US Auto Auction Market

Part
01
of six
Part
01

Auto Auction Market Size

The 2019 market size of the US auto auction market is $113.8 billion.

Market Size

2018

  • In 2018, the auto auction market in the United States was valued at $107.6 billion, as reported by the National Auto Auction Association (NAAA).
  • That year, around 9.932 million auto auction units were sold in the United States, while the projected average price per unit was around $10,836.

2019

  • In 2019, the auto auction market size is expected to reach an estimated $113.8 billion in the United States. [calculations below]
  • The CAGR of the auto auction market between 2014-2018 was 5.58%.
  • According to a market report from Market Watch, the U.S. vehicle auction market is predicted to expand at a healthy rate between 2019 and 2023.

Research Strategy:

First, we consulted market reports such as MarketWatch, IBISWorld, PRNewswire, and others, hoping to find precompiled data on market size of the auto auction market in the United States. However, all the reports for the market size and the annual growth rate were behind a paywall. Next, we consulted industry associations such as the National Auto Auction Association (NAAA). We came across the NAAA's 2014-2018 market report for the auto auction industry in the United States, which contained data for the market size, auto auctions sold per year, and the projected average cost per unit during 2014-2018. However, there was no report available for 2019 and the CAGR.

Therefore, we triangulated the data based on the growth rate of the auto auction industry market from 2014 ($82 billion in revenue) to 2018 ($107.6 billion in revenue). Using an online CAGR calculator, we discovered that the growth rate is approximately 5.58%.

Calculation:

2018 market size: $107.6 billion
CAGR: 5.58%

107,600,000,000 * 0.058 = 6,240,800,000
2019 market size: 107,600,000,000 + 6,240,800,000 = $113,840,800,000 or $113.8 billion

Part
02
of six
Part
02

Auto Auction: Key Players


The top five players in the US auto auction market are ADESA Auctions, Insurance Auto Auction, Copart Auto Auction, Manheim, Auction Broadcasting company.

MANHEIM

  • Manheim is a top provider of vehicle remarketing services. The company was founded in 1945 and is headquartered in Atlanta Georgia. They have 78 locations across the United states and over 100 locations worldwide.
  • According to Crunchbase, Manheim is the largest automobile auction company in terms of volume of trade. The company generates annual revenue of more than $2.6 billion.

ADESA AUCTIONS

COPART AUTO AUCTION

  • Founded in 1982, Copart Auto Auction is a global leader in online car auctions. Their primary focus is in salvage vehicle auctions, and they are also the leading destination for remarketing and resale of vehicles. Their members can bid on classic, early and late model industrial vehicles, motorcycles, cars and trucks.
  • They have their main office in Fairfield California and over 170 locations across the 47 states. They also have eight locations in Canada. In 2018, the company generated $1.8 billion in revenue in 2018.

INSURANCE AUTO AUCTION

  • IAA is a subsidiary of KAR Auction Services, Inc. Founded in 1982, IAA is one of the leading auto auctions in North America that is focused on salvage auto auction services. The company has a strong customer base, the largest facility footprint, and high returns in auctions.
  • The company has more than thirty locations across the United States. In 2018, the company generated $1.3 billion in revenue. 

AUCTION BROADCASTING COMPANY

  • Founded in 2000, "Auction Broadcasting Company is a full service auto auction company offering transportation, full and partial reconditioning, telemarketing, in-house restaurants, world-class auctioneers and ringman, and on-line bidding capability." Currently the company is known is America's Auto Auction.
  • Headquartered in Indianapolis, Indiana, the company has about 22 locations in the United States. It generates approximately $72.64 million in revenue annually.

RESEARCH STRATEGY

To identify top five players in the US auto auction market, we leveraged several market reports including Market Watch, Business Wire, and Research and Markets. These reports highlighted Manheim, Copart, and KAR Auction Services. Further research revealed that Adesa and IAA are KAR subsidiaries in the auto auction market. To further identify other players, we searched on media publications and expert analysis for other key players. We found a publication on LinkedIn that opined that the US auto auction market is highly segmented with KAR Auction Services and Manheim having a 27% and 42% share of the market respectively. In light of this information, we proceeded to the annual reports of the identified companies to find other major players in this market. We found on the annual report of Copart that Auction Broadcasting Company is one of the top competitors in this industry besides ADESA Auctions, Insurance Auto Auction, and Manheim. Based on these findings, we have ranked the top players in this market based on the most recently available revenue.

