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Powersports Auctions: A Pre-Owned Primer

Connect with a reputable powersports auction house to build your used business.Successful dealers that are up year over year are clearly focusing on pre-owned units.

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In the years of double-digit growth, powersport dealers didn’t need to worry about pre-owned units very much. Today, however, things have changed and the successful dealers that are up year over year are clearly focusing on pre-owned units.

 

The myth that pre-owned unit sales detract from new unit sales is a thing of the past. In fact, pre-owned sales may even add to new unit sales in ways such as brand loyalty, customer service loyalty and dealership loyalty. Many first-time buyers are spending half the money of a new unit on a pre-owned unit.

 

In order to be competitive with pre-owned units, you have to stock what your customers want the most, whether it’s cruisers, sport bikes or ATVs – and you can’t always rely on trade-ins to feed your inventory, which is why participating in wholesale auctions is so important to powersports dealers.

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According to auction experts, prices tend to fluctuate along with the weather. For most people, the peak riding time is the summer, but what happens before and after those months can be equally important to a dealer.

 

“Auction prices definitely fluctuate with seasonality,” says Jim Woodruff, COO of National Powersport Auctions (NPA). “Prices rise in the spring and decline in the fall/winter for all categories of powersports. Dealers can use this to their advantage when stocking their inventory.”

 

Karen Braddy of Manheim Specialty Auctions says that powersports dealers are generally looking for different types of vehicles during certain times of the year. “Spring is the hottest time by far for every category. And fall is pretty good, too. But spring is when everyone is dusting off their bikes and getting ready for the riding season. All the dealers want to be stocked up and ready for this rush. And it is the fair weather units such as personal watercraft and dirt bikes that are hot, and when you get into fall then the snowmobiles pickup.”

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Most traditional auction companies acquire their inventory through various sources including repossessions. However, with the economy on the slow road to recovery, and with some manufacturers cutting deals to allow owners to keep their vehicles, repos have fallen off their peak levels.

 

According to Woodruff, who notes that NPA sells 5,000 to 6,000 powersports units a month, the number of repos industry-wide has declined over the past three years. “Everyone is aware that the weak economy, lack of retail financing and the drop in OEM production had a dramatic impact on sales volumes of new powersports units,” he explains. “This is why so many dealers have turned to auctions to help fill their inventory void. In fact, NPA has expanded its supply of pre-owned units from numerous sources such as dealers, insurance companies and manufacturers, as well as increased market share as repo volumes have shrunk. Pre-owned has been the saving grace for a lot of dealers. The volume of repo units has essentially leveled off now, and we expect it to grow later this year and onward as economic conditions improve and new lending takes root.”

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In the summer, when it comes to repos, Braddy says, Manheim Specialty’s business is generated from a couple of different places as far as our sellers are concerned. “We get them from banks as repos, manufacturers that might have program or company type units, and dealers, fleet and rental as well. Our mix in the early days was a lot heavier in what we call commercial. It was lighter on the dealer’s side.”

 

Braddy says initially there was an increase in repos when the economy dipped, but then there was a decrease in them as some manufacturers tried to keep their riders on their bikes. “There were a couple of programs that went out and said just pay one of your bills in this four-month period, and you can keep the unit,” she explains. “The manufacturers who did this didn’t want an influx of product that they would have to short sell. So it did change the inventory makeup. Primarily because we had a lot of commercial sellers.”

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Braddy notes that today 55 percent of their inventory is coming from commercial sources and the other 45 percent comes from dealers themselves that were traded in or on consignment. And 100 percent of their buyers are dealers. “We are not open to the public at all, and the only people who buy are the dealers. So 100 percent dealers on the buy side and sell side about 45/55.”

 

Year-to-year variances in wholesale values have historically followed the 1 to 2 percent annual increases in MSRP, but the last three to four years have not been typical. Wholesale values in general reached a low point in 2008 to 2009 when the economy was suffering and available product volumes in both the wholesale and retail channels were at peak levels, according to NPA’s Woodruff. 

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“Today, wholesale values are strong and fairly stable, which mirrors what we have seen in retail prices as pre-owned remains popular with consumers,” says Woodruff.  “It’s hard to say whether the rise in wholesale values has been simply recovering from the low point of 2008 to 2009, or whether it is product scarcity or the strength of pre-owned at the retail level. We tend to think it is a mix of factors, all of which are positive signs for dealers.”


Heading to Auction

For some powersports dealers, there’s nothing like participating in an auction. There’s a buzz and energy to it, and dealers have the opportunity to network with other dealers and take the pulse of the market.

