IRS STEPPING UP FORM 8300 COMPLIANCE AUDITS
IRS Form 8300 Reporting Auto auctions today are full-service operations with a growing list of options to keep inventory rolling. The infusion of the Internet into the traditional auction business model has been, arguably, the most significant change in recent years. “The Internet keeps expanding and expanding,” said Charlotte Pyle, owner of Capital City Auto Auction in West Virginia and president of the National Auto Auction Association (NAAA). “I attended an auction recently and the entire lane was not there. They sold every car from a TV screen.” An increasing number of websites are emerging with features allowing dealers to shop for cars across the country without ever leaving the office. IndependentAuctions.com, for instance, has more than 67,000 searchable vehicles from 69 member auctions and boasts more than 41,000 registered dealers on the site. On any given week some 27,000 vehicles are sold. The site contains the inventory, postsale reporting and account management tools to help automotive professionals buy, sell and research vehicles from independently owned locations. ADESA, which operates 68 auctions throughout North America, has been one of the industry leaders in embracing online auctions. “Our biggest news as of late was the acquisition of OpenLane last fall,” said Tom Caruso, ADESA president and CEO and a recent inductee into the National Independent Auto Dealers Association Ring of Honor. “This industry-leading technology will help dealers as they expand their reach outside of their local markets in the online market. We are really excited about the progress we are making bridging our physical auctions and our online tool, ADESA OpenLane, to create a better buyer experience.” Auction Options While the economic issues of the past few years have meant fewer vehicles coming to auction, it has forced auctions to increase their level of service, Pyle said. “Volumes are down for the leases and repos, so auctions have opened up to do more outside work,” Pyle said. Auctions have stepped up floorplanning – providing the inventory loans that are a primary source of financing for dealers to purchase inventory to then resell, either from the showroom or in a wholesale format. Post-sale inspections have become an expected feature at auctions to give dealers assurance and peace of mind for both their in-lane and online wholesale purchases. “A dealer purchasing a post-sale inspection has assurance that the vehicle purchased passed a rigorous test, was properly represented by the seller and that Perry’s Auto Auction guarantees that the vehicle
meets the dealer’s expectations,” noted an item on the website of Perry’s Auto Auction in central Georgia. Most auctions with post-sale inspections follow a checklist of items that would cost $500 or more each to repair or replace. That includes checking the frame or unibody for structural damage as well as checking the paint, transmission, air conditioning system and brakes. They also check for things like odometer verification, flood inspection and emission control. Often there’s nothing mechanically wrong with a vehicle – it’s just dirty. But that’s OK, because many auctions are trumpeting reconditioning packages for dealers. At the Greater Erie Auto Auction, serving Buffalo, N.Y., Cleveland and Pittsburgh, a $95 “full detail” comes with an exterior wash, engine clean, exterior buff, interior clean and tire dressing. At a minimum, they’ll wash it for $10. Auctions also offer around-the-clock security for safe vehicle drop-offs, car title verification and transportation of vehicles. “Some of our dealers are heavily dependent on these truckers delivering the cars to the auctions, and over time the gas bill adds up,” Pyle said. Dealer Reaction Roger Montbleau, owner of Chelmsford Street Auto Sales in Lowell, Mass., buys cars at auction weekly. He’ll typically shell out money for the post-sale check his local auction offers as an extra service. “Good cars are not as plentiful as they used to be,” Montbleau said. “A lot of people mask these vehicles that come through. We need someone who can give us a certification. People aren’t as forthright as we want them to be.” If the cars he brings to the auction do not sell, Montbleau said, he appreciates the auction washing it before the next scheduled date. Stanley Thompson, owner of First Auto Sales in Bradenton, Fla., visits the auction about three times a month and sells 25 to 30 cars per month. “Auctions give you a greater selection at competitive prices you can’t get anywhere else,” Thompson said. Still, the new lineup of auction services has not exactly won him over. “We do everything in-house,” said Thompson, who has been in business for 20 years. “We know what we’re doing.” Indeed, as much as auctions keep working to enhance their services, some dealers would still rather do without. In fact, some avoid auctions altogether, choosing to get their inventory from other sources. Jay Iverson, manager of Carz Central in Estherville, Iowa, is not a fan of auctions, period. “Other than the fact that the cars are there,
there’s not a whole lot I like about auctions,” Iverson said. “There’s a lot of politics involved. The rules keep changing. There’s no consistency.” David Shoffner, owner of David Shoffner‘s Auto Sales in Redding, Calif., visits the auction twice a week. He likes the guarantee that the title is always good. “Whereas buying them off the street, you don’t know what you’re getting,” Shoffner said. Much has changed since Shoffner started selling cars with his dad in the early 1960s. He said he prefers an old-school method of buying cars. He is not impressed with online auctions – he’d rather go in person. “I pretty much cherry-pick the auctions to find what I like, and it allows me to make a good living,” Shoffner said. “I bought two or three cars from the Internet and it was a horrible experience. The cars required mechanical work that was not previously disclosed. “As for me, I like to see them and touch them first.” To be sure, online auto auctions come with risks. Similar to the other popular scams, said Kristin Judge, executive director of the Trusted Purchasing Alliance, a division of the nonprofit Center for Internet Security, there are two central themes to keep in mind when dealing with auto auction fraud: First, if an offer seems too good to be true it probably is, and second, never send money to someone you have not met in person, though that might not always be a practical rule for dealers to follow with online auctions. In 2011, the federal government’s Internet Crime Complaint Center (www.ic3.gov) received 4,066 complaints from victims of auto auction fraud. The total financial cost to those victims was more than $8 million, with the average loss being $2,000 per victim. The calls reporting the scams averaged two per hour. “Criminals misrepresent themselves as either Kelley Blue Book agents, or possibly a person moving out of town and needing to sell a car quickly before they leave,” Judge said. “Like other scams, the criminal sets up a persona that helps him appear legitimate. The price for the vehicle is usually at a great discount, too good to pass up. “When a buyer shows interest in the vehicle, he is asked to send a deposit to a third party to hold while the inspection takes place. Unfortunately, there is no legitimate third party. Once the scammer collects the deposit, the victim is left without his money or a car.” Auction Projections The future of auto auctions will place a continued focus on manipulating technology to benefit dealers. “We continue to make investments in our C O N T I N U E D O N PA G E 1 2
10
DEALER
NV_1012.indd 10
NEWS
OCTOBER/NOVEMBER 2012
w w w. n i a d a . c o m
9/18/12 11:53 AM