether it’s access to market reports with detailed sales histories that can help dealers determine the value of vehicles, or management software that helps dealers run their businesses more efficiently, the information auctions make available online is relied on by dealers, consignors and remarketing professionals daily.

Chapter 8   Glossary of Terms

A
Absolute Auction – An auction where every vehicle is sold to the highest bidder.

Absolute Low – The lowest price a seller is willing to take for a vehicle.

Absolute Sale – (See Absolute Auction)

Acquisition Fee – A charge included in most lease transactions that is either paid up front or included in the total cost of the vehicle. This fee covers a variety of administrative costs, such as the costs of obtaining a credit report, verifying insurance coverage, checking the accuracy and completeness of the lease documentation and entering the lease into data and accounting systems.

Adjusted Capitalized Cost (Adjusted Cap Cost) – The amount capitalized at the beginning of the lease, equal to the gross capitalized cost. This amount is sometimes referred to as the net cap cost.
Arbitration – A service provided by the auctions to protect the interests of both buyers and sellers to insure the transaction has been properly represented.

Arena – The area where the auctioneer works and the vehicles are offered for sale. (Also called Ring)

“As Is” – (See Red Light) Specifics on what constitutes an “as is” vehicle can vary from one auction to another, but generally will include vehicles six years or older, with more than 100,000 miles registered on the odometer or where the odometer is suspect. Other factors affecting the evaluation of a vehicle may also apply, depending on the individual auction’s policy.

At-Risk Vehicles – Cars or trucks owned by a daily rental company which, at their end of service, must be remarketed by the rental company. “Risk” means the rental company bears the risk of the price they will receive for this vehicle when it is retired from service. (Term “nonprogram vehicles” is preferred.)

Auction – The sale process by which multiple bidders compete to acquire a vehicle that is ultimately sold to the person offering the highest price.

Auctioneer – Highly skilled manager of the auction activity at the time of sale. Sometimes referred to as the “bid caller.”

Auction Access – (See Dealer Registration)
The national dealer registration system at some NAAA member auctions, which allows a dealer to electronically register at an auction and reserve a bidder badge. The system allows them to be automatically pre-registered at any participating member auction location.

Auction Agreement – A contract executed by the auction and its buyers and sellers that authorizes the auction to conduct the sale and sets out the terms of the agreement and the rights and responsibilities of each party.

Auction Guarantee – Specific guarantees may vary from one auction to the next, but usually cover the drive train, including (but not necessarily limited to) the engine, transmission and rear end.

Auction with Reserve – An auction where the sellers set a minimum price on their vehicles. They do not have to sell their vehicles if bidding fails to reach the reserve price, which may or may not be made public. (Floor price)

B
Bid – The amount of money offered for a vehicle in the sale.

 
Bid Assistants/Consultants/Spotters – (See Ringmen)

 
Bidder Badge – A credential that indicates a buyer’s bidder number for a specific sale. The buyer is registered with Auction Access, and the bidder number is connected to the buyer’s Auction Access account.

Bidder Number – The number issued to each qualified buyer on sale day.

Bill of Sale – A document provided by a seller showing the name of the purchaser and purchase price, which becomes the basis for calculation of sales and other taxes.

Black Book – Wholesale prices guide.

Block – The auctioneering and business transaction station in each auction lane.

Block Clerk – The person who records transaction information in the lanes.

Block Ticket – A computer-printed “paper trail” generated by the auction that documents the auction process from registration through the sale. (Also known as an invoice)

Buyer's Fee – A fee paid to the auction house by the winning bidder. The amount of the fee varies by auction.

C
Capitalized Cost (Cap Cost) – The price a buyer agrees to pay for a leased vehicle. The monthly lease payment is based on its depreciation, interest, administration, etc.

Capitalized Cost Reduction – An initial payment on a leased vehicle, which then lowers the monthly lease payment. That payment can consist of cash, a trade-in allowance on an existing vehicle or rebates and incentives provided by the manufacturer. The adjusted cap is the gross cap cost less the capitalized cost reduction.

Captive Finance Company – A leasing or finance company that is affiliated with a vehicle manufacturer.

