Auto auctions are a great way for dealers to find the inventory they need. But they are far from the only place vehicles are sold. For many dealers, non-auction purchases are an important part of their inventory acquisition strategy.
Let’s talk about non-auction purchases: what they are, where they’re sourced from, and how dealers can secure non-auction purchase funding.
>> New to floorplan financing? Here are some terms you should know.
Definition of a non-auction purchase
A non-auction purchase is a vehicle that is purchased by a dealer from any source other than a traditional physical auto auction or a digital auction/online marketplace.
Examples of non-auction purchases
There are plenty of non-auction sources of inventory out there that auto dealers can take advantage of. Here are a few common examples that a dealer might purchase from:
- Car trade-ins from customers
- From wholesale dealers
- “Street buys,” or a direct purchase from a private individual
- From other retail dealers independently, not within an auction
Some dealers even get creative, purchasing from sites like eBay Motors or craigslist.
Why make a non-auction purchase?
There are plenty of reasons a dealer might want to purchase inventory outside the auction ecosystem. Over the past few years, quality used vehicles have become tougher and tougher to find. In fact, inventory shortages have reduced supply all around—shortfalls in new vehicle production, due to staffing and supply chain issues alike, mean that newer vehicles aren’t getting resold as quickly as before. In other words, fewer new vehicles are now becoming used vehicles than before the COVID-19 pandemic. And since demand hasn’t dropped as much as supply has, it means there are not enough used vehicles to satisfy the market. All of this means that independent dealers have had to get creative to find inventory.
Additionally, sometimes the perfect vehicle you’re looking for just isn’t at auction. For the sake of flexibility and diversity of inventory, finding different sources like car trades is important.
Why floor a non-auction purchase?
There are plenty of advantages to floorplan financing (also known as “floor plan financing”) that other options lack. But when we’re specifically talking about non-auction purchase financing, one big reason is lienholder payoff. When a vehicle is financed, a lien is created—which means that until the loan is repaid, the lender likely holds the vehicle’s title. If the vehicle is sold again before the loan is repaid, the lienholder must be compensated before the title can change hands.
This process can be complicated, and it can tie up time and cash alike for a dealer. This is why some floorplan companies offer lien pay services to make things a bit easier. For example, AFC’s Lienholder Payoff Service verifies payoff, assists in remitting funds, and follows up on titles on the behalf of dealers. Access to this kind of trusted partner is one of the primary benefits of using a non-auction purchase floorplan.
