Canadian Auction Group
It's all in the psychology
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Moving almost two billion dollars' worth of cars every year all
comes down to psychology, if you ask Bert Dagnon. He's the Chief
Operating Officer of the Canadian Auction Group, a dealer-only
network of eleven massive facilities that enable dealers and
wholesalers to exchange more than a hundred thousand cars a year.
The cars, which are sold exclusively to automotive dealers, come
from car rental companies, fleets, automobile manufacturers (Ford
Credit is a major client); thousands of vehicles move through their
Brampton facility each auction day. The majority of them are
off-lease vehicles, although there are a lot of government and
repossessed cars on sale, too.
The prices paid for the cars are not nearly as low as you might
think. Because the CAG acts as sort of a "stock exchange" for the
used-car market, there's no real back room dealing here; the car that
you're buying off a dealer's lot for twenty thousand dollars didn't
cost him two. In fact, the prices for the cars and trucks running
through the five lanes, says Dagnon, are their real fair-market
prices. (The Brampton facility actually has eight lanes; the last
three are currently being used as a detailing shop, but as the CAG
expands, they'll move the detail shop into another building and open
up the extra lanes.)
Because no one's going to find a bargain at a dealer
auction&emdash;CAG runs a couple of public auctions a year, where you
can sometimes find one&emdash;it's up to the auctioneers to sustain a
sense of excitement in order to keep dealers at the facility for the
entire auction. It's here that psychology comes in. "What we try to
do here," Dagnon says, "is create an 'event' sort of environment.
It's sort of like a day at the amusement park. Very loud, very noisy,
very exciting. Also lets you do a lot of business."
Certainly the auctioneers are an element of this plan; they've all
attended auctioneer voice-training classes in Iowa, and their
rapid-fire delivery of specs, prices and details keeps the facility
humming. To keep buyers from getting too distracted, a lot of
attention has been paid to acoustically engineering the
site&emdash;crossing from one lane to another, the sound from one
literally disappears when you enter the next.
The lanes themselves have also been carefully thought out. Unlike
most dealer auctions, where a few hours in a facility can leave you
short for breath and coughing up black grit, the CAG's facility has
vents built into the floor and ceiling, recycling the entire volume
of air in the building six times an hour. The lanes, lit in
fluorescent lights, have shimmering sodium-based bulbs in front of
the auctioneers, which, when combined with a pre-auction wetdown,
erase minor dings and scratches from the car, help to hide any
imperfections. For buyers who can't hear or understand the
auctioneer's fast-talk, there's a signboard over his or her head with
the current bid, and "declaration lights": Car OK, TKU (total
kilometers unknown; an odometer problem,) and As Is.
It's the only auction where you can still bid if you're deaf,
boasts Dagnon; something that's not at all surprising in light that a
sound engineer once told building management that if someone spent
more than four days straight in the lanes, they'd lose their hearing.
Because the CAG was finding too many dealers were taking time off
for lunch in the famous Golden Gavel Café&emdash;and thus not
staying out on the floor and buying cars&emdash;they opened lunch
counters in between lanes. When dealers complained that the selection
of food wasn't as good as inside, they installed new ovens, and
doubled the choices on the menu. Tables and chairs were also
installed.
Perhaps the stroke of genius in the CAG's plan is that the car on
sale has already left the building. The lanes are always moving; a
car is sold every forty-five seconds (nearly 2000 cars run through
the building on auction day), estimates Dagnon. The car underneath
the auctioneer is what's going to be on sale next; the fact that the
car that's being sold is out the door&emdash;already gone, so to
speak&emdash;increases buyers' urgency to make one last bid, secure
the deal.
Equally impressive is the massive amount of preparation that goes
into every auction. With storage facilities for up to ten thousand
cars, just parking the cars in the right order on the thirty-acre lot
is a tall order. Add to that security and an annex where vehicle
identification numbers are checked&emdash;to weed out cars which have
been stolen, have had their odometers altered and engines
switched&emdash;and you have a facility that in Toronto alone has
more than forty full-time employees, which doubles on auction days
with drivers and car washers.
Whatever psychological tactics are used, they seem to have been
successful. The group's sales are up twenty-five percent over last
year, and combined sales to January 31st stood at a record 104,130
vehicles. The average wholesale price paid was $11,440; 70% of the
cars that run through the facility are 1994 and newer.
CAG is Canada's largest auction corporation, controlling about
forty percent of the market; it's the fourth largest in North
America. At its 11 locations, it employs over 600 people, selling
cars and real estate, running a repossession service, pre-auction
storage and vehicle transportation and reconditioning. Established in
the early 1960s, it initiated full-service automotive and real estate
auctions in Canada.