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Tue, Nov 27, 2001 - Page 24 News List

Used-car salesmen go online to survive

SEARCHER'S PARADISE E-commerce companies are working diligently to find small pockets where they can improve the efficiency of the used-car industry


Dealers examine listings of used cars on the Internet using computers at Manheim's National Auto Dealers Exchange auction house in Bordentown, New Jersey.


In the business arena, there is perhaps no more mismatched pair than the used-car industry and e-commerce. The used-car business is like an offensive tackle, a not-so-pretty giant that goes about its duties mostly unnoticed. E-commerce is like a promising running back, a first-round draft pick that has preened and danced its way to ignominy.

That the pair is now starting to operate successfully together could mean better times ahead for both.

The used-car market, which outsells the new-car market annually by a score of 42 million to 16 million, is experiencing a two-year price slump, industry analysts say. That slump is deepening, and not just because consumers are finding great deals on new cars.

Rental car companies, hurt by declining airline traffic, are dumping their cars onto the used-car market at a higher rate than they did in recent years, further undermining prices. The holiday months, meanwhile, are always the slowest for sales of used cars and trucks.

A few years ago, business-to-business e-commerce companies would have clicked a mouse three times, uttered a few words about "revolutionary end-to-end solutions," and promised to cure those ills. Nowadays when Internet and auto companies intersect, "revolution" is mentioned only in the context of RPM, as e-commerce companies are working diligently to find small pockets where they can improve the efficiency of the used-car industry.

Their efforts are paying off, say used-car wholesalers like General Motors Acceptance and others, which add that the Internet has helped open a new sales channel this year, and in doing so, it has put a small amount of positive spin, as it were, on an otherwise dreary 2001.

Analysts say that wholesalers of used automobiles, which sell their inventories to dealers of new and used cars, will sell just 4 percent of their cars over the Internet this year, a number that is expected to grow to 22 percent by 2006. Those seemingly paltry numbers add up quickly: Auto remarketers, as the wholesalers are known, are expected to sell US$38 billion worth of cars in 2006, and cut their costs by US$500 million in the process, up from US$21 million in savings this year, according to Forrester Research, the Internet consulting company.

Consumers get a break

Consumers may already be benefiting from the fact that wholesalers cut roughly US$300 from the cost of each sale they make via the Internet, savings that are mainly attributable to lower transportation costs and depreciation expenses.

Typically, auto credit companies and manufacturers take back nearly 10 million cars each year, including nearly 4 million whose leases and contractual agreements have run out with consumers and rental car companies. In the past, these companies have had to sell the cars in huge auctions run by companies like Manheim Auctions or ADESA Auto Auctions -- a process that takes an average of 37 days, including transportation from the wholesaler to the auctioneer, the inspection and the lag time between auctions.

Beyond the wholesaler's cost of carrying the car on its books for that long, myriad other costs are involved, including those tied to the paperwork-heavy process of coordinating with the auction company and delivering the car. Used-car retailers incur costs moving the cars through the auction, too. They can lose a day of work to the process and find no cars suitable for their lots.

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