The vehicle wholesale process is one of the most important aspects of the automotive industry, providing dealerships with a steady supply of inventory while allowing wholesalers to capitalize on bulk vehicle purchases. Whether you’re a budding automobile wholesaler or just exploring the car industry, understanding how this process works can help you make informed decisions and ultimately build a successful business. This in-depth guide walks you through the steps of the vehicle wholesale process, from sourcing vehicles to selling them, and provides actionable tips for beginners.
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Vehicle wholesaling involves purchasing vehicles in bulk from various sources, such as manufacturers, car auctions, or dealerships, and then reselling them to other dealerships or resellers for a profit. Unlike dealerships that sell directly to the public, wholesalers serve as intermediaries, providing inventory to businesses that sell to end consumers.
Vehicle wholesalers act as a crucial link between car manufacturers and dealerships, ensuring that dealers have access to a wide range of vehicles at competitive prices. They typically acquire vehicles from multiple sources and sell them in bulk to dealerships, helping the dealerships maintain sufficient inventory without the hassle of navigating auctions or sourcing from private sellers themselves.
Wholesalers can leverage bulk purchasing power to obtain vehicles at significantly lower prices compared to retail buyers. This allows them to sell the vehicles to dealerships at a price that still leaves room for the dealers to turn a profit when they resell the vehicles to consumers.
Key reasons vehicle wholesaling can be a lucrative business:
Bulk Pricing Advantages: Buying vehicles in bulk allows wholesalers to negotiate lower prices.
Higher Inventory Turnover: Wholesalers focus on quick sales rather than holding on to inventory, ensuring faster cash flow.
Low Overhead: Unlike dealerships, wholesalers don’t require a large showroom or customer-facing services, keeping costs lower.
When done correctly, vehicle wholesaling offers numerous benefits. Here’s why the vehicle wholesale business model is attractive to many entrepreneurs:
One of the biggest advantages for wholesalers is bulk buying. This means vehicles are purchased at significantly lower prices, maximizing profit margins. For instance, by purchasing a fleet of cars at an auction, wholesalers can often secure each vehicle at a lower rate than retail buyers, especially if the vehicles are part of a bulk deal.
Example: A wholesaler might secure 10 vehicles at an auction for $18,000 each, while individual buyers at retail pay $22,000 for the same make and model.
Wholesalers often have access to a wide range of vehicles, from standard sedans to luxury SUVs and everything in between. This variety is valuable because it allows them to cater to different market demands. A wholesaler may sell compact cars to budget-friendly dealerships or luxury vehicles to high-end showrooms.
Wholesalers typically deal with other businesses rather than individual customers, which speeds up the transaction process. Unlike traditional dealerships that must market to consumers, wholesalers can quickly move vehicles by selling to multiple dealerships or resellers.
Wholesalers often develop long-term relationships with both dealerships and vehicle sources (e.g., auctions, manufacturers). These relationships can lead to better pricing deals, exclusive access to desirable inventory, and increased business opportunities through referrals and repeat customers.
Because wholesalers typically deal with a higher volume of vehicles, their overall risk is spread out. If one vehicle doesn’t sell or has lower demand, the impact is offset by the successful sales of other vehicles in their inventory.
The vehicle wholesale process involves several key steps. To succeed in this industry, it’s essential to understand each of these steps and how to execute them effectively.
The first step in vehicle wholesaling is acquiring the right vehicles at the right price. Successful wholesalers use a variety of sourcing methods to build their inventory. Here are some of the most common methods for sourcing vehicles:
Auctions are a goldmine for wholesalers, offering a wide range of vehicles, including trade-ins, repossessions, off-lease cars, and fleet vehicles. Both physical and online auctions allow wholesalers to bid on large numbers of vehicles at once.
Physical Auctions: These auctions provide wholesalers with the opportunity to inspect vehicles in person before placing bids.
Online Auctions: Platforms like Manheim and ADESA enable wholesalers to bid on vehicles without having to attend an auction in person. The convenience of online auctions allows wholesalers to expand their sourcing options.
Example: Manheim holds hundreds of online auctions weekly, where a wholesaler can bid on vehicles that range from economy cars to luxury models.
