Inside Dealer Trading
By Bryan Harris WardsAuto.com, Dec 1, 2006 12:53 PM

LOUISVILLE, KY – Inside a plain office building on the outskirts of this city is a pond of cubicles that happens to be one of the nation’s busiest operations that deals with car dealers.

Representatives on phones gab with dealers, asking variations of: “What do you have? What do you want?” In a normal day, they’ll move 12-14 truckloads of cars. The new vehicles go from dealer to dealer, depending on inventory needs. It is dealer trading in high gear.

The action starts when a dealer on the other end of the line mentions he has a big need, maybe a few dozen units before the weekend. Then a ripple of tension spreads through the room.

Neighbors in the other cubicles pound the phones and tear through the database. Voices get louder as they shake a nationwide auto inventory until the right cars and trucks fall out.

They’re racing against the competition, which includes other dealers or vehicle locators whom prospective buyers might have contacted as well. They find the cars. More calls are made. Then it’s a race to the fax machines, and a tense wait to get the signed paper back.

If they do it all correctly and quickly, they’ll each pull down a few hundred dollars in a few minutes. Then they’ll sit down and do it all again. Sales leaders are tracked on a chalkboard. Morning meetings get them pumped before they hit the phones. The whole atmosphere comes with a strong dose of pressure that those who can’t sell can’t handle it.

Welcome to the Dealer Trade Network.

Chris Delgado, left, who runs Dealer Trade Network, and sales representative John Raisor.

“Have you ever seen the movie Boiler Room?” asks operating partner Chris Delgado, searching for an apt comparison. “When a guy has an identified buyer for 50, 60, 70 vehicles – we’ve done an order for 101 vehicles before – all the reps go crazy trying to find those vehicles.

“The reps make 10% commission and the sellers 20%, he says. “They just go crazy scrambling around trying to find the right makes and models. Other times, we’ll find 10 units that everybody needs, and then it becomes a race to get the agreements back. There might be another dealer down the road. Both need the same thing. Their reps will race to get their faxes back. They don’t want the guy across town advertising the cars they don’t have. That’s a big deal.”

The 11-member firm is far from being alone in the car-swapping business. There are lots of mom-and-pop-like vehicle locators. But few are as organized as the Dealer Trade Network. At the core of its business is a proprietary database, updated minute by minute as reps call dealers, noting what cars are needed and what cars are available.

The company also maintains a website where dealers can search for inventory online, including Ford GT40s for $170,000 that they resell for more than the suggested retail price. The firm specializes in General Motors Corp., Ford Motor Co. and DaimlerChrysler AG’s Chrysler Group vehicles.

John Raisor is a 23-year-old sales representative at Dealer Trade. He’s brokered trades for two years. Looking around the room at the young staff, he can pick out three reps that have lasted as long as he has.

In October, Raisor brokered a little under a third of the company’s total deals. He remembers the date on his biggest contract, July 31, 2005. That’s when Sam Swope Auto Group in Louisville wanted first pick of Dealer Trade’s entire GM list to restock when the employee discount promotion was extended into August.

“You’re constantly looking for buyers and sellers,” Raisor says. “What happens most of the time is we’ll bring a package in here from a seller, and we’ll put it in front of a buyer and he’ll sign an agreement that says he’ll take it if certain things change. Like a few units he can’t sell get swapped out, things like that.

“It’s all about counter-offers and negotiation. I’ve sold hundreds and hundreds of deals, and I think I’ve cold-called and sold exactly what I’ve pitched twice.”

On the other end of the phones are dealers such as Jeremy Jones, who manages dealer trades for John Jones GM City, a 4-lot dealership in southern Indiana. Jones has traded GMs and, previously, Fords for Bill Collins in Louisville. He does about 60-95 dealer trades monthly.

“Life without dealer trades would be a whole lot of special orders,” Jones said. “Instead of customers waiting 24 to 48 hours to get the exact vehicle they request, you’d have to sit and say ‘Do I have the allocation this week to get the vehicle?’ If not, you might have to wait another week or two. Or, does GM have a constraint on that vehicle? Will they let me have the SS package and the sun roof?”

Jones says dealer trades sometimes come in handy for moving inventory as well, but it’s often difficult. Cars that he can’t sell are often vehicles other dealers can’t sell either, like eight Cadillac CTSs he’s trying to unload. So he often moves inventory the old-fashioned way – by calling friends at other dealerships and brokering his own trades. But he admits dealer trade specialists are useful.

“We’re in a new century,” Jones says. “We’re in a whole new way of doing business than we were 10 or 15 years ago. You don’t know if you should order 20 Chevrolet Cobalts or 15 pickup trucks. You don’t know what to order because it’s so up and down between cars and trucks.

“To get another dealer to take something, you have to have something good to marry up with it to make it work. You call a dealership and they have eight Cadillac CTSs like I have right now, they’re going to want something good with it to make it fly right now. The neat thing about the locator guys is they’re always out there trying to find stuff.”