The ongoing supply chain crisis has hit just about every part of the auto industry. Public and private fleets place vehicle orders, only for those orders to then be canceled days or weeks later due to lack of availability. It’s leading some fleets to turn to used vehicles when needed. Government fleets can bridge these gaps by selling vehicles that still have plenty of life left in them.
Municibid, a national online government auction marketplace, is one of many sites municipalities, police departments, and other government agencies use to sell their old fleet vehicles and heavy equipment.
With inflation leading to higher vehicle prices and the supply chain crisis causing vehicle order cancellations, you might think that would lead governments to hold onto vehicles longer, meaning fewer options on sites like Municibid. But that hasn’t been an issue, at least yet, company CEO and Founder Greg Berry says.
Fair Market Value
Santa Clara County, California, fleet manager David Worthington believes using a third-party auction company allows government agencies to be a part of a competitive process that establishes the fair market value of used vehicles.
Using other processes to remarket used vehicles can create a perception of favoritism by the general public. Using a third-party vendor removes the perception of control or manipulation of vehicle sales. When auctioning vehicles using third-party vendors, government agencies have no direct control over the prices aside from the minimum price set.
Auctioning is a competitive process, which establishes the value of vehicles, Worthington says. When the demand for vehicles goes up, the value also goes up.
It’s also worth considering the value in doing work to prepare vehicles for auction too, Worthington says. Polishing the paint around the areas where decals were removed can increase the auctioning values by up to $500 beyond the cost of performing the polishing job, he explains.
Auctioning vendors can also perform additional services like smog testing for vehicles, removing decals, light detailing, and minor repairs like replacing batteries or diagnosing check engine lights to help government agencies maximize the value of a vehicle.
Keeping things Moving
Online auction marketplaces can help both public and private fleets continue to do the important work they need to do.
“If they’re waiting for a new front-end loader, let’s say, and the expected delivery time is not for six months to a year and they need something now, we are a great alternative for that,” Berry says.
Depending on the specific item being sold, the government agency selling it may require it to be picked up, rather than delivering it. Berry says he has seen businesses that are willing to make the trip across the country to pick up a much-needed vehicle or piece of heavy equipment if it means filling a gap for a fleet.
Searching for Parts
The supply chain crisis has also made it difficult for fleets to find very specific, uncommon parts for vehicles and equipment. Berry says in some cases, businesses – and even vehicle and equipment dealers – make purchases on Municibid simply for the valuable parts.
Taking the Load off Government Agencies
Using auction companies to sell used vehicles also reduces government agencies’ administrative workloads. California has a unique situation in which larger trucks and pieces of equipment are subject to California Air Resources Board emissions regulations. Some of the items being sent to auction must either be sold out of state or have the engine blocks damaged to make them unusable so the vehicle or equipment can be sold for parts only. Buyers are required to fill out disclosure forms in these cases. Auction companies in California are very familiar with these processes, Worthington says.
The use of third-party auction vendors allows governments to avoid dealing with buyers who suffer from “buyer’s remorse.” Worthington has found that using an auction company minimizes the chances of buyers contacting him with regret over the vehicle they purchased. Buyers don’t always realize auction vehicles are sold “as is,” and believe it is the government fleet’s job correct or repair the vehicle as its previous owner.
Without an auction process, government agencies can also receive phone calls or even in-person visits from potential buyers who want all of the maintenance and repair records of a vehicle to review it before purchasing it. That’s not something Santa Clara County provides due to the administrative workload. Auction companies insulate the county from this challenge by clearly stating that all sales are final and “as is” with no guarantees or warrantees. Buyers who purchase vehicles and equipment from auction sites are generally aware of this.
When determining whether to keep a vehicle and repair it or sell it, auction companies can provide valuable input. They can often give fleet managers an expected auction value for vehicles based on data they collect and retain, Worthington explains.
“Auction companies should be treated as valuable partners in your overall operations and be depended upon to help manage your fleet and reduce total cost of ownership [values],” Worthington says.
When to Use Brick and Mortar Auctions
There is still value in choosing in-person auctions over online ones in some cases. For Santa Clara County, there is not enough room to store used vehicles waiting to be sold at online auctions. The county also doesn’t have the staff resources to meet with each buyer to transfer the ownership of a used vehicle. There is also liability in having a member of the public at onsite facilities picking up vehicles. Worthington says he has seen buyers back into government and employee vehicles when picking up a vehicle sold to them through online auctions, which creates a headache when the buyer does not have liability insurance.
Brick and mortar auction sites are increasingly using online vendors to grow their pool of potential buyers, Worthington explains. So that can still work in government agencies’ favor.
There is no “one size fits all” solution for choosing online versus in-person auction sites, Worthington says. Online auctions are still valuable for agencies that are not located in close proximity to brick and mortar auction sites.
Commercial fleets aren’t the only ones who benefit from these marketplaces. Government fleets can use the money obtained through used vehicle sales to purchase new vehicles and equipment. In this case, inflation works in governments’ favor, because it can lead to higher auction prices.
Used vehicle pricing on Municibid has been up 20-30% in recent months.
“With general inflation, we saw it last year especially and it continues into this year obviously, that has really helped governments earn more money for their used vehicles. Especially with vehicles in general, and heavy equipment,” Berry says.
Even with businesses cutting back financially amid the recession, vehicle and equipment sales continue to flow in.
“People are still buying things, and buying them at true market value,” Berry explains.
Originally posted on Government Fleet
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