Part
03
of six
Part
03

Online Auto Auction Customer Journey

The user journey of online auto auction platform users is not readily available in the public domain, and there are no documented surveys of online auto auction platform users yet, but relevant reviews and success stories indicate that people discover online auto auction platforms through social media and news or press releases of big online auto auction sales. Before bidding, online auto auction platform users browse through listings and comments, and ask sellers questions about the cars they put up for auction, to get a feel of the market. Some bidders, particularly those who have long been on the lookout for a specific car make and model, or are repeat buyers, are mostly driven by passion or emotion.

People opt for platforms that demonstrate transparency, honesty, and integrity, and that have a tasteful curation and an easy-to-use interface. Users hardly need after-sales support, but great first-time experiences motivate them to share their success stories and make repeat purchases.

PRE-PURCHASE

  • There appear to be several ways by which people learn about an online auto auction platform. Some people, for example, may have learned about Bring a Trailer, a popular online auto auction platform, through social media.
  • Bring a Trailer has grown in popularity partly because of its marketing push. To promote its services, the company has released Jay Leno videos, launched a YouTube channel, and published Instagram stories.
  • It appears online buyers are wary of scammers, falsely-advertised cars, and time wasters, and their bad experiences on sites such as Facebook and Craigslist may have prompted them to discover and look for more trustworthy online platforms.
  • News of big online car sales, such as the sale of a 2017 Lamborghini Aventador LP750-4 Superveloce for nearly half a million dollars on eBay Motors, may have also reached prospective buyers and prompted them to try the reported platform. Sales of that magnitude give the impression that the platform can be trusted. Bring a Trailer has also issued press releases covering its big sales.
  • Before placing their bid, online auto auction platform users browse daily auction updates, new offerings, and auction results. They do this to "get a sense of the market."
  • Pre-purchase activities turn into a bonding, leisure, or addictive activity for users, as these users share, critique, dissect, and dream over the new listings for the day. Users pay special attention to comments on listings, as they watch sales or bidding wars unfold.
  • This act of browsing through listings and comments increases the comfort level of users, particularly those who are not yet comfortable buying big-ticket items online. Some users, however, get discouraged by big sales because they feel they have no chance of winning when they bid.
  • Prospective buyers research by commenting on vehicles that are up for auction and asking sellers questions.

PURCHASE

  • Passion or emotion appears to be the purchase driver or motivation for some buyers on online auto auction platforms. This was the case for Eli Kogan, a car enthusiast who recently bought a 1956 Porsche Speedster for $500,000 on Bring a Trailer.
  • According to Kogan, "the Speedster was a passion buy, an emotional buy," and he bid ferociously just to acquire it. He had been looking for a Speedster for a very long time, and he was ecstatic to find the color and build he wanted.
  • It appears that, when selecting an online auto auction platform to use or make a purchase on, some buyers look for a platform that entertains and demonstrates transparency and integrity at the same time. This was the case for car collector and real estate mogul Bruce Meyer who recently purchased a black 1935 Bugati Type 57 on Bring a Trailer for nearly $1 million.
  • According to Meyer, he finds Bring a Trailer entertaining, and he believes that the people behind the company are "really doing a good job of presenting a car correctly and honestly and without outrageous reserves." The comments that emerge as a sale unfolds are both humorous and insightful.
  • The way the platform curates vehicles, and the community the platform builds, appear to matter as well. Hannah Elliott, writing for Bloomberg, notes that Bring a Trailer differentiates itself from other auction sites by its tasteful curation and easy-to-use interface. Cars on the platform can be sorted by make, model, and auction status.
  • Elliott notes too that "the community feels like a special group of like-minded fellows."
  • Whether the company's tastes matches the user's taste is also an important consideration. Meyer, for example, prefers Bring a Trailer over eBay because the former's listings, classic and vintage cars, are more to his taste. In the same vein, Hemmings Auctions, which specializes in collector cars, is expected to appeal to car collectors.
  • The fee structure and the ease of transaction appear to be crucial considerations in the selection of an online auto auction platform. Randy Nonnenberg, co-founder of Bring a Trailer, says that, unlike auction houses that can charge at most 20% on individual sales, Bring a Trailer limits the buyer's fee to $5,000 at most because "super high fees chafe, and people don't like it." He says this act of placing a cap on the buyer's fee has resonated well with people.
  • People value online auto auction platforms where members are moderated and there is no bid sniping.