Certificate of Origin – A document that conveys the title of a vehicle from the manufacturer to the dealer.

Closed Auction (sale) – An auction sale limited to select dealers, such as those representing a particular franchise.

Closed-End Lease – A lease in which the lessee is not responsible for any difference between the actual and estimated residual value at the time of lease maturity. The lessee’s only extra obligations under a closed end lease might be mileage or wear and tear exceeding the lease contract provisions.

Consignment – Vehicles assigned to an auction for sale.

Consignor – Any member of the remarketing community who provides vehicles for sale at the auction.

Consignors range from automakers selling program cars to rental and corporate fleet operators to individual dealers.

Cross-Line Buying – Buying “across” manufacturer product lines, e.g., a Pontiac dealer buying a Cadillac at auction.

CyberLots® – Web-based collections of used vehicles that are offered to dealers for purchase over the Internet at a set price.

D
Daily Rental – Companies that rent cars by the day or week.

Dealer – An individual who has been licensed by the state to transact the sale and purchase of new or used vehicles.

Dealer Invoice – The purchase price of the vehicle that the dealer is obliged to pay the manufacturer.

Dealer Registration – (See Auction Access) The procedure whereby licensed dealers are registered to do business at an auction.

Dealer Sale Representative – An individual designated to act on the dealer’s behalf at wholesale auctions.

De-fleet – Action taken by commercial or rental fleet operators to reduce their number of vehicles.

Depreciation – The value lost as the vehicle ages. Depreciation is usually rapid in the early years of the vehicle’s life and can be greater or less than the average because of mileage and wear and tear.

Depreciation and Any Amortized Amounts – Total amount charged to cover the vehicle’s projected decline in value through normal use during the lease term, as well as other items that are paid for over the lease term. It is calculated as the difference between the adjusted capitalized cost and the vehicle’s value at the end of the lease. This amount is a major part of a lessee’s base monthly payment.

Disabled Sale – Auction term for a sale running inoperable vehicles with excess wear and tear.

Dispose, Resale, Remarket – Terms used to describe offering a titled vehicle for sale at an auction.

Draft – A bank collection item drawn by one bank on another. At auctions, the draft is signed by the buyer at the auction house and deposited, along with the title to the vehicle, in the auction’s bank. After the auction’s bank has collected from the buyer’s bank, the title is released to the buyer.

E
Equity – In an installment sale or loan, the positive difference between the trade-in or market value of your vehicle and the loan payoff amount. When the loan is paid off, the equity is the market value of the vehicle.

Excess Mileage Charge – A charge by the lessor or assignee for miles driven in excess of the maximum specified in the lease agreement. The excess mileage charge is usually between $0.10 and $0.25 per mile. Suppose, for example, that your lease specifies a maximum of 36,000 miles and a charge of $0.15 per mile over the maximum. If you drive 37,000 miles, the excess mileage charge will be $0.15 x 1,000, or $150.

Excess Wear and Tear Charge – Amount charged by a lessor or assignee to cover wear and tear on a leased vehicle beyond what is considered normal. The charge may cover both interior and exterior damage, such as upholstery stains, body dents and scrapes and tire wear beyond the limits stated in the lease agreement.

Exotic Highline® – (See Highline) A Manheim-trademarked term for a rare, unique or top-of-the-line vehicle, typically in the sports or luxury segment.

F
Factory Sale – The same as closed sale in which buyers are limited to those representing a particular brand.

Fair Market Value – The current value of a particular vehicle in the marketplace, based on mileage, exterior and interior condition, mechanical fitness and such. Floor planning – A dealer’s vehicle inventory line of credit. Manheim Automotive Financial Services (MAFS®) specializes in dealer floor planning through auctions.

Floor Price – The seller’s asking price for a vehicle.

Frame Damage – Any damage to the frame or frame members of a vehicle. Refer also to the NAAA Frame Policy.

Franchised Dealer – A licensed vehicle dealer authorized to sell and service a specific brand of new vehicles.

Frontline Ready – Vehicles that are in retail-ready condition and ready to be put in the front line of a dealer’s lot.

