Around 80 percent of off-lease vehicles in 2018 will go through a private-label auction powered by KAR Auction Services—the parent company of ADESA.

As the leader in upstream auto auctions, KAR is constantly investing in innovative technology to support the growing number of dealerships that purchase off-lease vehicles—an important trend that has helped prevent used car prices from collapsing.

One of the newest technologies we’re developing is changing the way used vehicles are bought and sold online, in addition to how these vehicles are inspected, priced and more.

I recently spoke with Automotive News about this reinvention of upstream auctions and its place in KAR’s mission to deliver industry-leading auto auction solutions.

You may be wondering what, exactly, our role is in regards to upstream—and downstream—auto auctions. To help illustrate this, here is a scenario:

Jane Doe’s 3-year lease from a captive finance company on her luxury sedan is winding down.

Here is what could happen next, and KAR’s possible role in each step.

  1. Several months before the lease expires, the captive finance company or dealership can see if there is demand for the vehicle on KAR’s OPENLANE online auction. If so, they may ask Jane if she wants to end the lease early and get another vehicle.
  2. A month before the lease expires, an inspector goes to Jane’s office parking lot to check the vehicle and take photos or video. The inspector may be from AutoVIN–an ADESA company.
  3. When Jane returns the vehicle to her dealership at the end of the lease, the dealer can use KAR’s Lease Turn-In Manager tool to complete the lease termination on behalf of the captive. The dealership then has 24-48 hours to decide whether to purchase the car, and if they choose not to buy…
  4. The captive offers the vehicle via a private-label online auction site, powered by KAR OPENLANE, to other dealerships of that brand for 24-48 hours. The captive may use analytics, largely from KAR’s DRIVIN subsidiary, to help manage its vehicle portfolio and decide how to price the vehicle for maximum profit and quickest sale. If the car doesn’t sell there…
  5. For automakers with multiple brands, the captive may offer the car to dealerships selling those other brands for 24-48 hours, via another private-label auction site powered by OPENLANE. If it still doesn’t sell…
  6. It is offered via OPENLANE to franchised and independent dealerships, and co-listed on ADESA.com, usually for 2-3 days. If there is still no sale…
  7. The vehicle can be offered to participating TradeRev dealerships. TradeRev—sister company of ADESA—enables dealerships to wholesale vehicles to other dealerships almost instantly via an app. Many of those dealerships will have specified the vehicles they’re looking for, and if Jane’s sedan is one of them, they will receive an alert when it is launched into TradeRev’s live-bidding, one-hour auction. If there are still no takers…
  8. The vehicle is shipped, perhaps by KAR’s transport subsidiary CarsArrive Network, to a physical ADESA auction. While there, it may undergo reconditioning or other work requested by the cosigner before being offered to bidders in the lanes and off-site via the ADESA LiveBlock The buyer, particularly if an independent dealership, may obtain floorplan financing from KAR’s Automotive Finance Corp. (AFC).

In this scenario, steps 4 and 5 are considered “upstream closed” sales, steps 6 and 7 are “upstream open” sales and step 8 is a “downstream” sale.

With this development of innovative upstream auction technology, we’re reaffirming our commitment to forward-looking dealer technologies. Once released, it will drastically and positively transform the upstream auto auction process.