Buying in Bulk Fuels Auto Auctions' Growth

There are cars on California lots that sun and sand don’t mix with — the same make and model that an Ohio auto dealer can’t keep in stock.

The two dealers make a swap in Indianapolis at a gathering closed to the public, a place where nearly 1,000 people buy and sell cars — cheap.

These Indiana auto auctions, obscure to the average consumer, are hot spots for dealers, leasing agents and major banks across the nation eager to get used or unwanted cars off their hands.

Indianapolis auctions — set to add 115 acres by April — are growing rapidly and drawing buyers and sellers from across the nation.

“Dealers register from Maine to California to Canada to come here,” said Chet Goins, owner of Auto Dealers Exchange at the corner of Post and Brookville roads. “It’s a big business.”

Californian Joe Conte travels 260,000 miles a year by airplane to attend Friday auctions each week. The travel fare and the $5,000 a week he spends to transport his cars back to the West Coast are easily covered by the money he makes off his purchases, he said.

“It’s worth it,” he said. “This is as good as it gets.”

While the number of major auto auctions in Indiana doesn’t compare to the likes of Detroit, the state is still a favorite to many.

“Indianapolis has got a lot of interest,” said Tim Dowling, executive vice president of the Automobile Dealers Association of Indiana. “It’s as simple as that.”

That means easier access to get cars to and from their destinations, said Bill Burton, who buys as many as 15 vehicles each week to take back to his dealerships in Peoria, Ill.

Burton, who works for Green Chevrolet, brings more than a dozen drivers with him to take cars back, typically retirees looking for extra cash.

And the auction’s customers range from mega-dealers, such as Dan Young, to Larry McConnell, who makes the trek each week from Paris, Ky., to stock his modest 70-vehicle used car and truck lot.

“I do a little bit of everything. I buy, I sell. I buy some more,” he said.

McConnell, who praises Goins’ selection of high-line cars, raves even more about the company’s planned expansion.

The auction site, situated on 40 acres of land, will expand by April to become a 105-acre lot with three new buildings: a 50,400-square-foot auction building, a 70,000-square-foot reconditioning center and a 36,000-square-foot office building.

Parking space for cars will double from 3,300 to 6,000.

Adesa auction in Plainfield also has announced a possible expansion, adding 50 acres to its 85-acre lot along U.S. 40.

The upcoming growth of both sites is a telling sign of the future of these auctions, Dowling said.

“They’re obviously expanding because they believe they can increase their volume and will increase their markets,” he said. “I would guess they’re probably bursting at the seams.”

For the average car lover, the swelling lots of shiny cars are inviting, and the thought of those cars going for wholesale inside — much cheaper than the public could buy them on dealers’ lots — is aggravating.

But Dowling said consumers are lucky they aren’t invited in. Dowling compares the events to livestock auctions, open only to wholesalers. They’re a place where the average consumer would be out of his element and could be taken advantage of.

At Auto Dealers Exchange, 2,200 cars pass through the auction’s 10 lanes, which run simultaneously with 10 different auctioneers. The vehicles stop for a matter of seconds; dealers give them a once-over and have to decide that quickly to buy or pass.

“And the dealers have 30 seconds to decide if they want to spend $50 or $100,000,” Goins said.

Sometimes, those dealers might wish later they hadn’t, Dowling said.

“When you purchase a car at an auction, it’s yours with all its faults,” Dowling said. “Dealers do as good as they can to detect what’s wrong with it or right with it, and then it’s theirs.”

If a consumer gets a bad car from a dealer, he can always go back to the dealer, he said.

But there are examples where an auto auction can come back to haunt the consumer.

It’s not uncommon for a new car buyer negotiating for more money on a trade-in to be told not to bother because the dealer knows he can purchase it at an auction for much less.

Days later, that dealer has shined up the trade-in truck and put it on the lot for $4,000 more.

“Profit is not a dirty word,” Dowling said. “Every guy’s got to make a buck. It’s the same with every business.”

But dealers aren’t always on the up-and-up when seeking that “buck,” said Norbert Brown, head of the transportation studies department at Vincennes University.

“They will attempt to limp cars by, patch them up good enough to get them sold,” he said.

So a lemon bought at an auction could be disguised and passed on to the customer, he said.

“Dealers love auctions because they can pawn off the cars they don’t want, put a little shine on the tires and change the oil,” he said, “and once they’re sold, no matter who they go to, they’re out of their hair.”

But many automotive and consumer experts agree the auto auction is nothing more than a way to see wholesale prices.

“It’s like the stock market, like the New York Stock Exchange,” said Johnny Morris, who owns 11 dealerships in Muncie and Columbus.

Morris has participated in Goins’ auctions for 19 years and sells $815 million worth of cars a year.

“There is nothing in this bad for consumers,” said Marc Bilodeau, associate professor of economics at Indiana University–Purdue University Indianapolis. “No novice car buyer would do good being let in.”

Plus, the buying and selling process at auctions may turn out to be irrelevant, he said.

“It’s like a clearinghouse,” he said. “And it’s possible that in the end not much money changes hands at all.”