G
Green Light – Auction term for a vehicle that is sold with some buyer protection as to its condition.

Gross Capitalized Cost (Gross Cap Cost) – The agreed-upon value of the vehicle, which generally may be negotiated, plus any items the lessee agrees to pay for over the lease term (amortized amounts), such as taxes, fees, service contracts, insurance and any prior credit or lease balance.

H
Hammer Falls – An expression used to indicate that the auctioneer has struck a deal between the buyer and the seller, and a sale is consummated.

Hammer Price – The price offered by the last bidder and accepted by the auctioneer, who bangs the hammer or gavel to acknowledge this price as the sale price.

Heavy Truck – Trucks with a Gross Vehicle Weight over 33,000 lbs. are Class 8 or Heavy Duty. Class 7 trucks, 26,000 to 33,000 Gross Vehicle Weight are sometimes referred to as Heavy Duty.

 
Highline® – (See Exotic Highline) Manheim-trademarked term for a top-of-the-line car.

I
IF – An offer made strictly between the buyer and the seller and not binding on either party until the sale is consummated. Usually facilitated by the auction between the buyer and seller. The bidder agrees to buy the vehicle “IF” the seller will accept the offer within a specified period of time.

Incentives – A form of reward offered to boost sales; a special price reduction or rebate from vehicle manufacturers to influence the sale of a particular model. Incentives can be low to zero percent financing rates, no down payment, cash back offers, “free” options, etc.

Independent Dealer – A used vehicle dealer who is not associated with a manufacturer.

Inventory Turn – A measure of a dealer’s operations that calculates how quickly he sells, or “turns,” his inventory.

K
Kelley Blue Book – A publication that lists prices of used vehicles.

L
Lane – The passageway in front of the auctioneer where the vehicle travels to the block to be offered for sale. Usually listed as Lane 1, 2, 3, etc. or Lane A, B, C, etc.

 
Lease – A contract between a lessor and a lessee for the use of a vehicle or other property, subject to stated terms and limitations, for a specified period and at a specified payment.

Lessee – The company or individual to whom a vehicle is leased.

 
Lessor – The party to a lease agreement who holds legal or tax title to the vehicle and receives the lease payments.

Lights – (See Blue, Green, Yellow, Red) Each color provides important information about the condition of a vehicle, and is illuminated while bidding is underway.

Light Truck – A truck under 16,000 Gross Vehicle Weight, including pickups and vans. Classes 1 to 3.

M
Manufacturer's Statement of Origin (MSO) – (See Certificate of Origin)

Manufacturer's Suggested Retail Price (MSRP) – The suggested retail price the dealer is asking. Generally the same as the “sticker price.”

N
National Automobile Auction Association (NAAA) – An international organization whose members operate wholesale vehicle auctions. NAAA’s 360 member auctions remarket more than 16 million vehicles annually and are active in the Americas, Europe, Asia, Australia and New Zealand.
National Automobile Dealers Association (NADA) – Founded in 1917, NADA represents more than 19,400 franchised vehicle dealers.

National Association of Fleet Administrators (NAFA) – A professional organization created in 1957 for automotive fleet managers.

National lndependent Automobile Dealers Association (NIADA) – Formed in 1946 to represent independent automobile dealers nationwide.

No Sale Fee – A fee charged by the auction to the seller when a vehicle goes through the lane but is not sold.

O
Online Auction – An auction held over the Internet.

Open Auction – A wholesale auction open to all licensed car dealers, both franchised and independent.

Open-End Lease –  A lease where no specific time limit is set for the vehicle to remain in service. In most cases, at the end of the lease, any gain or loss from the sale of the vehicle belongs to the lessee.

P
Post-Sale Inspection – An inspection service that helps dealers ensure that a purchased vehicle meets its announced conditions. Auction personnel test drive the car and inspect its frame and mechanical condition to ensure quality and performance before sending it on to the dealer’s lot.

Program Car – A vehicle that is sold directly to a daily rental company by an automaker under terms set by the manufacturer. Program cars represent a large portion of current model-year vehicles remarketed through auctions.

Private Transaction – When one consumer sells a vehicle to another consumer without the interaction of a car dealer.

