The increasing number of used vehicles sold via the Internet is making it necessary to develop a vehicle condition grading standard in the remarketing industry. Buyers and consignors alike need a way to identify the condition of vehicles sold online in some form of shorthand fashion. This is not a new concept. A vehicle condition grading system has been in operation in Japan for several decades with the country’s three major auction chains using a 0 to 10 scale. A vehicle condition grading system is critically important in Japan since the country remarkets almost all of its vehicles in an electronic format. Vehicles remarketed at Japanese auctions are not driven in front of the buyers, but electronically displayed on a computer screen, and buyers bid remotely. One reason the grading system in Japan has been successful is because the objectivity of the grading scale has been universally accepted. For instance, there is very little dispute as to what represents a grade 9 versus a grade 8 vehicle.

Manheim Debuts Vehicle Condition Grade Scale
In the U.S., Manheim has developed a 0-5 vehicle grading scale, which it officially debuted in June 2003. Manheim, the nation’s largest wholesale auction chain, is soliciting feedback from vehicle consignors on the viability of creating an industry-recognized vehicle condition grading scale. “Strategically, we developed a tool that we think we will need in an electronic selling arena,” said David Munnikhuysen, vice president of recon operations for Manheim.

Manheim’s goal is to provide sellers and buyers a professional analysis of the overall condition of a vehicle sold at auction. Manheim first started displaying a vehicle grading scale on electronic condition reports. All Manheim condition report writers assign a vehicle condition grade when preparing an electronic condition report. In fact, the writer can’t close a condition report screen on the hand-held tablet computer without assigning a grade to a vehicle. Also, to gradually acclimate buyers to the grading scale, all buyers participating in a Simulcast sale see a numeric grade for each vehicle displayed on their computer screen; however, no definitions are provided for an assigned grade. In a Simulcast sale, buyers, in real-time, remotely view and bid on a vehicle being sold at a live auction via the Internet. “As Simulcast technology continues to evolve and as more buyers use it, we believe it will be critically important to display a vehicle condition grade,” said Munnikhuysen. Buyers want to purchase vehicles via the Internet with minimal risk. If a vehicle has an industry-accepted grade assigned to it, buyers will have an expectation as to the condition of the car. “We believe that the more you tell buyers about the condition of a vehicle, the more aggressive the bidding,” said Munnikhuysen.

What’s the Next Step?
The next step is to assemble an industry task force to investigate adopting a vehicle condition grading system on a broader scale. The National Auto Auction Association (NAAA) is currently examining the merits of establishing and endorsing an industry standard, as is the International Automotive Remarketers Alliance (IARA).

“We believe that there has to be a standard,” says Munnikhuysen. “We are not trying to suggest the entire industry will agree with every word on the 60-box matrix created by Manheim. It may require editing to get consensus; but I believe that is the next step.”

Let me know what you think.

mike.antich@bobit.com See Chart