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Auction Action: Pre-Owned Heats Up

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As Bob Dylan noted, the times they are a changin’ – and if you aren’t tuned into the pre-owned market, you could be left singing the blues! According to the Motorcycle Industry Council (MIC), new unit sales were off -2.7% for motorcycles and -4.7% for ATVs in 2016. As a direct consequence, the pre-owned space has been heating up. Even The Motor Co. which had previously kept used bikes at arms length, especially metric trade-ins, is now embracing the pre-owned sector.

With pre-owned units representing a growing portion of a dealership’s sales, knowing how to buy and sell used is becoming an increasingly vital component to the survival of many dealers. Relying solely on trade-ins for inventory can be a challenge if you want to manage the right mix of vehicles to market to your customers. The solution is to work with a reputable auction company to manage your pre-owned inventory. Improved technology, streamlined logistics, better selection and the convenience factor combine to make auctions a viable option for virtually every dealership.

National Powersport Auctions (NPA), the largest provider of powersport vehicle remarketing services, was kind enough to grant us access to its newest location in Philadelphia for the grand opening and walk through of the auction process. With nearly 400 units on the auction block, there was plenty to take in. We were impressed not only with the facility but also by the way NPA works
to help dealers acquire or consign inventory.

NPA’s COO Jim Woodruff was on hand in Philly to walk dealers through the new operation, which he says is currently the smallest of their five facilities so they may outgrow it sooner than later. As part of the grand opening celebration, NPA was offering a special auction of approximately 100 Harley-Davidson Financial Services (HDFS) units with extended pre-flooring through the end of the month. Woodruff noted that the first two and a half rows of bikes were designated exclusively for the HDFS units, which is standard across all five of NPA’s locations.

Another highlight of the tour was when the NPA team gave dealers a sneak peek at a simulated auction, along with some tips on how to get the most out of one of their sales, whether you’re live or online. If you have never been to an auction before, it can be difficult to follow for the uninitiated. Without some sort of plan going in, you could spend more than you intended. “If you place a bid during the auction, we will come back to you until you put your hand down and say no,” says Cliff Clifford, founder and CEO of National Powersport Auctions. “But if you wait and try to slam it through at the very last minute there’s a good chance you will get left out in that bid.”

NPA’s head auctioneer Steve Holt says these scenarios can happen live as well as online, which is why he also encourages dealers not to wait until the last second. “If the auctioneer says ‘sold,’ that’s the command. Regardless of what happens with the computer, that unit is sold,” he explains.

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Holt says they don’t give preferential treatment to anyone, but timing differences can occur. “We have to click a button on the computer that says sold. So if you’re waiting for the last minute to jump in, especially online, you will probably miss out. We can’t tell online if you’re going to bid or not. We can’t see you and read your body language to see if you’re looking at the bike. Things move fast and furious sometimes, but we are always open to communicate with.”

Holt had some sage advice for newcomers: “If you’re live and bidding on a unit make sure you know what you want to bid. We see a lot of guys look down at the catalog and look back up, then a few Internet bids come in, and they look down again at the catalog. The print is not going to change,” jokes Holt.

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But seriously, he suggests that you figure out what you want to pay for a unit well ahead of time. Do your homework before the auction. The quicker you can bid, many times you get a better price. If you stay active and competitive at auction, Holt says auctioneers tend to appreciate that and will come back to you before calling “sold.”

Auction Trends
Proxy Bids are becoming more of a trend now, according to Holt. It’s not uncommon for two or three people to put in proxy bids on the same unit. “If we start out with a bike and I ask for $5,000 and all of a sudden it jumps to $7,200, that means there’s two people who put in a proxy bid.”

How do you make a proxy bid? Woodruff says you can use your phone, iPad or computer to put in a proxy bid anytime before the sale runs. “If you put that proxy in the day before and you change your mind, the computer will actually let you change your mind until the day of the sale,” he explains. “But once the sale starts, proxies are in and that’s what they are. The computer does the bidding for you. The interesting thing is the auctioneers don’t know — It could be you or your proxy bidding with the computer doing the work on your behalf.”