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“When dealers are on-site they have the opportunity to perform their own vehicle inspections, start and listen to the sound of the motor and ask the staff any questions they might have about a vehicle,” says Woodruff.  “It is a great way to learn the auction process, understand the depth of our condition reports and learn the overall way we do business. Once a dealer has attended a few of our auctions and is confident in our condition reports, it is not uncommon for them to bid from the comfort of their dealership via NPA Simulcast. Dealers have also made attending live auctions in-person a part of their regular routine, either because they appreciate being there first-hand or because they do their own hauling to and from the auction of the units they are buying and selling.”

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Dealers need to consider certain factors before attending an auction or buying online through a simulcast event or some other program. And there are benefits to each of the strategies. Our auction experts recommend that if it’s your first time or you are a brand new dealer, that you attend your nearest auction to get a better understanding of what they offer before considering a purchase in the lane or online.

 

“Today over 40 percent of everything we sell for Specialty sells online,” says Braddy. “Which is a really high sales percentage compared to some other traditional auction companies. What enables us to do this is really good condition reports and accurate floor prices from our sellers. In other words, they bring their stuff ready to sell. They describe their products really well, take pictures to go along with it, and that enables us to sell a great percentage of them online. But, with that said, there’s a lot to be said for the ‘in lane’ sale. That’s where they all have the chance to get together once or twice a month and talk business and have lunch and smell them, hear the exhaust, kick the tires and so on. There’s definitely a benefit to that.” 

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Online Offerings

There’s much to be said about online purchasing versus real brick and mortar buying experiences. Wholesale motorcycle auctions are a bit different than perusing the aisles of your local bookstore. You’re there to buy inventory, not browse. However, online you can be a little more casual if you want. But experts say dealers can be just as effective buying online after they’ve become comfortable with all the tools they have.

 

NPA’s Woodruff believes that technology is critical for dealers, and today they have many tools available for finding and previewing inventory, researching vehicle values, managing auction inventory, and participating in live auctions via simulcast or an online sale. “Our condition report software has been finely tuned over the last 20 years and along the way has been customized to every year, make, model and category of powersport vehicle,” he explains. “Our condition report technology is consistent across all our venues and plays a major factor in all facets of a dealer’s experience, including the success of NPA eSales where dealers can use us as a virtual warehouse to buy with confidence as their needs dictate.”

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Manheim Specialty’s Braddy says that the online part of their auctions is almost like a virtual inventory for dealers. “Picture yourself sitting somewhere in the country, and you have a retail customer come in and ask for a 1994 Harley-Davidson FXR, for instance, that’s what I have. Not a common bike, it’s for a shorter person. So you’re trying to put together a deal for a bike that is not very common, and isn’t on your lot. Using Manheim’s online tools enables the dealer to go online anytime and search for a 1994 Harley Davidson FXR, find it anywhere in the country, and put the deal together for him. So it’s like a virtual lot of inventory that you don’t have to carry, store, insure, pay taxes on, etc. But you will have access to it. So it’s pretty powerful for the dealers who view the online tools we have as their virtual lot.”

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Outside the Box

A little bit outside the traditional auction options, a company called Insurance Auto Auctions also happens to sell quite a few powersports units as well. Dan Oscarson, vice president of global buyer marketing for IAA, says they have agreements with insurance companies, fleet leasing companies, finance companies and other companies which have large numbers of vehicles that need to be sold. IAA then liquidates the vehicles through their 150 auction locations across the country. Oscarson says that 28 of their locations are “mega bike centers,” where they bring additional units from other areas of the region for what they call a “big bad bike sale.” He says that in Los Angeles alone, they could have 120 to 130 motorcycles and powersports units, which is one of their largest for this market.

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“These are motorcycles that people can purchase to buy for parts, or to repair and restore, to customize or make racers out of,” says Oscarson. “Some of the units may have had collision damage, flood damage, some may be fire damage, some may have been stolen and recovered, they might be repossessed or from a finance company. We get bikes from all kinds of vehicle providers.

 

Oscarson says it’s typically a clean title if the unit is a recovered theft or from a finance company, or it could be a salvage title, depending on the laws of the state in which it’s sold.

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“If you buy it as a salvage title, you’re going to bid accordingly, says Oscarson. “When it’s restored or rebuilt then it will have a restored salvage title. If you’re building it for yourself, no one’s going to care.” 


Do Your Homework

Using a reputable auction company is very important, according to our auction experts. Dealers can succeed in the wholesale marketing channel if they remember a few key things. Use an established, reputable auction company that stands behind their sales and will back you up if you need help. While a recent story has shed light on an unscrupulous company making dealers sign “invoice protection” contracts, our experts say that in the end, the only way you can be confident you are going to get paid, etc., is if you have a contract with your auction provider that specifically states what is going to happen, and makes clear what the fees are, so there are no surprises.

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