Auctions can Sell Your Car Faster and Put More Money in Your Pocket
You’re not getting a fair-market value if you’re selling a car through trade-in, or a set-price listing online. Well, probably not. Auctions create higher demand and value for your car.
That’s because the marketplace is stacked against you. But if you can level the playing field, the result is more money in your pocket.
But we have a solution: a one-day, dealership-only auction.
Seriously. We’ve got the research to back it up. Plus we’ve already made thousands of people more money than they would’ve gotten from Carmax or Carvana.
Stanford Economist Robert Wilson sums it up nicely:
“People tend to have the impression that auctions are all about competition, but a lot of what we also study is how to design the rules to get an efficient, cooperative outcome.”
Economics and communications researchers have found that auctions trigger a number of natural human responses that can generate fair-market values for the seller. And sometimes those conditions can benefit the seller by driving the price up.
And we want you to get a fair price for your car without having to drive from one dealership to the other. Or worse, without having to talk to strangers on the Internet.
Bidding Creates Social proof:
A car is only worth what someone will pay for it. But in an auction setting, each bid redefines what the car is worth. The more dealerships bidding, the greater the social proof that your car is actually worth more.
Psychologist Robert Cialdini popularized the concept of social proof. At its core, humans gauge our own personal risk based on the actions of those around us and close to us.
Imagine you’re unsure about a new tool at work. What if your friends at a similar company were all excited about it? Would you be more confident in switching to that tool? What if people you respect from your company also switched?
Now imagine you work for a car dealership and are on the fence about buying a car. What if every other dealership in your region put in a bid that was a few hundred dollars more than you thought the car was worth? Would you reevaluate the car?
The Principle of Scarcity:
Scarcity is similarly defined in both economics and psychology. Basically, the more access we have to something, the less we value it. Inversely, the less access we have to something, the less we value it.
All used cars are different, so your car is unique. When it sells, every other buyer misses out on that particular car. Human beings instinctively value scarcity.
We wear diamonds and gold because they’re rare. We pay more for limited-edition sneakers. Buyers will pay more for your car, the more unique it is, and in a used car marketplace every car is unique.
Auctions Leverage Multiple Buyers:
Auctions leverage the scarcity principle by including multiple potential buyers in the process.
If you have a case of cold bottled water in your fridge, would you pay $1 for a bottle of water from a door-to-door water salesman? What if you saw the same salesman in the middle of the desert and he was charging $10?
In a traditional sale, one buyer pays one price. That price can be negotiated, but will ultimately be based on the needs of one buyer and one seller.
A trade-in offer is based on the needs of one dealership. Making the car available to multiple car dealerships with differing inventory needs creates a fairer market price.
Auctions Create Competition:
This is the simplest of all the concepts.
Humans thrive on competition. It’s wired into our brains. There are multiple television channels dedicated solely to auctions because we love competition.
ESPN has more channels than any one person can watch and each one is based on less and less serious competition — from multi-million dollar boxing matches to cup stacking and bean bag tossing.
The dealerships bidding on your car are essentially competing for your car. And each bidder is from a different car dealership, so they’re competing in that arena as well.
Auctions Are Time Restricted:
Restricting time means that the bidders have less time to process, meaning they rely on faster reaction instincts instead of processing more deeply. In humans, the rational brain is the slower processing part of the brain.
This also plays back into the scarcity principle. There is no second place in an auction, so you have to have the highest bid when time runs out.
Carmigo’s one-day auctions ensure that you can sell your car fast, but it also acts to give bidders a hard deadline to make a decision.
Then Why Do Dealerships Participate?
Cars are expensive, and new car production has lagged behind demand for years now. That means more people need more used cars.
Dealerships have to keep high-quality used cars in stock to attract new customers to their lots and keep old customers happy.
The reason you got a low-ball offer on your car last time you took it to a dealership was probably because that dealership didn’t need that car.
Dealerships in Denver need more 4-wheel drive crossovers than dealerships in Florida. Dealerships in rural Texas need more crew-cab trucks than dealerships in urban California.
Having a large footprint allows us to match the specific supply with the specific need.
Dealerships flock to the Carmigo auction marketplace because they know we’ll have a diverse selection of cars, ready for them to sell.