Confessions of Car Wholesalers

Probably the most lively session at the AFLA Fall Meeting in Chicago this year was the Confessions of Car Wholesalers, a panel discussion of the wholesale car business followed by a testy question and answer session moderated by Pierce Walsh of Warren Buick. Members of the Panel included: Eddie Malone, Gold Coast Auto Brokers; Inglewood, Calif.; Glen Coleman, Coleman Bros. Motors, Morgantown, Ky.; Arthur Iverson, Albany Auto Sales, Chicago, and Sol Nieman, McCullagh Leasing.

Malone - My background in the automobile business goes back a long way. I was with the Chicago White Sox in 1949, 50 and 51. There was a thing called a curve that got me into the automobile business in a hurry. It didn't take them long to find out that I was a little overmatched in the big league. But some years ago, I went into the automobile business as a retail salesman. I progressed up to being a manager, I was a general manager. I became a used car dealer. I eventually became a Chevrolet dealer. And eventually my business experiences led me into the wholesale business, and we do wholesale a lot of cars. We buy and sell an awful lot of cars. We're kind of an important cog to you people. To start with, we couldn't survive without you. If you could find another way this morning or this afternoon to get rid of your cars without wholesaling, if it's more profitable, you wouldn't need to sell your cars to a wholesaler. So we need you and we know this and we respect you for this. But we do have a service that's very worthwhile and it's important. We do one thing - we just turn your inventory into cash. I know one time while I was a Chevrolet dealer, my office manage came to me one day and said Eddie we don't have any money in the bank. Some of you dealers know what I'm talking about. So I looked out the window and I had $25,000 in used car inventory. So, immediately I got hold of a wholesaler, a wholesaler with some money. So you know what I'm talking about when I tell you all we do is turn your inventory into cash and make you look good all the time.

I've been asked to talk to you about the used car market in southern California. Right now it's a very complex and a very confusing and a very unpredictable market. It is very complex and confusing because if we were to sit down and talk to 20 different dealers within a 50 mile radius we would probably get four, five or six different opinions of how business is. Excellent, good, fair and dealers that are fighting for their lives. It's hard to analyze what the market is. People are now buying cars in packages instead of one at a time. With the shortage of cars, with the increase in price of these cars, that was such a drastic step at one time, I believe we've got to have a good strong market for at least 90 days.

Coleman - We try to buy roughly around 25 cars a week in this area. We buy a few from leasing companies, pick them up in other states and other cities throughout the country. We take them home and try processing them in the best way we can. We have no particular way other than the fact that when we unload a transport they're for sale. We try to wholesale them for what we can, we fix the rest up either for wholesale or for retail. But we don't hold any cars for retail. This has worked for us. I don't know if it would for anyone else or not. I think one of our successes might be that we deal with a lot of little people. As most of you know the big operators never make you a lot of money. The people that keep you in the business are the little operators. The people that maybe own shoestrings but are still as honest as the speaker before me mentioned. They tell you that when they take a car and they'll pay you next week or next month or whenever they can, you can depend on it. No matter what people say about the automobile business, I believe they are the most honest people I have worked with, and I have worked in other businesses. In the other businesses I have had problems with finding honest people. In the car business I have had car fewer of these problems.

Iverson - There is probably in the wholesale business three ways to go with a car. If you're going for top dollar you've got to make the car, but then your costs get too high so you can't come out there. So then you get the wholesaler in who's going to do all the work and he's going to want to make a profit on that car. He'd like to make $600 a car. That would be fair enough. No one would be offended by getting a car passed out to them too economically. That's always good but it never seems to work out that way. So Warren Buick this year is going way out for fleet. So they said to me what do you want to do with these fleet cars that we've been taking in here. I'll buy them for what they want for the car. For what they say the price of that car will bring. I'll try on a hundred cars and after I go through a hundred cars I see if it can work. And he might tell you that they want $1900 for that car. Fine, we'll pay them $1900 for that car. We're going to try not to go through the haggling and chiseling. We're just going to step right ???? and fight that car off whatever it is. You've got to be able to make some money. These lease cars are good cars mechanically. I'd say out of 95-percent of the lease cars I've had very few mechanical problems. The cars have mileage on them but they drive good. They have good service and good maintenance on them. They run fine. I've never had a lease car with a bad engine in it, or transmission. I buy a lot of cars that are trade-in cars. They do not run as good as the lease cars. Now the interiors and the bodies, that's something else. But mechanically they are great, and with the cars this year, the market is going to be great. People that have cars that they are going to turn over are going to be in real fine condition with them. Because the price increases that these manufacturers are going to throw at the people, they are just not going to swallow it. They are not going to stand and pay that big price. This year I know more people that are buying used cars. The 72, 73, 74 car is going to be a real strong car and the cars are going to bring top dollar. Whatever you do with the car it is going to bring more money than it has before. Those cars are going to be in big demand.

Nieman - The energy crisis brought home the fact that the final result of a car lease is never known until that used car is sold. Although the capitalized cost or the monthly rate may vary between lessors, the expertise in the handling and the merchandising is the most important factor in lease costs today. It has always been important but more so today because more dollars are involved with the substantial increase of new car prices.

