The Auction Market Problem -I
Insights from our sources on the auction market- Week#14 (founding members only)
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Throughout our auto industry research, we have largely focused on the demand side of the equation relating to negative equity, financing access, high prices for cars, interest rates, etc. However, there's an equally important discussion to be had on the supply side of the market. For that, we've looked at the wholesale/auction market. Historically, this is where dealerships, banks, and OEMs dump cars that have lost the resale value. During COVID-19, when prices were surging, dealers made money on cars sold at auction, but then the market started to compress, and the spread between what buyers were willing to pay and where sellers were willing to sell widened considerably, driving down the number of transactions.
Over the course of few years, we spoke with numerous dealerships and auction houses. Here are our thoughts.