POST-PURCHASE

  • It appears users interact with an online auto auction platform post-purchase either to complain about sellers or share the great experience they have had with the platform.
  • One member of the Lotus Cars Community, Steve of Rhode Island, has interacted with the after-sales support of Bring a Trailer and was not happy about it. After winning a bid on Bring a Trailer, he requested the seller to furnish him a copy of his license, but apparently, the seller had no intention of complying with his request. He raised this problem with Bring a Trailer but was told that they do not obligate the sellers they have vetted to comply with buyers' requests for license copies and accuracy certification.
  • Users who were happy with their experience on Bring a Trailer interact with the company post-purchase by submitting their success stories. Several of the people who have submitted their stories were repeat buyers. This indicates that some users are indeed motivated by their previous experiences to make additional purchases.
  • @fringecarcollector, for example, has already bought two Porsche cars on Bring a Trailer, one was a 1995 Porsche 968 purchased in 2017, and the other was a 1999 Porsche 911 purchased in 2019.
  • @Harrygambill is another example of a repeat buyer on Bring a Trailer. The first car he bought was a 54 Jaguar XK 120, while the second car he bought was a 2012 McLaren MP4-12C.
  • In just 30 days, car enthusiast Eli Kogan was able to buy four cars on Bring a Trailer — a Speedster, a 1974 Jeep, a Legacy Power Wagon, and a 1973 Porsche 911.

RESEARCH STRATEGY

In determining the customer journey of online auto auction platform users, we first checked if the user journey is readily available in the public domain. We looked for articles or reports covering the journey or the path to purchase, and since purchase habits are often determined through surveys and interviews, we searched for surveys and interviews of online auto auction platform users as well. This strategy, however, returned very limited results, and we soon learned that the desired user journey is not readily available in the public domain. It only led us to Cox Automotive's 2018 and 2019 Car Buyer Journey and CarGurus's 2018 Buyer Insight Report, but unfortunately, these surveys are not specific to online auto auction platform users. Though Cox Automotive's reports offer insights about the online portion of the car buyer journey and are specific to the United States, they do not provide any information on online auctions. CarGurus's report describes the digital purchase paths of car shoppers but does not offer any information specific to online auctions.

Since we could not locate surveys, reports, or articles that directly cover the user journey, we changed tactics and turned our attention to the websites and press coverages of online auto auction platforms Bring a Trailer, Hemmings Auctions, and other online car auction websites such as SmartAuction, Dashub, Capital Auto Auction, Copart, Adesa, eBay Motors, Auto Auction Mall, and RideSafely. As these companies are the players in the online auction space, we figured that their disclosures may offer some clues into the user journey of the online auto auction platform user. With this strategy, we were able to find Bring a Trailer's Success Stories, a compilation of stories submitted by users who were able to purchase a car successfully through the platform, and a number of news articles covering either Bring a Trailer or Hemmings, including those published by Bloomberg, Motor Authority, Hemmings Daily, Business Standard, Business Insider, and Work, Wine and Wheels. We learned that SmartAuction and Adesa are wholesalers, meaning they sell to dealers not consumers, so we excluded them from our analysis. Most of the other online auto auction platforms differ from Bring a Trailer and Hemmings Auctions in that they offer mostly ordinary vehicles, not vintage, classic, or collector cars.

