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A significant driver behind the increased auction activity is dealer financial distress. Many dealers have overpaid for vehicles, and if they can't sell them quickly, they face mounting floor plan interest costs—funds borrowed to finance inventory. These cars, often bought at high prices, become liabilities instead of assets.
Because holding unsold inventory is costly, dealers are compelled to liquidate at auctions swiftly. They often lack aggressive pricing strategies—preferring to hold prices high and hope for a sale, which leads to inventory stagnation. The dealer explains, "They price it out as a home run and keep it for a month; if it doesn't sell, they won't lower the price." This slow-moving approach results in months of stagnant inventory and cash flow issues.