By: Derek Hansen, vice president of wholesale, vAuto

Vehicle wholesaling was turned on its head during the pandemic, and I would argue that it’s changed for the better. Even with physical wholesaling options, more dealers than ever are turning to digital wholesale platforms to purchase inventory. That’s a great thing for sellers, as more eyeballs on their cars have no doubt contributed to the banner profitability most have seen in wholesale recently. However, it’s important to realize that the recent seller success has much more to do with market conditions (high wholesale values and limited inventory) than a newfound strategy or discipline.

And since we all know that what goes up in wholesale usually comes back down—at least to some degree—now is the time to make the strategic shift that can help sellers keep their wholesale efforts generating profits.

Progressive dealers are already rewriting the rules of wholesaling. The most successful ones are starting at the time of acquisition—a shift from the traditional retail-first approach.

Deciding when to wholesale a vehicle has changed.

With tight supply in used cars over the last year, we’ve seen a rise in dealers activating “we’ll buy your car” campaigns just to get inventory, sometimes even flipping those vehicles right into wholesale. As wholesale values appreciated month after month, dealers realized that, in some cases, wholesaling the vehicle right away represented the exit strategy that made the most financial sense for the vehicle and the dealership. This double-barreled evaluation of each vehicle’s retail or wholesale exit, at the time of acquisition, represents a competitive advantage for dealers who need to make money with every vehicle they acquire, irrespective of whether the profit comes from the retail or wholesale market. 

And with the ease of offsite wholesaling—where dealers can sell vehicles right from their lots—the process of getting a vehicle into the wholesale marketplace has been dramatically transformed. Offsite solutions such as Manheim Express eliminate transport costs since the vehicles don’t have to be moved to a physical auction, while also enabling those vehicles to get listed quickly with leading condition tools to showcase them well. Sellers love it, and buyers do too, as evidenced by the triple digital growth Manheim Express has seen year-over-year.

With all these trends converging, it’s no wonder that we’ve started to see some of that double-edged thinking already put in motion. That approach has served dealers well in this market—and it has the potential to continue serving them as the market shifts back closer to normal.

What happens when the market goes back to “normal”?

We firmly believe that wholesale can and should be profitable in any market—and that’s where Cox’ Automotive’s new Upside™ solution comes in. When dealers get a Kelley Blue Book Instant Cash Offer for a vehicle and then select to wholesale it in the Upside Direct digital auction, they will know at the time of appraisal what their minimum profit will be—no matter what the vehicle actually sells for. 

All vehicles are listed with no reserves and bids start at 50% of MMR, so the unit will almost certainly sell. And if the vehicle sells for a price above the Upside minimum, the seller gets to keep the lion’s share of the additional profit. Ultimately, Upside gives sellers even more reasons to lean into a new approach, as it offers an easier and more assured opportunity to maximize profitability for their vehicles.

You may be wondering how we can be so confident in this new way to wholesale that we practically guarantee sellers wholesale profit in any market conditions. The answer is simple. We’ve taken every piece of research, data and best practice we’ve learned from touching the entire retail-to-wholesale process for decades and put them all into practice in one seamless experience.