Gone in 60 Seconds

Jim Motavalli

Jim Motavalli | Aug 20, 2018

MANHEIM, PENNSYLVANIA—The car auctions I’ve been to have been fairly consistent. An auctioneer, usually British, sits up on a podium and offers a running commentary as a parade of shiny collector cars are driven or pushed past. Furious bidding ensues, both in the room and on the phones. An air of sophistication is maintained, and occasionally there are cocktail waiters to keep the bidders well oiled.

Fueled by Coke, Manheim auctioneers move the cars along--one per minute. (Jim Motavalli photo)

But there’s another approach, and I’ve just seen it at the world’s largest auto auction, Manheim, in business since 1945. That year, three cars were offered, and just one sold, but it was the start of something—now there are 78 locations in the U.S. Picture this: 36 lanes of auto auctions (set up sort of like a huge bowling alley) proceeding simultaneously. The pace is relentless: The cars are, literally, gone in 60 seconds.

Very competitive bidding for this Tesla Model S 85D. (Jim Motavalli photo)

Pure cacophony. A din from three dozen auctioneers at full song, blasting exhaust from every conceivable form of automobile, and shouting dealers. It was like the floor of the New York Stock Exchange on Black Monday. I loved it. For a car guy, it was as close to nirvana as you’re going to get.

The dealers come in from all over. (Jim Motavalli photo)

You’ve probably heard about the “secret auctions” where Army surplus Jeeps are sold for $50? Well, this is what they’re talking about—a dealers-only confab where cars change hands at wholesale prices. Not $50, though. The cars come from rental companies, factory fleets, insurers, expired leases and trade-ins.

This wasn't the exotic auction, but there were exotics there anyway--like this Maserati. (Jim Motavalli photo)

First, a few words about the used-car market from Cox Automotive Chief Economist Jonathan Smoke. The used car market in the U.S. is 20.5 million cars annually, which makes it 70 percent of total sales. Independent dealers sell more used cars than franchised dealers do. The average used car at an independent sells for $22,995, versus the new car median price of $35,170. Customers who are shopping for new or used cars (51 percent of all buyers) are 40 percent more likely to buy used.

Chaos on the floor. With 32 lanes, it's like a huge bowling alley. (Jim Motavalli photo)

The new car market is retreating a bit; the used market is still growing, but likely to hit a plateau soon. Some 85 percent of new cars are financed, but just over half of used vehicles are. The recession of 2009 to 2012 resulted in big cuts in auto production, and that shortage rippled through the used market.

The independents, Smoke said, are having inventory problems, but it’s passing now. The phenomenon contributed to a value rise for some used cars (Toyota Camry, Nissan Altima), which actually rose in value from one month to another. SUVs, particularly compacts, are attracting the biggest premiums as used cars, not surprisingly. Oh, and used cars are worth more in the spring, because that’s when people get their tax refunds. Value surges also after natural disasters, such as Hurricanes Irma.

The parking lots were vast. (Jim Motavalli photo)

Grace Huang, president of Cox Automotive Industry Solutions, said the used car market is $550 billion annually, and there are 270 million of them on our roads. That fact was brought home by the vast and nearly full parking lots on Manheim’s 500-acre campus. I saw everything from Lamborghinis and Aston Martins to Teslas (Model S and X), Maseratis, Ferraris, Porsches of all types and AMG Mercedes-Benz.

The good old days: Manheim in the 50s. (Manheim photo)

And this wasn’t even the exotic car "highline" auction—that’s coming up next month. There’s also classic car auctions, and a salvage one for problem cars that can be either sold for parts or fixed up.

The city that car sales built. (Manheim photo)

On the floor, I watched the progress of a lovely white 2017 BMW M2 coupe. With just 1,598 miles on the clock, it went for more than I expected. Conversely, an old Toyota 4Runner—the only rusty car I saw at Manheim—made what dealers must consider pocket change. The Tesla Model S with 29,000 miles went for a fair market value. There were bidders in traditional African garb, because a bunch of these cars are headed for Nigeria. Russians are big buyers, too.

Atlanta-based Manheim, more like a small city than a business, has 18,000 employees and 40,000 dealer customers. It’s a one-stop shop, said Kevin Gantz, Manheim assistant general manager, and will repaint (with water-based finishes), detail or mechanically fix cars for clients. Polluted water—43,000 gallons a day—is collected and 25,000 gallons are purified to drinking water standards in a reverse osmosis process that reduces demand by 60 percent. Delivery services are, of course, also available.

The view down the lanes. (Manheim photo)

When the cars roll in, Gantz said, they’re given a 1 to 5 grade. Owners have the option of getting that grade improved with on-premises' work. It’s obviously to their advantage to sell a car that’s rated 3.5 or better.

The Manheim business offers eight million cars annually with a market value of $58 billion, Huang said. And 500,000 cars are offered for sale just at the original Pennsylvania location. Big-spender dealers used to fly in, but these days 43 percent stay at home and use the Simulcast app, which shows the cars as they’re wheeled in and gives buyers the same information they’d get on the floor.

I enjoyed my visit to the 10th largest employer in Lancaster, Pennsylvania. It’s a charming community of 55,000 souls, with the same rows of graceful colonial brick row houses you see in Alexandria, Virginia. Not surprising, because Lancaster is America’s oldest inland city, with a population of both Amish and Mennonite people. They don’t drive, though they do build RVs.

I’ll be back for the classic car auction. Too bad I can’t bid without a dealer’s license. No $50 Jeeps for me.  

Here's the view from the floor on video:

 


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