Photo via Wikimedia.

Photo via Wikimedia.

The tax season had a late start in the southwest market. The boost in sales — which has been described as a steady increase as opposed to a spike this year — that auctions typically begin to see in February did not arrive until March.

Late as it was, the tax season did provide a healthy boost in sales to Dealers Auto Auction of the Southwest, San Antonio Auto Auction, and Metro Auto Auction Dallas in March and April.

“Tax season did take a little longer to hit this year than it did the prior year,” said Ashley Weston, marketing lead for Texas-based Metro Auto Auction Dallas. “We didn’t really see tax season until late February / early March, and because of that, it hasn’t necessarily ended for us yet either.”

Weston said that in March her auction was running about 1,400 cars a week with an average 83% conversion rate. During the auction’s best week, she noted, it sold over 1,100 cars. In April her auction ran somewhere between 1,100 to 1,400 cars a week with an average 75% conversion rate, averaging 800 to 900 sales.  

“April took a bit of a downfall. We saw a slight downturn in inventory coming into the auction because the retail market has been up, which has caused the wholesale market to decline slightly,” Weston said.”

The best performing units for the auction were older units with anywhere between 100,000 to 200,000 miles on the odometer, she said. These units, Weston noted, were attractive units for buyers who received tax returns in the $3,000 range. Metro Auto Auction Dallas has two lanes dedicated to these units, and typically sees about a 95% conversion rate for the older year, higher-mileage units.

Conversely, the units that the auction had the most difficulty selling in March and April were luxury vehicles. Weston said that she attributes some of the difficulty to the fact that Metro Auto Auction Dallas doesn’t typically have many luxury units available, which makes it difficult to attract buyers. She noted, however, that she did begin to see the segment pickup toward the end of April.  

At San Antonio Auto Auction, Brandon Walston, AGM / Operations manager, said that his auction’s performance in March let them breathe a sigh of relief.

“There was a lot of uncertainty this year, February was definitely weak this year and it’s typically always been a strong month for us since we’ve been open,” said Walston. “We didn’t see [tax season’s] numbers until March this year. It always seemed like there’d be a good month of strong sales and this year there was only really like two or three weeks where we saw a spike. Tax season was definitely late arriving.”

In terms of volume sold, Walston said that March this year provided the auction’s strongest month ever since its opening in 2010.

In March, San Antonio Auto Auction consigned 4,396 and sold 2,126 for a 48% conversion rate. In April, consignment was slightly down at 3,667. However, the conversation rate stayed essentially flat at 47%, resulting in 1,730 sales.

“We’re definitely a truck market, so trucks and SUVs have done well. Cars have not done as well but they’ve still done OK. The vibe I’m getting from dealers is that the price of cars isn’t falling off, but trucks are definitely stronger.

Two states west, in Arizona, Stephanie Gingras, general manager of Dealers Auto Auction of the Southwest said that the tax season was also slow to arrive to her auction.

“In the last four years, especially in the last three, the tax season has kind of fizzled off. It seems to be a little more drawn out and not quite as an event, more flat if you will. I do think the money was late, which appears to be the new normal,” said Gingras.

During March, her auction consigned just under 3,000 cars and sold slightly less than 2,000, resulting in a 72% conversion rate, which was 10-15% better than the first two months of the year. For April, the auction is on track to sell a few hundred cars more than it did in 2016.

In terms of demand, Gingras said that pickups — specifically two-wheel trucks given her geographic location — are continuing to perform well.  Standard imports like Hondas and Toyota are also top performers due to their reputation of reliability, even at high mileage. Four- to five-year-old off-lease vehicles with 90,000 to 100,000 miles on them have also become good sellers.

Vehicles that her auction has struggled to sell have been salvage / junk vehicles.

“Right now, the salvage vehicles that used to have such a high demand even just for crushing are struggling. The price of true metal has just crashed, and now it’s more worth it to make a vehicle run than to scrap it. Learning to make those cars marketable as runners has been more lucrative for everybody. Rather than just letting it sit and be a salvage vehicle. If the price of metal goes up, I think that you’ll see the restored salvage vehicle / junk vehicles do a little bit better,” said Gingras.

Looking forward, Gingras states that auctions will have to adapt in order to say successful once the expected influx of inventory floods the market.   

“There’s going to be a lot of cars on the road in this next quarter, year, and onward,” she said. “I would anticipate that you will see flat wholesale prices and sellers are going to have to adjust their prices to sell, because there’s going to be so many vehicles. And because there are going to be so many cars and so many choices for these buyers and sellers, you’ll have to stay innovative and creative to keep your customers around.”

Editor's note: This is part of an ongoing series that goes beyond the numbers to provide a snapshot of market conditions in the vehicle remarketing industry in the Northeast, Southeast, Midwest, Southwest, Rocky Mountain and Pacific regions. The Southwest includes Arizona, New Mexico, Oklahoma, and Texas

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