Whether you are an occasional buyer or a veteran auctioneer, the success factors are the same. Non-professional buyers may be more emotional, especially when they can buy a luxury or exotic vehicle that will become their future baby. For an entrepreneur, however, it is important to remain cool-headed.
We are addressing professional or amateur buyers who purchase vehicles to recycle them for profit. They buy to rebuild, export, resell in parts or complete to profit from the raw materials, or a happy mix of some of these elements.
If you are such a buyer, you probably need vehicles as inputs to keep your business running. So being adept at auctions, especially digital ones, can be a key skill to your success.
Here are 3 factors to guide your auction bids:
1. Be a good judge of supply and demand
That is the sinews of war. This varies your prices, your margins, and the cycle time between buying and reselling a vehicle. Of course, pay attention to the year, make and model of the vehicles, what they are worth today and what you think they’ll be worth when you’re ready to sell them. The price of metal, of parts and of new vehicles, even their colour are all factors to consider.
Knowing the past prices is interesting, but those who have a flair for estimating the prices of the future will be able to make the most judicious choices at the auction. You do not need a crystal ball to estimate the resale value. It’s about looking at your numbers and if you have a POS or ERP that allows you to know your demand, that’s a plus.
There are even tools that allow you to guide your bids with their information. But you must be careful because it’s not magic. You need to keep an eye on automotive and raw material current events to keep abreast of the new trends. For example, in 2020 and 2021, the peak years of COVID-19, the most prolific buyers are those who were able to read the market before it changed.
Tip: For auto parts dealers buying total loss units, such as recyclers, vehicles with a bumper or driver’s side door are preferred. These parts add value to a unit when they are still in good condition. Since most impacts in automobile accidents are frontal or driver side, these highly demanded parts sell quickly.
2. Respect your margin
Now that you have an idea about a vehicle’s resale price, several factors will come in between the purchase and resale, impacting your profit margin. For an exporter, it could be the exchange rate or transport fees. For vehicle rebuilders, it could be parts and labour costs for rebuilding a unit. For a recycler it could be the drop in metal prices. Each buyer type has its own challenges. Controlling one’s margins partly requires the same skills as for supply and demand for the external elements that can influence margins.
It is important to follow current events and trends related to your process. For internal items such as the efficiency of a production floor for dismantling or rebuilding a vehicle, entrepreneurs must know their overhead costs and have a good analysis of their internal costs.
Tip: when buying total loss vehicles at auction, it is important to have your own idea of the estimated damage to the vehicle. As in all things, there are some very good damage estimates and some very bad ones.
It is up to you to weigh up what you see in the photos against the estimate and get an idea of the repair costs that the damage may entail. Some vehicle manufacturer repair specifications, which are mandatory to get a vehicle back on the road in North America, can simply render unprofitable a purchase for which damage was poorly estimated.
Of course, make sure that the vehicle’s key parts are present and in the condition you want. For example, a main battery on a hybrid car or a catalytic converter on most models.
3. Know the competition
If you buy at several auctions, it is important to adapt your buying patterns. The rules of the game and especially the buyers are not the same everywhere. They are your direct competitors.
Get to know those who bid on the same units as you; how they operate, the units they win and at what price, what they intend to do with the units they won, etc. If you have a reseller profile and foreign exporters are interested in the same units as you are and their market is more lucrative, you might want to revisit your buying strategy and, if things get worse, your business model so you can remain in the competition for the resource.
In short, it is not about emotions, but rather about strategy and adaptation. The market is ever changing. Based on the last two years, the next ten will be marked by intense developments. As an entrepreneur, you must remain rational, make good purchases and, if needed, redefine your business model, even if it’s painful. Some trends are inexorable and here to stay. You must adapt to get ahead.
Obviously, the origin of the vehicles you buy is fundamental and often a guarantee of the quality of the units. An auto auction such as ProgiPix offers total loss or stolen/recovered units for Canadian insurers. In addition, their service and that of their network keepers is outstanding. You can always be sure that the units were in good hands before and during the auction.
Author: Alexandre Rocheleau
Collaboration: Frederic Miceli
Translation: Sophie Larocque
Editing: Émilie Blanchette