Q: How does Upside work for dealers who send cars to wholesale auctions?
A: We’re going to take that car that you don’t want to keep for your retail lot, and we guarantee you $300 minimum profit. We’re going to represent that vehicle on your behalf in the Upside Direct market, using those best practices.
When that vehicle sells, we’re going to give that dealer 90 percent, almost all of the upside, hence the name of the program — we’re going to give that selling dealer 90 percent of the money that it brings for auction over that $300 minimum guarantee.
How did Cox Automotive data inform the creation of Upside?
For the better part of the last two years, Cox Automotive spent a lot of time poring through an enormous amount of wholesale data. Our purpose was to identify the techniques that developed the highest value for vehicles in the wholesale market.
What compelled you to explore this topic and write “Whole Truth”?
My curiosity about the wholesale market, under those very extraordinary [COVID-19 pandemic] conditions, just grew. There always have been misconceptions and bad habits — those are the two words that would best characterize what I began to realize about the used-car market. It led me to a belief that if we thought about wholesaling differently than we ever have before and we behave differently, we could turn a breakeven business into a profitable business.
What misconceptions and bad habits are affecting the wholesale market?
A couple things began to occur to me. No. 1 is that dealers looked at wholesale vehicles, more or less, as like taking out the trash.
It’s that mindset that is the first thing that prevents them from realizing the real potential of those vehicles. That’s where it begins, but then how they make them go away is the second interesting revelation.
Sometimes the way of getting rid of those cars easily and quickly are methods of mere convenience, rather than methods of opportunity. Methods of convenience [are to] call up a wholesaler, get somebody down here who’ll give us a check and take these cars away. They’re going to make a profit on the vehicle that you just sold them that could have been your profit.
So the solution came about because, while writing “Whole Truth,” you realized not all dealers have the resources to replicate wholesale best practices that lead to profits?
Exactly. And not only the resources — dealers didn’t have the mindset that they would be willing to lose money. That’s why, when I created the solution, I had to create it in a way where dealers would get the upside benefit.