The "Humline" Price

Last post I talked about how price discovery is going on demand and that commoditizing the VIN has begun.

But as I got thinking about it, I’ve realized that with a certain segment of vehicles it already exists. Which illustrates what commoditized pricing will do to the market at large.

Last week I was invited to speak at the National Public Auto Auction Association conference hosted by Clark County Auto Auction in Jeffersonville, Indiana. Lots of great conversations and different approaches to running a public auto auction.

At dinner, the topic turned to dealing with the non-running and barely running vehicles that every marketplace disposes of. Most have no reserve and will sell to the highest bidder. An interesting similarity arose, almost every auction had a standing offer from one of their dealers on every single vehicle in the sale. At my own auction, Great Northern, it’s currently $200 a vehicle.

It's a baseline price, a “humline” and always present. Other bidders in the auction know (or figure out eventually) that this is $ on the table. But they also know that advancing the bid will allow them to secure the vehicle. Sometimes the dealer will buy and lots of times not.

So how can this dealer be confident enough to leave this blanket offer? I called him to find out. Here’s what he said, “Sean, I’ve been at this a long time, I like to think I know my business. I’ve got my ducks in a row to handle these cars. Besides, if the market drops out or goes up...do I not call you and adjust my standing offer?” “Of course.”

Now, I’ve got to tell you, as a marketplace...this “starting offer” or call it what it really is - the commoditized price for non-running, end-of-life trade-ins - changes the dynamic of the sale.

Other "in play" buyers pay attention lest they miss a deal. It speeds up the auction because you’re starting with a relevant market price and the auctioneer just has to quickly see if there is more interest from the bidders. In fact, the price permeates up to the point of trade-in. With the standing offer, any dealer selling a vehicle knows what they’ll get at a minimum for that end of life trade-in.

Now apply this same "humline" pricing to any year, make and model, would the market not react the same? As sellers, we would know the minimum price we would see in a robust open market. As buyers, we would also know this price and know where to advance the price. The marketplace speeds up.

A commoditized price will ignite the market. This is Accu-Trade.

See you next time as we explore more of the commoditized VIN.

Sean Liptay knows Trade-Ins.

Sean’s education started as part owner of TGNA, the largest independent auto auction in Atlantic Canada... which means, he sees 10,000 trade-ins a year! He received his Undergrad in the wholesale market with his start-up Selectbidder, a dealer-dealer trade-in marketplace. He is now studying for his Masters, "taught” by the world’s largest automotive wholesaler, and the founder of Accu-Trade, Robert Hollenshead.

Rest assured, Sean's thesis, "Commoditizing the VIN with Accu-Trade" will dramatically change the automotive industry as we know it today.