Manheim Auto Auction vs Salvage Auto Auctions
Last edit: February 20 2024 • 323 view
Today’s story… It proves why car dealers “CRY OUT” that it’s impossible to get cars for a decent price at Manheim Auto Auction, and that’s why most of them have not generated any profit for the last few months.
Case study: 2020 Mercedes-Benz E450
I had a customer at CARS4.BID who was looking for a used, convertible Mercedes-Benz E-class for his wife without a salvage title and a grade better than average. Additionally to salvage cars we also buy cars from Manheim and Adesa (a car dealer-only auctions) with clean titles. This is part of a “Car Finder” service where we can assist with any kind of request.
I have personally been searching for this Mercedes, and I sourced a white one with a blue roof and blue/beige leather interior. It has very nice specifications. I liked it a lot.
What is MMR?
Here is where it gets interesting. Manheim has a pricing analysis tool called MMR (Manheim Market Research). This tool helps car dealers determine what to pay for cars. Essentially, instead of conducting their own research, they trust MMR and pay the price it suggests. They used to pay MMR blindly, never doubting the price analysis. Currently, MMR is $44,300!
Can you trust MMR?
I don’t trust MMR, just as I don’t trust the retail value shown at Copart and IAAI, I always verify it with the real market. So I searched for the same year, same trim, same specs at cars.com. The retail price for this Mercedes-Benz ranges from $45,500 to $50,000 with an average of 10,000 fewer miles!
So, I suggested paying up to $39,000 for the car, since prices are going down, and MMR has not caught an update yet. A few days ago actually, a car with less mileage and a better grade sold for just $42,500.
The Mercedes went to auction today and did not sell, because the seller did not let it go for a price below $40,000.
By the way this seller had advertised the Mercedes at his lot for $49,995, but it did not generate any leads. Within 2 weeks, they put it up for auction to get MMR to break even as soon as possible. By the way, you can get this info from CarFax (I get my CarFax reports via VIN.DOCTOR, need to be registered first).
This is bad news for the car dealer. They will lose money on this car, as there is no way it will even fetch $40,000 when it goes for sale next week. Dealers aren’t stupid right now, and they do research prices, therefore many of them say that dealer auction prices almost the same as retail. They cannot buy anything.
Manheim vs Salvage Auction
On the other hand, a month ago, I saw a similar-looking 2020 Mercedes-Benz E450 4Matic theft recovery go up for sale at a salvage auto auction and sell for just $30,250, providing a much better deal overall!
Three lessons learned here
1. Never trust suggested prices, do your own research.
2. The car business is a difficult game, and even car dealers can lose money.
3. Salvage auto auctions are much better value that allow much deeper discounts, which helps to prevent loss if prices suddenly drop. We have much better margins to work with. The best part is that we can buy for ourselves, drive for free for a year or so, sell, and even make money. If you’re thinking of car flipping, salvage cars are the only way to go. There’s less competition, lower prices, and they’re easier to sell.
Join the Autohacker movement
I also recommend reviewing my short course, which teaches you how to navigate the world of Salvage Auto Auctions. Join my Facebook community, and you’ll find the course attached to a post there. It’s available in Spanish too!
Update
This car has been sold for $43,300, I am surprised that they were able to sell it for this price, but MMR dropped within a week.