Finally, to find additional information, we looked for reviews of the aforementioned online auto auction platforms. We figured we could glean additional information from these reviews. Some of the sites we consulted were Best Company, Yelp, Trust Pilot, Shopper Approved, and LotusTalk. The sites we found most helpful were review site Yelp and car forum LotusTalk because the reviews on these sites are more detailed than those on other sites.

All in all, there is limited information about the journey or path to purchase of online auto auction platform users in the public domain. Since the online auto auction industry is a nascent one, companies in the space may be cautious about sharing what they know about the purchase habits of their target audience. The most relevant source we found were Bloomberg's article on Bring a Trailer, Bring A Trailer's Success Stories, which provides detailed accounts of the purchase process from the perspective of users, and customer reviews of Bring a Trailer on Yelp and LotusTalk. From these sources, we were able to compile a number insights about the pre-purchase, purchase, and post-purchase habits of online auto auction platform users.
Part
04
of six
Part
04

Online Auto Auction Launch Best Practices

Smartphone apps and high-quality vehicle images are two best practices for launching an online auto auction platform

SMARTPHONE APPS FOR ONLINE AUTO AUCTION LAUNCH

  • According to Glenn Mercer, president of Glenn Mercer Automotive, an independent consulting firm in Cleveland, one of the best practices in launching an online auto auction is by bringing smartphone apps to the market, also known as "the app crew."
  • This practice is where online auto auction players provide mobile apps for customers in online auto auction. Mercer views "the app crew" as a collective group that is proliferating and getting decent funding from investors.
  • This practice is considered a best practice because most companies in the online auto auction industry are using this method when launching an online auto auction.
  • Additionally, this practice was proven successful where ACV Auctions Inc created a smartphone app for its customers, the company sold more than 5,000 vehicles in March, representing a 400% increase in year-over-year vehicle sales for the company.
  • On the other hand, KAR Auction Services Inc. sold 30,000 vehicles through its mobile app TradeRev.

2. HIGH-QUALITY VEHICLE IMAGES FOR ONLINE AUTO AUCTION LAUNCH

Why it is a "best" practice:

  • Most companies are applying this kind of practice when launching online auto auctions like Manheim's Enhanced Vehicle Imaging system and ACV high-resolution photos.
  • This practice has proven to be successful for both companies. ACV Auctions sold 10,000 vehicles through its online auctions in October 2018 and only 3,000 vehicles in October 2017.
  • On the other hand, Manheim's Enhanced Vehicle Imaging system increased the number of vehicles by 17%, attracted 26% more bids, and brought in $132 more per vehicle.

RESEARCH STRATEGY:

To provide the best practices for launching an online auto auction platform, we leveraged a compilation of industry reports, leading publications, and news articles specific to the online auto auction industry. We began our research by examining through trusted resources such as Automotive News, Marketersmedia, Autoremarketing, etc. We were able to identify two practices applied in launching online auto auction like creating smartphone apps and using high-quality vehicle images. We then considered these practices as best practices for launching an online auto auction as these were applied and used by more than one company in the online auto auction industry like ACV Auctions Inc., KAR Auction Services Inc., Manheim, and Tred & Carvana. In addition, these best practices were verified by success metrics and solid data such as ACV Auctions Inc created a smartphone app for its customers and was able to sell more than 5,000 vehicles in March, representing a 400% increase in year-over-year vehicle sales while Manheim's Enhanced Vehicle Imaging system has attracted 26% more bids from dealers, brought in $132 more per vehicle, and the number of vehicles that sold the first time through the lanes rose by 17%.
Part
05
of six
Part
05

Bring A Trailer & Hemmings

Bring A Trailer launched BAT Auctions, its online auction site in 2014. It has a selective auction-type process and is focused on classic and vintage cars. On the other hand, Hemmings has been in the car collection publishing business since 1954 but just recently started its online auction business (2019) with a wider-range of car varieties listed on their auction site, Hemmings Auctions.