R
Reconditioning (Recon) –  The process of correcting mechanical and cosmetic defects to prepare a vehicle for resale. Auctions typically provide these services to consignors because their investments are more than fullly recovered through the lanes.

Red Light – Indicates a vehicle being sold “As Is.” A red light is illuminated while bidding is underway on such a vehicle.

Remarketing – The term that encompasses all services as well as the actual transfer of a vehicle from seller to buyer.

Resale, Remarket, Dispose – Terms used to describe offering a titled vehicle for sale at an auction.

Reserve Price – In most cases, the minimum price a seller is willing to accept.

Residual (Value) – The projection of the market value of a vehicle at the end of a lease. Specialized companies that evaluate used car price data to make their forecasts typically calculate residual values.

Financial companies, including the captive finance operations of the auto companies, use these values to set lease terms.

Retail Price – The price paid by a consumer to a dealer or individual for a vehicle. The dealer or individual sets the retail price of a used car by evaluating the wholesale price paid plus reconditioning expense and other costs.

Retail Transaction – When a licensed car dealer sells a new or used car to a private individual. It is estimated that there are 1.6 wholesale transactions supporting every retail transaction.

 
Ring – (See Arena) The area where the auctioneer works and the vehicles are offered for sale.

Risk or At-Risk Vehicles – Cars or trucks owned by a daily rental company, which, at their end of service, must be disposed of by the rental company. “Risk” refers to the fact that the rental company is responsible for remarketing these vehicles at the end of their rental service, and thereby they are taking the price risk. By contrast, program cars are sold to rental companies with end-of-service price guarantees.

Run List –  The listing of vehicles for sale at a particular auction.

Run Numbers – (a) Numbers assigned to a vehicle or a consignors’ group of vehicles when lane reservations are made. (b) Position in the lane during an auction.

S
Salvage – A vehicle that is not economical to repair and is sold for the value of its salvageable parts.

Seller’s Market – A market in which all or certain vehicles are scarce, and therefore buyers have a limited selection and prices usually tend to be high.

Seller’s Fee (Sale Fee) – The fee paid by the seller to the auction after the vehicle is sold. The fee usually is based on the sale price of the vehicle.

Simulcast Auction – A live auction that is simultaneously transmitted to remote locations via the Internet so that dealers not physically at an auction can bid in real time for vehicles in the lanes.

 
Subvention – A program or plan in which certain items are subsidized by the manufacturer, the finance company, the lessor or the assignee.

SUV – Sport Utility Vehicle.

T
Title – A legal document issued by the state showing the owner’s name and the vehicle’s mileage at the time of sale.

“Title Absent” (or “Title Attached”) Transactions – When a vehicle is sold “title absent,” the title is not available on auction day and must be produced and delivered to the auction by the seller within a certain period of time.

Trade-in – A vehicle that is sold to either a new or used car dealer as part of the purchase of another.

U

Unit – A single car or truck. A dealer’s or an auction’s fleet operator, or a rental company’s volume, is expressed in number of units.

Used Car Guidebooks – Publications that report current wholesale and/or retail prices of vehicles.

Wholesale values generally are determined from factors including auto auction prices, other wholesale transactions and regional demand. Prices are listed according to year, make, model, options, mileage and condition of the vehicle. Retail prices generally are determined by factors including dealership retail sales prices, other retail transactions and regional demand.

V
Vehicle Identification Number (VIN) – A 17-digit combination of letters and numbers that identifies an individual vehicle. It is located on the driver's side of the dashboard at the base where the windshield glass and dashboard meet. Each digit or letter in the VIN provides information about the vehicle.

W
Wholesale Price – The price paid for a vehicle by a purchaser who intends to resell the vehicle.

Wholesaler – A dealer who buys vehicles at auction – or from a dealer or another wholesaler – and resells them in the wholesale market, i.e., to dealers rather than consumers. Wholesalers also buy and sell cars among the dealers with whom they do business.

Y
Yellow Light – A vehicle that is being offered with certain conditions that are announced prior to sale. Buyers cannot take these conditions to arbitration. A yellow light is illuminated while bidding is underway on such a vehicle.

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