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Why go with the proxy approach? “It allows people to be in one lane while buying units from another lane, for instance,” says Woodruff. “Or maybe you have to step away for a short period of time. It does not take you automatically to your maximum unless there is a bid right above you in a proxy world. You may not need your full max bid.”

‘Subject To’ Approval
NPA, like most other wholesale auctions, operates with some sort of a reserve price. At NPA these can result in “Subject To” sales and they can be a little more complicated because if the high bid doesn’t meet the reserve price that is set for that unit, then you are on the hook to pay if the seller accepts your high bid amount. This way if you’re the winning bidder, you still have a chance to get the unit if the seller agrees.

Most of the time you’re committed to any bid you win unless you’re at the auction live and you pass as soon as the unit runs. “You can’t say a couple of hours later, ‘I bought another CBR600 and I don’t want that one now,” says Clifford. “But you can tell us at the end of the run if it’s ‘subject to’ that you don’t want it and you’re passing on it right then. You can’t do that online. That is the advantage to being at the auction versus online. If you’re the high bidder online and it’s a subject to, you’re committed to it.”

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What happens if there’s a tie bid? “If you’re here and you spent your time and effort to be here in person, you receive the tie bid,” says Holt. “The only exception to that is if it’s a proxy bid. Our thought process on that is if we open up a bike at $7,000 and you said yes I’m in at $7,000; if it was a proxy bid that bid already happened before you came in, they get the preferential treatment. You would have to bid $7,200.”

Condition Reports
A key component of the NPA process is the condition report. “There is no such thing as a 100-point pre-owned unit, we take the vehicle evaluation process very seriously,” says Jeff Kinney, NPA’s vp of operations. “If you have a highly rated vehicle, and all of the scores seem to be good from the engine, transmission and frame, the rest of the issues are typically just cosmetic. Most dealers can handle these pretty easily.”

But if you have a low score and the vehicle looks good, then you have to look for mechanical issues and really pay attention to the condition reports. “There’s 34-35 different options we go through on the different vehicles,” says Kinney. “When you’re looking at those, they do have an affect on the score. Just take the time and preview the vehicles really well. We include photos of any damage.”

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Woodruff adds they also employ a number of safety checks to make sure things you might not know about get caught. “If we know about something, we will say so, and it’s all available on the website and on the mobile app. We do a VIN history check on every vehicle that runs through. So if it has any sign of a salvage history, we will disclose that. Our job is to be as transparent and accurate as possible so you can bid and sell with confidence.”

Bottom Line
The times have definitely changed in the past decade when it comes to the pre-owned sector. Auction companies such as NPA spend plenty of time behind the scenes working with financial institutions, the OEMs and dealers to help them all work in harmony.

“We want bikes that are priced right for you,” concludes Clifford. “You’re here to make purchases and you want to take the bikes home with you so you can resell them and make money.”

Sounds like they are playing our song!

 


Black Book Value Guide

Value guides can be very helpful to dealers buying a trade-in or selling a unit either at retail or a wholesale auction including Eastern Powersports, Adesa and others. NPA even produces its own value guide that covers specific pricing of units they’ve sold in the past few months. It also includes the condition of the units, so it can be helpful for dealers to get a feel of the pricing.

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The folks from Black Book, motorcycle and powersports value guide publishers were also in attendance for NPA’s Philadelphia grand opening. We spoke to the editor Scott Yarbrough, who says that the guide covers most of the major wholesale auctions. The Black Book is targeted at dealers, lenders and other financial institutions in the industry.

“We try to keep an eye on most of the major powersports auctions around the country – everything from NPA to Manheim, Adesa, Eastern Powersports,” says Yarbrough. “These are the core groups we keep an eye on and the rest we can gather as needed.”

According to Yarbrough, the market has really picked up over the past couple of months. Pre-owned sales used to see more pronounced spikes for seasonality before the recession hit, since then the curves have been flatter.

“The powersports market used to have a pretty big ramp up in the spring and a pretty good drop off in the winter. While this still holds true, it’s much less pronounced now. But this month was almost reminiscent of the old days.”

In fact, data from both Black Book and NPA’s Value Guide shows that the market has been gaining strength the last couple of months. Last month Black Book reports the top increase was 2% for cruisers, and this month cruisers are up 3.2% across the segment. Scooters (although a smaller segment) are up almost 6%. The dual sport segment is up almost 4% as well.

