Path: bloom-picayune.mit.edu!enterpoop.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.twt.metro From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Pressures of buying a used car are going, going, gone in Date: Mon, 23 Nov 92 15:07:21 EST Message-ID: Lines: 108 \SE B;METROPOLITAN;MONEY;THE ENTREPRENEURS \HD Pressures of buying a used car are going, going, gone in Fairfax \BY Elisa Williams \CR THE WASHINGTON TIMES Having worked in the used-car business for several years, Greg Powell and Barry Goldberg said they were convinced that automobile dealers needed a more efficient system for selling trade-ins. Some Washington-area dealers were shipping cars to auctions in New York. Others were refurbishing them to sell through their own used-car divisions. But when the recession hit and new-car sales began to fall, the operation became too time-consuming and too expensive for many dealers. In an attempt to cut costs, one Northern Virginia auto dealer talked to Mr. Goldberg, 32, and Mr. Powell, 31, about starting an auto auction business. He eventually decided against it, so the two partners formed Fairfax City Public Auto Auction in 1990 to test the concept on their own. "The demand has been overwhelming," Mr. Goldberg said. "We started out small, about 50 to 60 cars a week. Now we have to turn people down because we've run out of space to store the cars." Fairfax City Public Auto Auction operates on property owned by Steve Smith Pontiac off Route 50 in Fairfax and has 15 full-time and 10 part-time employees. About 200 potential customers show up at its two weekend auctions, and the owners say they sell 120 to 150 cars a week. The company charges both dealers and individuals a $30 registration fee and $10 to have a car inspected. The fee covers the cost of showing the car at two auctions; if it doesn't sell, the car is returned to the owner. The auctions are held at 8 p.m. on Friday and noon on Sunday, and there is no admission fee. The autos are lined up and driven past potential buyers before they are auctioned off, one at a time. The highest bidder pays a $300 deposit. The buyer has two days to pay the balance, which includes an auction fee, and pick up the car. On Thursdays, buyers can visit the lot and look over the inventory. In some cases, if a customer finds a car he wants to buy, Fairfax City Public Auto Auction will call the owner with the customer's offer. If the deal is made, the car doesn't go to auction. The company makes most of its $5.5 million in annual revenues off the fee paid by the buyer. Fees start at $95 for a car that sells for less than $1,000 and run as high as $395 for one that sells for more than $5,000. "We've provided a whole new channel of distribution," said Brad Powell, Greg's brother, who helped conceive the idea and recently joined the business as a manager. "Selling these cars involved a lot of expense for the dealer and often a long time lag," he said. "We knew there'd be demand for something better." To get started, Mr. Powell and Mr. Goldberg used their savings for initial expenses. Instead of signing a lease for space, the partners offered Steve Smith a portion of the venture's profits, Brad Powell said. Having operated as a wholesaler in the used car business for about 10 years, Mr. Goldberg had a network of potential customers. The company also began marketing its services to individuals who didn't want to take a trade-in offer from a dealership or take the time to sell their car on their own. "Once we established a reputation, it was much easier to get the cars from dealers," Brad Powell said. In the past year, the business has gotten more requests to sell cars than it can handle because of the size of its lot. About 60 percent of the cars it sells at auction come from dealers and 40 percent come from individual owners and other sources, like companies. "We're now at the point where we're forced to turn away a lot of cars," Mr. Goldberg said. But despite the high demand, Fairfax City Public Auto Auction has to work aggressively to maintain its volume. There are several competing used-car auctioneers in the Washington area, and more than 200 brokers and dealers. Many of the customers who attend the weekend auctions at Fairfax City Public Auto Auction have shopped around and visited several auctions before they make a purchase. Doreatha Davis, for example, visited several used-car auctions in the Washington area before deciding she would look for a car at Fairfax City Public Auto Auction. She said her decision to buy there was based almost completely on price. "They have a good selection and the cars look good," she said. "They have low mileage and lower prices." Ms. Davis drove from her home in Oxon Hill to look over the cars Thursday and ended up buying a car off the lot instead of waiting for the Friday auction. "Basically, I just want a car that I don't have to make payments on," she said. This article is copyright 1992 The Washington Times. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM