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I believe proxy bids represent the next generation of used vehicle acquisitions as competition and supply constraints force dealers to widen the number of sources they use to feed their inventories. Given these conditions, proxy bids strike me as the most efficient way for a dealership to extend its acquisition efforts to reach multiple outlets at the same time.

Yet, many dealers say proxy bids are ineffective. They say vehicle win rates are too low (10 percent or less) and they rarely win vehicles for less than their maximum bid amounts.

To address these concerns, I’ve met with Manheim executives to obtain data on dealer proxy bids and determine ways to make this form of online auction participation less of a stumbling block for dealers. Here are key data points and insights from these discussions:

Most dealers don’t use proxy bids.

On Manheim Simulcast, less than 20 percent of participating dealers place a proxy bid; on OVE, 41 percent use proxy bids. These proxy bid usage rates suggest most dealers are either distrustful or unfamiliar with the proxy bidding process. I’ve talked to several dealers who acquire 100 percent of their auction inventory through proxy bids. They say proxy bidding is a more efficient and productive means to acquire vehicles than physical and simulcast auction participation. Such anecdotes suggest dealer participation rates will increase as more dealers become familiar with proxy bidding.

Dealer bidding generally misses the mark.

Manheim data show dealers have more proxy bid success on OVE (20 percent of proxy bids win vehicles) than Simulcast (7 percent). Interestingly, Manheim also reports that losing proxy bids often fall short of a vehicle’s selling price (5 percent less on OVE and 23 percent less on Simulcast). On a $14,000 vehicle, this gap is either $700 or $3,200, respectively. This data suggests that many dealers’ proxy bids aren’t competitive enough to win the vehicles they seek. I suspect this is due to dealers hedging their bids to “steal” vehicles or avoid risk, as well as the limited transparency that each auction platform currently offers. On OVE, for example, dealers see more bidding information than they do on Simulcast — a key factor behind OVE’s smaller bid-to-selling-price gap. Some good news: Dealer bidding will get better as Manheim provides more data to proxy bidders on the gap between a vehicle’s selling price and the losing proxy bid amount.

“I only win proxy bids at the maximum bid amount.”

This appears to be an incorrect dealer perception, according to actual vehicle win data. The data show that winning proxy bids hit the maximum bid amount 41 percent of the time on OVE and 19 percent on Simulcast. These percentages seem reasonable in the highly competitive auction environment. Likewise, if dealers purposefully shy away from bidding as much as they know they could or should (as noted above), one would expect to see a fair number of proxy bids reach their maximum to win a vehicle.

These data points appear to refute some of the chief concerns dealers raise about proxy bidding. Likewise, the data suggest that dealers who say “we can’t find the inventory we need” probably haven’t exhausted all of the resources at their disposal.

I will continue to examine online auction bidding and best practices to help dealers become more effective in their used vehicle acquisition efforts.

In the meantime, I would like to publicly thank Manheim executives for sharing previously unpublished data on proxy bidding with me as part of their broader efforts to bring more transparency, ease and efficiency to the online auction marketplace.

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