How Dealers Use Auto Auctions to Source Inventory

For decades, auto auctions have been the beating heart of the used-car ecosystem. Dealers show up in person or log in online to bid against peers, hunting for vehicles that will turn quickly on their lots. Auctions remain indispensable, but how dealers use them, and the economics of sourcing, have shifted dramatically in recent years.

Why Auctions Are Critical

Despite the growth of trade-ins and direct-to-consumer purchasing, auctions still connect dealers to millions of wholesale vehicles each year. Manheim alone handles more than 7 million units annually across its 75+ locations and digital channels. ADESA (now OPENLANE for digital sales) and fast-growing platforms like ACV Auctions give dealers access to everything from late-model lease returns to high-mileage trade-ins.

Independent regional auctions, specialty events like Barrett-Jackson, and salvage players like Copart round out the ecosystem. Together, these venues provide variety: CPO-ready off-lease sedans, budget-friendly older units, trucks for work-focused lots, or even rebuildables and collectibles.

Dealer Strategies for Winning at Auctions

Successful dealers develop sourcing strategies tailored to their markets and margins:

• Targeting specific vehicle types. Zeroing in on high-demand models, from Toyota RAV4s to F-150s, that match their retail mix.
• Geographic arbitrage. Exploiting regional or seasonal price gaps, such as convertibles going cheap in northern winters, while carefully calculating transport costs.
• Bulk buying. Taking down multiple similar units in a single sale, often from fleet liquidations, to capture discounts and streamline recon.
• Leveraging condition reports. Relying on detailed cosmetic and mechanical grades to price in reconditioning costs and avoid surprises, especially in online-only bidding.

The most disciplined buyers combine all of these: spotting undervalued models, sourcing them from out of state, purchasing in volume, and trusting robust inspection reports to protect their margins.

A Decade of Volatility

The past five years have been among the most volatile periods in wholesale history:

• 2020–21: Record highs. Pandemic-driven shortages pushed wholesale auction prices up nearly 40% above pre-COVID levels. Dealers often paid near retail book value just to keep their lots filled.
• 2022–23: Diversification. With auctions thin on supply and painfully expensive, dealers leaned more heavily on trade-ins and direct consumer buys. Auction share of franchised dealer sourcing dropped from 27% in 2019 to ~18% by 2023.
• 2024: Stabilization. Prices cooled by 5–6% year-over-year, yet remain elevated versus historical norms. Tight supply of late-model vehicles, thanks to fewer lease returns from 2020–21, has kept depreciation muted.
• 2025 outlook. Analysts expect a gradual return to “normal” depreciation patterns by late 2025, as lease maturities recover and rental companies increase fleet turnover.

This volatility has left dealers more cautious, more data-driven, and more open to blending channels. Auctions remain core, but no longer monopolize sourcing strategies.

The Digital Disruption

One of the biggest shifts has been digital wholesale. Online-only players like ACV and BacklotCars surged during the pandemic, capturing significant share by allowing dealers to bid from anywhere. Manheim and ADESA have invested heavily in response, rolling out AI-enhanced condition reports, 360° imaging, and guaranteed “buy now” pricing.

The impact is threefold. The first is greater reach. A dealer in Chicago can compete for the same vehicle as one in Dallas. The second is greater competition. That same reach intensifies bidding pressure, making condition report quality and transport logistics more important than ever. Finally, the more people focus on digital auctions, the less competition there is at physical auctions.

Physical Auctions as a Competitive Edge in the Digital Era

The digital surge has made another impact: buying from physical auctions is now strategic. Dealers who continue to walk the auction lots often discover vehicles that weren’t available online. Being able to see, touch, and hear a vehicle before bidding also provides a level of confidence that even the most advanced 360° imaging can’t quite match. In-person inspection reduces surprises in reconditioning and gives experienced buyers an edge in judging quality.

There are also practical considerations. Smaller independents often offer lower fees, flexible service, and a personal touch that strengthens trust over time. At a time when digital platforms can feel anonymous, auctions still provide something dealers value: relationships. And, for local auctions, vehicles sourced closer to home arrive on the lot faster, keeping capital moving and helping dealers hit tight arbitration windows.

The smartest dealers aren’t choosing between digital or physical auctions. They’re blending both. They rely on digital platforms for reach and arbitrage opportunities, while treating physical auctions as reliable engines of supply that digital misses. In a marketplace where every point of margin matters, showing up to an auction is a competitive strategy.

What Dealers Should Watch For In 2025

Looking ahead, several themes will shape how dealers use auctions:

• Tight supply of late-model inventory will persist into 2025 due to the leasing slump of 2020–21.
• Increased digital competition means more bidding wars across state lines, raising the stakes for geographic arbitrage.
• Emerging EV and hybrid volumes will begin to enter the wholesale stream in larger numbers, requiring dealers to adapt reconditioning and remarketing playbooks.
• Transport speed and transparency will grow in importance. Buying the right car at the right price is only half the battle; getting it to your lot before arbitration windows close is just as critical.

Auctions and the Bigger Picture

Auto auctions are not going away. They will continue to anchor the wholesale pipeline, offering scale and variety unmatched by any other channel. But dealers who thrive will be those who adapt: combining auction sourcing with alternative channels, sharpening their bidding strategies, and rethinking logistics as a competitive edge.