Some wholesalers establish direct relationships with manufacturers to purchase excess or unsold inventory. These deals can often result in discounts on new vehicles, allowing wholesalers to offer brand-new cars to dealerships at competitive prices.
Example: A wholesaler may partner with a car manufacturer to purchase last year's unsold models at a steep discount, which they can then resell to dealerships.
Some wholesalers buy vehicles directly from dealerships. When a customer trades in their car, the dealership may sell it to a wholesaler instead of trying to resell it on the lot.
Tip: Building strong relationships with local dealerships is key to securing consistent trade-in vehicles.
Companies with large fleets, such as rental car agencies, often sell vehicles in bulk when they reach a certain age or mileage. This provides a lucrative opportunity for wholesalers to purchase multiple vehicles at once.
Example: A rental car company might sell its fleet of sedans once they reach 50,000 miles, giving wholesalers access to gently used cars at a fraction of the cost.
Some wholesalers buy directly from private sellers. Websites like Craigslist and Facebook Marketplace are excellent platforms for finding individuals who are looking to sell their cars quickly.
Tip: This method requires careful vetting, as not all private sellers provide accurate information about the condition of the vehicle.
Once a vehicle is sourced, thorough inspection and valuation are critical. Wholesalers must ensure the cars they purchase are in good condition and can be sold at a profit.
Exterior Condition:
Check for dents, scratches, and rust that could reduce the car’s resale value.
Interior Condition:
Inspect the upholstery, dashboard, and electronics to ensure the car’s interior is clean and functional.
Mechanical Integrity:
Assess the car’s engine, brakes, transmission, and suspension. Any necessary repairs should be factored into the vehicle’s resale price.
Vehicle History Report:
Use services like Carfax or AutoCheck to verify the car’s history. Look for red flags, such as previous accidents, extensive repairs, or high mileage.
Title Status:
Ensure the vehicle has a clean title with no liens or legal issues that could prevent a sale.
Effective negotiation can significantly increase a wholesaler's profit margin. Here’s how to negotiate effectively:
Research Market Prices:
Know the average sale price of similar vehicles in the market. Use resources like Kelley Blue Book or Edmunds to compare.
Factor in Repairs:
If a vehicle requires minor repairs or refurbishing, use this information to negotiate a lower purchase price.
Set a Maximum Price:
Always have a maximum price in mind and be prepared to walk away if the seller isn’t willing to meet your terms.
After acquiring vehicles, they must be transported to your lot or directly to the buyer. Efficient logistics ensure vehicles arrive in good condition and in a timely manner.
Open Transport:
An affordable option but exposes vehicles to the elements. Ideal for standard cars.
Enclosed Transport:
More expensive but provides extra protection. Often used for luxury or high-value vehicles.
Local Pickup:
For local purchases, wholesalers might transport the vehicles themselves to save on transport costs.
Tip: Consider partnering with a reliable transport company to ensure vehicles are delivered safely.
Once vehicles are in your inventory, it’s time to sell. Wholesalers primarily sell to dealerships, but they may also work with independent resellers or large fleet buyers.
Build Relationships with Dealerships:
Networking with dealerships ensures a steady stream of buyers. Attending automotive trade shows or local business events is a great way to establish contacts.
Utilize Online Platforms:
Websites like eBay Motors, Cars.com, and AutoTrader allow wholesalers to reach a wider audience.
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Offer Competitive Pricing:
Keep your prices competitive to attract repeat business. Dealers will return to wholesalers who provide good deals and a consistent supply of vehicles.
Starting a vehicle wholesaling business requires a combination of legal preparation, networking, and business acumen. Here are the steps to take:
To legally operate, you’ll need a wholesale dealer license. Requirements vary by state, but generally, you must:
Submit an application to your state's Department of Motor Vehicles (DMV).
Provide proof of a business location.
Pay a licensing fee.
Tip: Some states may require a business location separate from your residence and insurance coverage before granting a license.
Building a network of auction houses, dealers, and transportation providers is essential for success. Strong relationships ensure that you can consistently acquire and sell vehicles.
You’ll need a physical office space for business operations and potentially a lot to store vehicles. In addition, investing in tools like inventory management software and accounting systems is crucial for keeping track of your vehicles and finances.