Knowing is the name of the game. Knowing your local market and knowing your market 200, 300 or 400 miles away or more. This helps you make better decisions. The wholesalers must know his dealers. He must know what kind of cars they buy, what kind of cars they handle best and what they do with these cars. In September and October I feel the used car market will be very good. From Halloween on, it could be "tricks or treats", depending on the number of cars that hit and depending on the economy of the country. It figures the new car sales will be slow at announcement time. And the dealers sales will be affected by: 1. The higher prices of the '75 models, 2. very little model change, 3. high interest rates and, 4. concern over the catalytic converter. No knowledge makes a lot of people confused. They don't know how it's going to work or will it work. Availability and price of unleaded gasoline. Rumors are that unleaded gasoline will not be available or the price will be higher. And the strikes that are around at present are causing a slow down in production.

Wholesale used car market will be fairly stable. I feel that the big demand will be for the intermediates and the compacts as they have been right along. Small cars have been a little soft. Should we experience any energy crisis again or any slow down in gasoline, they're going to be right back where they were in the start of this year. The American public will not walk. We know that. We know that they will buy automobiles if they have to do without other things. They will buy automobiles and they will use them.

Walsh - Here's a question for everyone on the panel. What is your estimate of wholesale worth of an above average 1973 Torino wagon, air and power, red, 55,000 miles?

Iverson - I would say $2500.

Coleman - I would say it would depend on whether you are buying or selling, but I imagine about $2000.

Malone - I think it's worth a little more money that that $2300-$2400.

Walsh - Now here's a $23-2400 call on the car.

Nieman - I'd say it's a $2400 automobile.

Walsh - Now here's a guy in Chicago saying it's a $2400 auto. We just want to file that away, put that in your memories.

(It should be noted here that later in the meeting, this same car was examined by everyone in attendance while parked in front of the Westbury Hotel in Chicago. Used Car Condition Reports were filled out, after which Frank Farrendorf of Gambles C & M Leasing gave a talk on "Condition Reporting & Assessment as 'The Price is Right.' "The car was then auctioned off at the meeting by Jimmy Franks of Arena Auto Auction, Chicago, and top bid was $2345 by Arthur Iverson).

Now here's a question for Iverson, Past opinions have mentioned that the pollution control devices on 73 and 74 cars was going to cause valve problems, because of excessive heat. Have you found any indication of this yet?

Iverson - Not really, most of the 73 and 74 cars that I've bought have been decent mileage cars, around 40,000. And I haven't seen any problems on them.

Walsh - Well, it's another concern in the industry that the pollution problems and the type of fuel they use would cause valve problems. And Art says it really has not been that pregnant as for as he knows. Members of the panel, what, in your opinion, is the difference in wholesale value of a 1972 Impala 4-door Sports Sedan, air, ready to go, both cars same color, trim and condition. One has 65,000 miles and the other has 30,000 miles. I'm sure every member of this panel can answer that.

Iverson - What's the difference between the worth of the two cars? One is worth $2100 the other $1850.

Walsh - A $250 difference.

Coleman - Both same condition, I found that in my area mileage hasn't been as important as it has been previously. Since you've seen a lot of high mileage. I think about $150.

Malone - I would say the difference is between $300-$400.

Nieman - $150.

Walsh - Here's another question for the panel. Is there any merit to reconditioning an 80,000 mile car?

Iverson - The biggest problem with the car is something that I don't think any one of these companies here could cure, so I'd say no.

Coleman - I think it would if it wasn't damaged too extensively we'd merit to recondition it. But not just an old worn out, banged up car, but one that's running good, looks good, but has 80,000 miles on it.

Malone - It would all depend on what area you had to recondition the car. An 80,000 mile car, you've got two strikes against you. I would spend a little money on it. I wouldn't fix interior, paint or metal to make it sell. I would spend a little money.

Nieman - If mechanically the car was good I wouldn't spend any money on it. I would sell it the way it is.

Walsh - Art, are cars being clocked?

Iverson - I don't think anyone in here would say no.

Coleman - I refuse to answer on the grounds that it may incriminate me. I don't know, I've heard rumors.

Malone - I was sure they weren't until I got to Chicago, I have never seen anybody clock a car. It's against the law in California!

Nieman - I imagine there is some clock work being done. But who, I wouldn't know, and if I did I wouldn't say.

Walsh - I don't care who it is, I just want to know if it's being done.

Panel - Yes.

Walsh - Tell us about books. Black Book. Red Book, Blue Book, NADA. Art tell us the varience in it. What is the book worth?

Iverson - Well, the books are good for a guide line. They don't really substantiate any figure on a car. It's not surprising to see $1,000 difference between two '72 Cadillacs-identical models, identical colors, identical equipment, identical mileage. But then you go into the fine line of how the car really looks. And the person that's looking at the car and the person that's flipping back the pages trying to guess without seeing the car, it's all in the dark. The black book is a very good book, it's a good guideline. It tells you in approximation of about $800 what the car is really worth.

Walsh - How can you make a car? And the word make is in quotes. How can you make a car, or remake a car, or make it into a lady?

Iverson - I think the only secret is the when we go in and buy a car we take a personal interest in that car, because we've put up our hard earned cash for it. And we just don't write a RO on it and send it in to the shop and say, "pain the side out." And the man sends it back and you forgetting the little scar on top of the fender. We just go about 50-percent further than the normal new car shop would go with reconditioning an automobile.

Walsh - How come the market is higher in California than when I sell a repro I get a rotten price? Question directed to Ed Malone.

Malone - You're just at someone else's mercy, someone else's discretion. It's easy to sell them when they are in front of you, but when they are 3,000 miles away you're asking for trouble.

Walsh - Do you think the car market on '75 units will be good at the end of the year?

Coleman - Yes I do. I think we found that America really wants a big car. We  went through the little car deal this early spring and last winter. And I think it would take a lot to get some people back into a little car.