By D. Hulse
To all of those dealers that make a living wholesaling cars, and franchise sellers who are unloading aged inventory, Part I of the Arbitration Tool Kit is for you.
This is a pretty common scenario that most wholesalers are a master of (if they’re successful, anyway). In this example, our good buddy Seller A runs 20 cars at Big Box X Auction, and has a typical sale day, selling 9/20, all green light, a 45% conversion rate. Seller A is pretty happy, she made some good money on some fresh units, and dumped a few old pieces that were lingering.
Then she checks her Big Box X account on her phone- the dreaded phrase popped up on 2 of her sales- Arbitration In Progress. Seller X shakes her head, grits her teeth, and a feeling of “Crap, what now????” waves over her, knowing that the next week is going to be fraught dealing with the arbitration department, fighting to keep her cars sold. Resignedly, she clicks out of her Big Box X account, and punches the numbers into her phone she knows only too well.
Anyone see this movie before? You spend hard earned time and money to get cars bought, transported, reconditioned, and sold at the sale, to have a (pick one), new, overly cautious, or uninformed mechanic at the auction fail your vehicle in PSI. From here, it is a battle that can take days, or even weeks, to get a solid resolution from the auction. Let’s keep in mind that this is also significant money (yours) being tied up, while the auction takes its time to handle the failed PSI.
Here are a few scenarios that can play out- 1) the vehicle actually has a legitimate problem. (Note: good wholesalers have vetted their inventory, and fixed any significant known issues, and 2) The vehicle has no known issues- the Failed PSI is thought to be erroneous. For our case, we will assume that the seller believes the car to be 100% mechanically sound.
For our purpose, we will also assume the selling dealer handles his or her inventory remotely. An in-lane seller, being at the auction, has an advantage of being able to go stand in front of someone to plead his case (although many auctions do not permit you to talk to the mechanic shop supervisor at all).
Here are the steps a seller should take to reverse a failed PSI and keep their sale together.
1. Upon notification of the failed PSI, call the auction immediately, and request to speak to the arbitration department. Time is of the essence, particularly if the buyer is a large entity; many “corporate” buyers have policy of “no negotiation”, and once a failed PSI is determined, the sale is voided immediately. Pro tip-many large buyers will “blackball” that unit from future purchasing. The VIN is recorded and will not be bid on again within that company. Did you also know that in some instances, it is noted on the VDP that a vehicle has been arbitrated? Not good for online selling.
2. Take copious notes- best practices would be to use the unit stock folder to keep arbitration notes on. Record date of sale, time of call, and who spoken to. In the event of voicemail (very likely), leave name, number, last 6 of the VIN in your recording. Write down the time you called in your notes. If you do not hear from the arbitrator within the hour, call back. Most likely your message will not be received timely, and if it is, there’s a good chance it will be ignored entirely. If you can’t get anyone on the phone, the auction knows that most dealers will give up. KEEP CALLING. Attempt to get the arbitration supervisor’s email and contact the auction that way. THE AUCTION WANTS YOU TO GIVE UP.
3. Get your facts together on the vehicle sold. If you know the car had previous codes and the issue was repaired, have the invoice ready to send to the auction as proof the issued was fixed (in the event of stored codes being the issue).
4. Know any inherent issues on certain makes/models. Any dealer with experience will have knowledge that certain vehicles have tendencies- as an example, Kias are notorious for sounding like they have upper engine noise, when in fact, it is injector noise. Make sure in any communication with arbitrators you make those facts known.
5. Ask for a second opinion- once you do actually talk to an arbitrator, ask for the vehicle to be re-inspected, and give the reason(s) why; i.e., the issue is inherent, the vehicle has been repaired, you’ve inspected the car personally, etc. Communicating these issue to the arbitrator builds credibility in your case- bear in mind many sellers just will accept whatever the auction tells them. DO NOT ACCEPT THIS if the vehicle is mechanically sound. This is YOUR MONEY at stake, and your reputation. Failed PSIs and arbitrations have a 40% weight to many auction houses’ seller ratings (sounds like another column coming up).
6. Have the vehicle taken to an outside shop/dealer for diagnosis- Many auction mechanic shops won’t overturn a tech’s decision. Request that the vehicle go the dealer or an outside shop for verification. Your downside here is that you pay for the diagnostic and the transport to and from. You need to decide if financially if this makes sense to you- did the car make $3K? Did it break even or lose a little? These are things to consider when going outside the auction’s mechanic shop.
7. Consider a $$ adjustment for the buyer- Let’s say for example, the car is mechanically sound, but the infotainment system is non-functional and you missed it when you bought and reconditioned the vehicle. If you can stand it, $500 may get your deal to stick and you can keep that one sold. This is also predicated on whether you have an open communication channel with the arbitrator. If not, see the points above- KEEP CALLING and EMAIL the relevant parties if possible.
8. Escalate the case- If you can’t get any resolution with the arb department, or communication has ceased, ask to speak the Assistant AGM at the auction. This is where your copious notes are prevalent- you are much more likely to be taken seriously if you have your timeline and docs together. Again, if you can’t get in touch with the AGM, contact the GM. They can’t ignore you forever.
9. Live to fight another day- If you end up losing this battle, if needed, get the vehicle fixed, and keep the unit listed online between sale days. If necessary, take the car to another auction- it will be a fresh unit for another group of buyers. All is not lost. No matter what, keep fighting.
10. Register with Auto Auction Review- AAR is dedicated to dealers’ success at all levels; our mission is to create transparency within the auction environment, and to ensure fair practices are upheld. AAR provides a platform for dealers to file complaints, review auctions, and keep stakeholders informed. Register with AAR.com today; it’s free and always will be.
Let us know your thoughts in the comments below!
Review, Rate, and Resolve!
Dane Hulse
President/Founder