Tip: Use platforms like DealerSocket or VinSolutions to streamline your inventory management.
Establishing a professional website and utilizing social media is key to growing your wholesale business. Platforms like LinkedIn, Instagram, and Facebook allow you to connect with other dealers and promote your inventory.
Understanding the vehicle wholesale process can unlock profitable opportunities in the automotive industry. Whether you’re just starting or looking to grow your existing business, following the steps outlined in this guide will help you thrive as a vehicle wholesaler.
Source vehicles from auctions, dealerships, and private sellers.
Thoroughly inspect and value each vehicle to ensure profitability.
Build strong relationships with dealerships, auctions, and buyers.
Sell vehicles quickly to maintain inventory turnover.
Invest in logistics and transportation to streamline delivery.
By mastering the vehicle wholesale process, you can build a thriving business and ensure long-term success in the competitive world of vehicle wholesaling.
By Bill Bishop, SVP of Sales and Marketing, FLD Remarketing
January 17,
Over the past 5 years, I’ve been fortunate to develop a year-end review – and look at the year ahead – for the readers of Fleet Management Weekly, and am proud to have that opportunity again as we start . As it does every year, my report takes an in-depth look at the wholesale used vehicle market, as well as some of the important factors driving the fleet industry. During the time I’ve been writing this piece, our industry has certainly experienced a formidable host of challenges, as I believe we will in , as EV integration, sky high interest rates, the domestic and global political situation, and industry disruption continue unabated.
That said, as I sit down to pen this year’s version, I’m somewhat encouraged by what I am seeing and feeling across the industry – although certainly not by everything. While I’d be hard pressed to predict a return to pre-pandemic glory days, there are several positive movements in the market. For one thing, high quality assets are still bringing solid prices at auction, while export markets – for the most part – remain strong. And while fleets may have gotten used to the top-tier resale prices we saw between -, it’s important to remember that many vehicles have been on the road 12 to 24 months longer than expected. And working through the inventory glut caused by the pandemic could be painful, as well.
That said, the reset we’re experiencing now is similar to what the Federal Reserve is trying to do by raising interest rates. It’s going to take some time to work itself out, but it likely means that could be the year we round the corner and fall back into more predictable patterns. With that in mind, here’s my look back at the wholesale vehicle market in and, next week in part 2, a few predictions for where I think it’s headed in .
: Like Three Years Rolled into One with Three Distinct Segments
In the first third of the year, the used vehicle market rolled along nicely, with both wholesale volume and pricing tracking similar to what we saw in . And while there may have been a small bump in the road here or there, those patterns held fairly steady right up until the end of April, falling back into a narrow range the few times they got slightly off kilter.
Unfortunately, that four months of relative calm was the last time seemed anything like normal, with the price of wholesale vehicles suddenly falling 10% between the last week of April and the beginning of June. During the next 2-3 months – while nowhere near as drastic as May – prices floated downward, further eroding confidence and casting doubt over what everyone hoped would be a fairly benign year.
By September, used vehicle prices were in a freefall with virtually every segment of the white metal market, taking a significant hit. Suddenly, assets that many fleets had been forced to hold, due to a lack of new vehicles, had lost anywhere from 10% to 35% in just a few months.
In Q4, most segments of the market fell even further, with some wholesale vehicles worth less than 50% of what they were a year ago, and still others bringing little or no interest from buyers who had been actively purchasing in the first third of the year. In fact, when we take a look at the wider market, there are several classes of vehicles that will have trouble selling even at drastically reduced prices despite being roadworthy.
As we look back on , I would say the best way to characterize the wholesale used market as unsettled with a lack of demand, with buyers generally purchasing based only on need. As the year ended and with new vehicle availability picking up, it’s likely we’re at the bottom of the market – hopefully poised to see both prices and volume move back up.
Here’s a quick overview of how each class of used work trucks fared in :
Sleeper Trucks and Day Cabs
The hardest hit segment of the market, sleeper trucks, have dropped in price significantly in just the last couple of months. And while high quality units with low miles are still bringing solid interest at auction, some makes and models that were selling easily in the first third of , receive little or no interest today, and are down as much as 60% year-over-year.
