Auto lenders are using a new, digital, wholesale sales platform to liquidate their off-lease inventory and repossessions, Bruce Thompson, chief executive of CarOffer, told Auto Finance News, although he could not name specific financiers due to confidentiality agreements.
CarOffer, launched in September 2019, is a self-proclaimed “real-time Stock Exchange” for used vehicles, Thompson said. “Its just like placing a limit order in the stock market for Apple shares.”
The buyers — which include Carvana, Byrider, Sonic Automotive, America’s Car-Mart, “three of the top five publicly traded dealer groups,” and 1,400 franchise dealerships — place their orders in the system much in the way they’d order new cars from the manufacturers, Thompson explained.
“They tell me what cars they want, what specs they want and what price they want to pay,” he said, noting that buyers can specify their wholesale threshold. “They can use Manheim Market Report plus a point, or NADA left side trade plus 500, so the bids vary.”
CarOffer facilitated 60 million transactions in January through its platform, and puts out $1.2 billion dollars in bids per day, Thompson said, noting that he expects the latter figure to double by next summer. “Our average bid right now is earning between 103% and 105% of auction prices.”
The startup’s origins can be traced to Carvana, Thompson said, adding that Carvana came to CarOffer in 2019, to purchase 350,000 cars in 2020.
“So, we essentially developed an algorithm with them where they provided some basic information on the car and we’d get a binding offer in about three to five seconds. We then took that algorithm and took it several steps further — we call it the ‘matrix’ — and then had all the other players come in and make their orders in the system,” Thompson said.
“We’re making offers on cars 24 hours a day, seven days a week, and the offers refresh about once every 24 hours.”