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“We’ve been seeing more increases from 1.5-2.5%, getting up to 3%,” says Yarbrough. “Three segments have better than a 3% increase this month, which is a pretty significant rise. The biggest thing we’re seeing right now – a nice increase in the on-road bikes!”

 


Q&A With Garrison Hudkins, Vice President of Eastern Powersports Auction

MPN: What drove you to enter the wholesale powersport market?

GH: A demand for a powersports auction in the Northeast clearly existed. Many of our local finance sources such as credit unions and community banks required remarketing services for their repossessed or leased inventory.

Snowmobiles from the Northeast were being shipped all over the country because no true powersports auction existed in the Northeast. But the needs were not just limited to snowmobiles. We saw a need for all types of powersports units and the idea for Eastern Powersports Auction was crafted by our core team over dinner one night. It truly is a great story.

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MPN: What special features/services does EPA offer powersports dealers?

GH: First and foremost is EPA’s customer service and commitment to our dealer customers. EPA is and remains a private family held business. We continue to focus on our customer and invest in their success. We find creative ways to help them acquire quality units and to assist with getting those units delivered promptly.

An example of our investments into our customers is our industry leading 14-Day Certified Program. This guarantee applies to select units that are tested on our dyno. Dealers can offer a 7-day guarantee on the units they send to EPA, too. With the large number of powersports dealers purchasing online, this peace of mind guarantee helps a dealer bid with confidence.

MPN: Several indicators show that the pre-owned side is heating up. Where do you see the pre-owned market headed this year?

GH: Manufacturers have varied production on many makes and models through the past few years. That has resulting in a high demand for used units. As we look forward, the pre-owned market also gives the price conscious younger generation an entry point into the powersports world. We see the pre-owned market continuing to be a source of revenue and profits for dealerships in 2017.

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MPN: How does seasonality affect your sales (especially being in the northeast)?

GH: For EPA, the high demand for quality used powersport units has resulted in stable market values year of year. In other parts of the country, we typically see the Fall and Winter months having declines in values. We are somewhat insulated from those declines because of the quality of our inventory. The riding seasons are shorter in the Northeast, therefore we see pre-owned powersport units with lower miles when compared the other regions. So far, this year is shaping up as expected, with strong values and high conversion rates from quality sellers.

MPN: Since you have Eastern in your name, are you limited to the East Coast, or do you ever plan to expand?

GH: Our location has not limited our expansion in the country. We have dealers attend our auctions both in person and online from all over the country and even from Canada. Our online bidding platform, coupled with best in clast condition reports, has validated Eastern Powersports Auction as the premier powersports remarketing company for both buyers and sellers.

MPN: How far do most of your customers travel to come to your sales? And do you find dealers from further out are more active in your online auction events?

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GH: Each month, we see buyers who drive 500 or miles along with their trailers to attend our auctions in person. Additionally, we have buyers who fly in from all over the country – Wisconsin, Tennessee, Texas, Florida, Ohio, Michigan, and Canada, just to name a few. Oftentimes, these same dealers may choose to attend our auction through our online bidding platform. What remains consistent to dealers attending both in-lane and online is our commitment to customer service.

MPN: Can you tell us more about your Dyno Reports?

GH: The dyno is a great story and a good example of our commitment to our customers and dealers. When we entered the powersports auction business, we found that the AS IS-WHERE IS component significantly depressed the true values of powersports units.

Financial institutions were not unlocking the full value of their units and dealers were often times bidding without assurances as to the integrity of their purchased units. More than once we heard bad stories of dealers buying units, incurring shipping costs, only to find upon delivery that the units had significant issues. We invested significant capital to purchase our Dyno, and to change the way financial institutions and dealers sold and bought powersports units.

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As to the reports themselves, specified units will receive a test run on the dyno and the Dyno Report is included with each unit. It is part of the online condition report, measuring horsepower and torque. The dealer can buy with confidence and also use it as a tool for his retail process to show their customers the true condition of the motor. It is truly a win-win for us, the dealer and the customer.

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