BRING A TRAILER (BAT)

STRENGTHS
  • Bring A Trailer has been in the business since 2007 which started with a fixed price listing. Due to the rising demand in the market, the company launched BAT Auctions, a bidding-style system, in 2014.
  • BAT has listed more than 15,000 cars in BAT Auctions, an indication that many sellers and buyers have been using this platform. The BaT website records about 3.3 million website visits per month, in which 79.47% comes from the United States.
  • During the first half of 2019, the company's sale rate was 73% and had a 60% increase in the number of listed cars for sale (5,131 cars) compared to the same period last year (3,224 cars).
  • BAT allows website visitors to request for a car model they want to be featured or send their success stories after buying or selling on the auction platform.
WEAKNESSES
  • It is found that BAT does not facilitate payments but handles the listing and auction process. This aspect is what some users find BAT's premium service lacking, to be the intermediary entity for the financial transaction between buyers and sellers.
  • Since the company has shifted from being a simple car listing site to a classic and vintage car auction site, some sellers who previously utilized the listing site now find it hard to enlist their cars. Of about 600-700 auction requests BAT receives per week, it only accepts 200 and factors out over 400 of its requests every week.
  • According to an article published by GuysWithRides, over 45% of the requests are considered to be dealer-sourced which indicates that the company rejects over 150 private seller auction requests every week.
  • Therefore, private classic car sellers with low reserve prices may not always win a listing opportunity as BAT tends to choose to feature collectible cars.
COMPETITIVE ADVANTAGES
  • The company's auction website is updated constantly with daily listings of new offerings. Unlike Hemmings, which presents numerous cars, BAT selects what it offers, mostly high-end vintage cars.
  • Its team of 22 full-time professionals evaluates the cars based on rarity, uniqueness, condition, design, beauty, and the seller's requested reserve price. Only 40% of the cars that apply to be listed each week are accepted by BAT after thorough evaluation to ensure that buyers are certain the vehicles are well selected.
  • BAT also sends professional photographers to the seller (with a fee) to take quality photos to support the auction listing. Other auction house fees reach up to 20% per sale. Bring A Trialer's buyer's fee is capped at $5,000, regardless of the car's price.
  • The BAT auction site is considered to be a great option for car collectors and enthusiasts who want to benefit from a constantly updated access to quality cars.
CUSTOMER REVIEWS
  • Some reviews on BAT mentions the site's ease of use, especially the query function by make and model, allowing users to filter results based on the auction's status.
  • Buyers who already had transactions through Bring A Trailer commends it for "the ease of the transaction, and that buyer’s premiums and fees are significantly less".
  • The company was rated 2.5/5 on Yelp from over 68 reviews in total, with one recent review being curious about BAT's "hidden criteria as to who they accept and who they don't".

HEMMINGS

STRENGTHS
  • Hemmings Auctions has become a respected name for collector cars and parts since 1954. It started publishing high-quality reading materials for collector-car enthusiasts and expanded its lineup of publications in 2003 that feature muscle car profiles, restoration articles, technical articles, engineering and historical research, road tests, and auction results. This year (2019), Hemmings Auctions was launched, the company's online car auction site, to rival BAT.
  • Hemmings Auctions section has a wide range of vehicle selection for buyers and sellers, from exotic, classic, muscle cars, performance cars, motorcycles, trucks and SUVs, to engines and parts that can be easily filtered.
  • The Hemmings website records about 3.2 million website visits per month. Of this number, 79.73% is from the United States.
  • It also has a Hemmings Podcast that features discussions and interviews with known personalities in the car-collection hobby.
WEAKNESSES
  • To obtain further details on Hemmings Auctions, users need to create an account first, answer a lengthy questionnaire, and pay a flat rate, unlike other sites that allow customers to log-in through their email address.
  • Hemmings allows a seller to upload 25-50 photos depending on their pricing tier.
COMPETITIVE ADVANTAGES
  • Hemmings Auctions has a page that instructs users on how to go about the process of selling or buying through the company's platform. By having an account on the Hemmings Auctions website, a user would be entitled to have access to all collector car services.
  • The company claims to be the "only no-risk auction" in the business since a listed car that was not sold can remain listed on its platform for six months without additional cost.
  • Every listing at Hemmings has built-in fraud protection, bidder verification system, and great customer service.
  • Hemmings accepts car listings from anyone with an account at Hemmings Auctions, unlike the selective auction-type process of BAT. It also has a free marketplace app called Hemmings Classic Cars for Sale.
  • Hemmings, being a publisher with three magazines, offers car enthusiasts and sellers to be featured in their monthly issues.
CUSTOMER REVIEWS
  • Hemmings is considered to be one of the five best-used car buying websites, ranked by Car and Driver. Users find the company's personalized approach, by assigning a dedicated specialist, very helpful.
  • Reviews on Hemmings' new auction site mentions that Hemmings' is more customer-focused with great customer service.
Part
06
of six
Part
06

