Do Car Dealerships Buy Cars in Groups or Individually?

In the world of car auctions, the practice of car dealerships acquiring vehicles is a fascinating topic. Typically, dealerships purchase cars individually rather than in bulk. Each car is a unique item with its own condition, history, and market value, making it impractical to buy them in groups. This article explores the strategies that car dealers use when purchasing cars at auctions, drawing from historical insights and real-world experiences to provide a comprehensive understanding.

The Traditional Method: Individual Purchase

Each vehicle at a car auction is different. Dealers usually bid on and buy cars one at a time, based on specific inventory needs and market conditions. This method allows dealers to tailor their purchases to their specific market and customer demographics. Purchasing cars individually also enables dealers to better control the quality and condition of the vehicles they acquire.

A Historical Case Study: A New Dealer's Adventure

Back in the early 1980s, a new Chevrolet dealership faced a unique challenge: opening the doors to a market starved for vehicles. Upon opening, the dealership found itself without any inventory, as new cars were not due for several weeks. This presented a strategic opportunity to act quickly.

Our dealership secured a significant lot at a General Motors (GM) auction. The warehouse was organized by brands, with Chevrolet vehicles initially presented, followed by other brands like Citation II and other models. We strategically loaded the dealership with a diverse selection of slightly used vehicles. These cars could be sold as “current model year” and came with extended factory warranties. The success of this auction strategy hinged on our ability to use gamesmanship and strategic bidding to secure favorable prices.

The auction featured a high demand for certain models, such as the Camaro. Dealerships from various areas were bidding aggressively, with some cities offering higher resale values. Our strategy involved bidding on a car we knew we wouldn’t want, driving up the price, and then exiting the bidding process, allowing another dealer to pay too much. This tactic created a perception that the cars were overpriced, thereby discouraging other bidders and giving us a competitive edge.

We successfully employed this strategy three times, securing a fleet of 15 Camaros, largely the Z-28 model with a Crossfire injection system, all for thousands of dollars less than they would have cost if they were new. In a matter of weeks, we sold these vehicles and built a reputation for being a great value in our market area.

The Evolution of Car Auction Practices

Historically, GM assigned factory representative cars to dealers. However, this method was often deemed unfair as dealers had no control over the inventory they received. This led to the adoption of car auctions, where dealers could choose the vehicles they wanted. Under this new system, our dealership thrived.

Conclusion

While car dealerships typically purchase vehicles individually at auctions, the strategy and decisions made at these events are complex and multifaceted. Understanding the market dynamics and using strategic bidding can significantly impact the cost and quality of the vehicles a dealership acquires. This historical case study demonstrates the effectiveness of employing such strategies in a competitive buying environment.

For further insights into the latest trends and best practices in car auction practices, continue exploring our resources.