Such low valuations can make it hard to justify the price to prep and re-locate them. This was challenging to do in , as demand for rail cars, transports, and driveaway services were at all-time highs. For their part, day cabs hardly faired better, down 50% from a year ago, with little impetus to reverse course to start the new year.
Class 6, 7 and 8
Perhaps not as hard hit as the semi units, class 6-8 vehicles have dropped anywhere from 40% to 45% in a year, a significant chunk of money for fleets that were forced to hold these assets longer than planned. And while the outlook for these vehicles is a bit murkier, the fact that demand for freight continues to be soft makes me think prices for this vehicle class will continue south. And with higher interest rates continuing to slow the housing market, it’s likely the lack of demand for materials handling will continue, meaning prices could have further to drop than the 25% they fell in just the last 4 months of alone.
Class 3 – 5
Despite high demand for many of the service providers that use these vehicles, class 3 to 5 units fell anywhere from 30% to 35% in . A seriously significant hit over what we’ve seen in a normal year, but still nowhere near as drastic as bigger units. And while new vehicle availability has been a problem since the pandemic, our Customer Advisory Board tells us that for the most part they are expecting delivery of the majority of the 3-5 class trucks on order, something that could further pressure wholesale pricing while potentially flooding the used market.
Class 1 and 2
For the most part, Class 1 and 2 vehicles took nowhere near the beating larger units did, with most falling anywhere from 20% to 25% – and some units not even that much. And while the price of used cars was still down in , most fell anywhere from 15% – 18%, a reversal of course from what we experienced the last few years when used cars were not only in short supply, but historically pricey.
Traditional Indicators are now Murky, Erratic
Over the nearly 10 years that our team has been producing our quarterly White Metal Market Report, we’ve leveraged a host of traditional economic indicators to gauge the health and veracity of the wholesale used vehicle market, as well as give us an indication of where it might be headed in the future. These indicators, which for the most part have been fairly reliable, include the strength of the US dollar, housing starts, the unemployment rate, and the price of crude oil. These days – as the saying goes – forget about it.
For example, increased activity in the housing sector generally meant an uptick in both the demand and price of used white metal. But while developers are in the process of completing 1 million new rental units – with 600,000 more planned to complete construction in according to realpage.com, that activity is not driving the kind of robust volume – or pricing – our team would have traditionally predicted.
Instead, Class 3 to 5 cutaway vans were down hard in the last quarter, as was the demand for 16-foot cutaway van – units we would have expected to increase in value with so much construction going on nationwide. This is further indication that the price for most vehicle classes will not approach some of the sky-high valuations we saw up until April .
Making matters worse – interest rates have more than doubled since January, restricting access to financing and leaving companies cash-strapped. And while some lenders are offering better rates in an attempt to jump start business, the economy remains strong, and we expect the Federal Reserve will be hesitant to go all in on rate decreases for fear of overheating the markets.
Your Partner in a Better Remarketing Experience
Regardless of where things are headed in , our team at FLD is looking forward to what’s in store. We invite you to follow along by emailing us at [ protected] to sign up for our free quarterly White Metal Market Report, an in depth look at the factors driving vehicle remarketing and the wholesale used vehicle market.
If we were to give fleets one piece of remarketing advice as we head into : Don’t wait to sell used assets.
Not at a time when so many unforeseen factors could end up costing your fleet literally millions of dollars, just like it did the ones who held on to used vehicles when we implored customers to begin selling at the top of the used market in April .
Don’t get caught holding used assets that – as we’ve seen over the last year – could end up being worthless. Especially at a time when new vehicle allotments are returning to normal, and fleets need to prepare for the brave new world ahead. Doing so could be disastrous.
Call the seasoned experts at FLD: Remarketing is all we do. We won’t let you down.
Our only goal is to help make your life easier while saving you a meaningful amount of time, money and resources. We’ll give you a quote on any used asset in hours and get you paid in one fast, easy transaction that takes about a week.
And with our proprietary OVRView app – you can manage your entire remarketing universe from any device, anywhere, anytime it’s convenient for you – it’s just that easy?
To learn more, give us a call at 1-800-754-, or [ protected] for a free 5-minute assessment of your remarketing landscape.
To read Part 2, ‘The Outlook for the Wholesale Used Work Vehicle Market’, click here.
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