US Auto Market SWOT

Some of the strengths of the US auto auction market include limited start-up risk and the ability to sell products online. Weaknesses include heavy competition and high start-up costs. Opportunities include the ability to develop additional stores and enhance propriety products. Threats include the "continued evolution of technology and how it applies to the sales of both new and used vehicles" and the change in regulations by the government.

STRENGTHS

  • Auto auction services are most likely to remain profitable given the continued and ongoing demand for the buying and selling of vehicles.
  • There are high barriers to entry and this will slow down the increase of rivals.
  • The auto auction market is an owner-operator business that offers better control of the business.
  • In New York, the competition is relatively less in the auto auction market.
  • It offers the ability to sell products online.
  • High website visibility increases sales.
  • There is limited start-up risk associated with the business.
  • It can be seen that "the gross margins generated are extremely high since it is a commission-driven income".
  • The various operating costs linked with this type of business are considered moderate.

WEAKNESSES

  • Currently, there is a significant amount of competition online among used-car sales platforms.
  • A lot of people have resorted to using various "entities in lieu of paying a large commission for having a vehicle auctioned".
  • Competitors can offer similar products quickly.
  • Transportation cost is high in this business.
  • There is limited flexibility in pricing.

OPPORTUNITIES

THREATS

  • The major threat is going to be the "continued evolution of technology and how it applies to the sales of both new and used vehicles".
  • A change in regulations by the government can impact the business.
  • Products are already flooded in the market by competitors.
  • The insurance cost is on a continuous rise and this can negatively impact sales.

RESEARCH STRATEGY

There is no precompiled data on the public domain regarding the SWOT analysis of the US auto auction market. We examined sources such as Forbes, PRNewsWire, New York Times, Yahoo News, and Marketing91. We came across a SWOT analysis of the auto industry on Marketing91. However, the analysis wasn't US-specific. Further, we performed a thorough search on the website to identify reports specific to the US market but couldn't locate such data.

Next, we decided to identify the SWOT analysis of the top states of the US to present proxy data that might represent the United States as a whole in the auto auction market. Through this search attempt, we discovered a general SWOT analysis of the auto market industry and nothing more.

As our last resort, we identified the large US firms in the auto auction industry and tried to find their SWOT analysis. Further, we also looked for the global SWOT analysis of the auto auction market. This approach was considered because in most cases, the US market plays a huge role in the global market of any industry.

At this point, we came across a SWOT analysis of Amazon in the US and a business funding resource that provided a SWOT analysis of the auto market. We corroborated the two reports and created a SWOT analysis of the US auto auction market.
Sources
Sources

From Part 02
From Part 03
From Part 04
Quotes
  • "It started in retail with what Mercer calls "the app crew." Retailers such as Tred, Carvana and the now-defunct Beepi figured customers would prefer to purchase used vehicles online and through smartphone apps. "
Quotes
  • "ACV uses 40 to 60 high-resolution photos for each vehicle listing and considers itself a third-party inspection service that can give confidence to buyers."
  • "Greater transparency around pricing and images emerged on the consumer side of retail sales and now has made its way to the wholesale and business-to-business spaces, Chamoun said."
Quotes
  • ""We didn't see a lot of consistency on angles, lighting and all the things that make a good-quality picture," Reid said. "We feel that [enhanced imaging] helps us sell more cars, cuts down on arbitration and delivers an experience that dealers deserve.""
Quotes
  • "Enhanced Vehicle Imaging provides a standard and consistent set of vehicle images, leading to a higher conversion rate for sellers and a higher degree of confidence for online buyers. "