Virtual Auctions

For vehicle auction companies, the Internet has opened a new, untapped resource for accessing customers and markets. The introduction of virtual online vehicle auctions should be of particular interest to insurance companies. Insurers looking to get the most dollars from salvaged cars, trucks and recovered theft vehicles are now able to interact with buyers through an online vehicle auction technology that allows car buyers to compete in real-time. This ultimately leads to a speedier and more efficient process of moving inventory.

Reaping Benefits

Virtual online auto auctions took foothold in 2003. The technology helps insurance companies sell salvaged vehicles faster and often for higher recovery prices than through traditional physical auto auctions. More often than not, this increase in efficiency results in higher returns for insurers, translating into lower premiums for policyholders. 

Prior to the advent of the Internet, salvage auto auctions spared insurance companies from having to negotiate separately with contractors, auto wreckers and salvage yards, thus saving insurance companies cost and hassle. Rather than continue with an inefficient, logistical nightmare, cars were pooled together and buyers were allowed to bid on them — and thus auto auctions were born. The virtual online auto auction has taken this process several steps further, streamlining the process to make it more efficient, while at the same time boosting the insurer’s return on investment (ROI).

The International Buyer

Since all bidding is done online, items on the auction block are available to buyers anywhere in the world.  Insurance companies benefit from multiple advantages reaching and converting international buyers. For example, insurers see increased competition online, often resulting in higher returns. The more bidders involved in the auction, the better chance the item has to be sold — and for a higher price.

Unlike in the United States, many countries do not have their own — or at least a large — established domestic automobile production. This means they cannot meet all of their domestic demand. Many foreign countries therefore have to import their vehicles; this often comes with heavy tariffs. In some cases, the duty alone on importing new or used cars exceeds 100%. In many countries, salvaged automobiles are legally considered parts and are not subject to such duties. Buying salvaged cars at U.S. auctions, shipping them overseas, rebuilding them and then selling them is financially efficient. Today, some of the largest export markets for salvage vehicles in the United States are in Eastern Europe and Latin America.

Auctions and Transparency

Virtual online auctions can help eliminate some of the more unseemly aspects inherent in the auction process such as intimidation, collusion and “sniping.” Intimidation and collusion have plagued the auction world since it was invented. It occurs when bidders and/or the auctioneer conspire to “fix” an auction. Auctions are more susceptible to fixing if they involve bidders who cannot attend and the absent bidders use a “leave-the-bid-behind” method, which authorizes a third party to bid in their absence.  Not only does collusion cheat the other bidders out of a fair auction, it also prevents the items on the block from being sold at their optimal price.

A virtual online auction takes the human element out of the process, establishing a more even playing field for all bidders. It eliminates opportunities for threatening or intimidating other bidders, thereby ensuring fair access to all vehicles.

Conclusion

Online auctions have helped insurance companies recover money through the salvage process by broadening the scope of access and expediting the process of buying and selling automobiles. Looking at how far the industry has come, we might expect to see continual improvement in the area of virtual auctions, as the industry migrates toward an entirely electronic format — with no paper, no red tape and significantly reduced bureaucracy.

FAST FACTS:  Pros and Cons of Online Vehicle Auctions

Virtual online vehicle auctions are an advanced way for insurance companies to sell off salvaged cars faster and achieve a higher recovery price. Here are some fast facts on the pros and cons of online vehicle auctions:

Benefits

•    The pool of bidders is larger than that of physical auctions, maximizing the amount of money recovered from salvaged vehicles.

•    Assists sellers in the vehicle claims evaluation process by providing online salvage value estimates. This helps determine whether to repair a particular vehicle or deem it a total loss. 

•    Insurance companies can enter a vehicle into an auction to establish its true value. This gives insurers a means to avoid dealing with estimated values when negotiating with owners who wish to retain their damaged vehicles.

•    Offers sellers real-time data for processed vehicles, including vehicle sellers’ gross and net returns on each vehicle, service charges and other data.

•     The whims of Mother Nature do not affect online auctions; therefore sales are not lost due to inclement weather conditions. Challenges

•    Some auction companies do not inspect cars before auctioning, which deters buyers. Insurance companies should ensure they partner with reputable auction companies that inspect each vehicle.

•    Auctioned cars are bought “as-is.” Therefore, buyers may not purchase a car that has severe damage or looks like it needs a lot of additional work.

•    Online auctions provide photos to view the vehicle, but buyers who want to “touch and feel” the car before they purchase it would still have to go to the facility.

•    Auction sites are working to minimize risk, but the potential still exists for online fraud and scams.