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What does an auto auction lot do? How does an auto auction lot find the cars on the lot?
Over 17 million cars reach an auction every year, while more than 9 million cars are actually sold at auction. The value of those cars is estimated at over $100 billion. Auto auctions have general functions that apply to most auctions around the United States. From obtaining cars, to pre-sale activities, to the actual auction, the details of how auto auctions function can be found below.
OBTAINING CARS
Vehicles are consigned to auction houses by sellers. Examples of sellers are car dealers, banks, manufacturers, and rental car companies. Car dealers typically consign cars that have been traded-in and are older, ones that would not sell well in their dealerships or ones that have already been sitting at their lots too long. These vehicles tend to be in better condition given the fact that they are accepted for trade-in. Rental companies consign even better condition cars for the most part. This is because most rental companies have certain limits for their fleet vehicles, such as condition or mileage. Once a car hits that limit, even if it is in otherwise great condition, it must be removed from the fleet and is usually then sold at auction.
CONSIGNMENT
Before an auction begins there are many things that need to be done by employees. The pre-sale activities are known as consignment. The first step, after obtaining cars to sell in the auction, is to scan each car’s VIN number. This allows employees to see information about the car and make sure that it is not stolen.
Next, photos must be taken of the cars in most cases. These can be used to advertise in print or online, drawing interested buyers to the auction. After photos are taken, a certified condition report writer creates a report of each vehicle’s condition, often times using a handheld computer called a portable terminal that allows them to create reports anywhere on the lot. This is used to let interested parties know what they are potentially buying and to let consignors (the parties who brought in the cars) know how much they might expect the car to sell for in its condition. This is also how the auction house comes up with each starting bid. It is important to note that auctions do not “buy” or take ownership of any vehicles. They simply host the auction and collection auction fees for their services, which usually vary depending on the winning bid of the car.
Once all the paperwork has been done, the cars are put into lanes, which are sections of cars that are auctioned off in succession. These lanes usually contain cars from the same consignor, however there are sometimes special lanes that group cars together by type, such as previous rental cars.
AUCTION
Most auction houses open before the sale starts for “pre-sale”, which means that registered parties may look around at the cars they are interested in before the auction starts. Each car will have a tag, similar to a regular car dealership, or a handwritten note written in window paint that contains information about the car such as make, model, run number, mileage, and lane number. This is a good time for buyers to get a visual idea of where the cars they are interested in will be when it’s time for the auction.
During the auction, interested parties go to the lane that the car they want to bid on is located. That lane is where the actual bidding will take place. Each car is brought to the lane’s designated location, often just in the center of the lane, and shown to the prospective buyers as the auctioneer calls for bids. The seller, or consignor, has often chosen a minimum bid, called the floor price, that must be reached for the car to sell. If this minimum is not reached, consignors may choose to lower the floor price or to not sell the car. It is estimated that the entire auction process for one car takes less than 60 seconds.
Because the auction process is so fast-paced, auction houses use colored lights above the auctioneer to quickly and clearly indicate the condition of the vehicle on auction. Green lights mean that the car is free from major defects and is ready to drive off the lot. Yellow lights mean that the car does have some kind of defect, but the issue has been disclosed to the potential buyers before the auction, so the buyer cannot arbitrate the sale, or claim they did not know of the issue. Red lights mean the vehicle is sold as is, that there may or may not be major issues. As with yellow lighted cars, buyers cannot arbitrate the sale because they are informed of the as-is status before bidding. Blue lights are used to indicate that the car is being sold without a title present. Vehicles that are sold without titles are dealt with differently at each auction house, but the seller has to deliver the title to the new buyer somehow, and usually within a specified time frame.
Some auctions offer post-auction services such as test-drives, post-auction inspections, and transportation of the vehicle to the buyer’s location of choice.
LOT LAYOUTS
Layouts of auction lots, or lanes, vary from one auction house to another, but there is a general system that many companies use. Cars are given a number, called a run number, that shows the lane number, the parking spot number, and the time or sequence that the car will be sold in the auction. An example of what run numbers look like can be found here. All cars that are being sold in an auction are given a run number, which are then made into a run list. This list is available both to the auction employees, to quickly locate the sold car, and to the public. The public list is usually online and is posted so that interested parties can contact the auction house and give them the run number of a car they would like to get more information on.
When it is time for a car to be auctioned, an employee called a driver uses the run list to find the car in its specified lane and spot and drive it to a central location where it will be looked at and auctioned off. The number of drivers varies on how many cars are in a lane and how many lanes the auction has. Size varies greatly but recent data shows that the average number of lanes at an auction is eight.
In conclusion, auto auctions function in similar ways across the united states. They have industry jargon, such as run numbers and lanes, that are used across the various auctions and create a cohesive industry.