East Bay Business Times - by Michael Fitzhugh
June 26, 2008
Adair
Copart Inc. is expanding its auction services beyond insurers to the public in a move that will increase its supply of resale vehicles as the company continues its rapid worldwide growth.
CopartDirect, its new consumer service, will open the door for individuals to the company's more than 100,000 buyers in 90 countries, offering a guaranteed bid cars within about a week.
The automotive salvage giant acts as a middleman, auctioning vehicles for parts and reuse to dismantlers, rebuilders, used vehicle dealers and exporters through daily online auctions.
"We recognize there is a need in the country today for the general public to have a way to sell their car that doesn't take up a lot of their personal time, require them to show their car to strangers or deal with collecting money or filling out DMV paperwork, said Jay Adair, Fairfield-based Copart's president.
The company also hopes to make Copart, the largest provider of auction and related services for the salvage market according to analyst firm Robert W. Baird & Co., into a household name by promoting the company in ways it never has before.
Copart's profits have grown steadily every year since it went public in 1994, reaching $136.3 million on sales of $560.7 million in 2007. Most of that money has come from fees insurers paid Copart to auction damaged vehicles deemed a loss or not economically repairable, or recovered after a theft for which an insurance settlement with the vehicle owner had already been made.
The company sells 1.4 million vehicles each year worldwide.
"Finally, we asked ourselves, 'Why aren't we selling cars for other people too? We already have the facilities. We already have the technology. Maybe we should open it up to them," said Marla Pugh, Copart's communications director.
"One of the clients we're targeting with Copart Direct are the people who have liability-only (insurance) and don't have comprehensive or collision (coverage). Their insurance will cover the other person's car, but they're left with a wrecked car and they don't know what to do with it," said Pugh.
About one-quarter of the nation's drivers have liability-only insurance, according to Don Griffin, vice president of personal lines for the Property Casualty Insurers Association of America, a Des Plaines, Ill., insurers group.
Griffin expects the launch of CopartDirect to be a positive development for consumers, especially for consumers getting rid of damaged vehicles, for which he believes Copart's buyers are likely to pay higher prices than junk yards might.
"The title would be properly marked as salvaged vehicle because it has gone through an auction," Griffin said.
"One of the things we've tried to do countrywide is to make sure once vehicles are totaled the title reflects that and the cars are sold for parts instead of whole vehicles put back on the road," he said.
The supply of such vehicles, which sustains Copart in large part, could diminish somewhat as gas prices rise, leading to a reduction in miles driven and consequently accident rate, the company noted in a recent regulatory filing.
But that trend could be more than offset by other factors, notes Craig Kennison, an analyst with Baird.
"As cars become more complex and the vehicle population ages, we expect accident severity (percent of accident claims that result in a totaled car) to rise - driving modest industry volume growth," he wrote in a June 5 report on Copart, noting in a chart that that the number of vehicle appraisals deemed as total losses has climbed above 13 percent.
No matter a vehicle's condition, Copart will accept it, Pugh said, so long as there's no lien on it and the seller can provide a title of ownership. Cars don't even have to be registered or, in California, to have passed smog testing.
CopartDirect's minimum service fee is $50, due when individuals either drive of tow their vehicle to one of Copart's more than 100 facilities nationwide. That covers the listing, vehicle storage, sale preparation and the cost of running the bidding process.
If a seller approves the high bid, Copart charges 2 percent of the sales price, plus a $25 title processing fee, money taken directly out of the proceeds from the sale. If the seller doesn't approve the high bid and the car doesn't sell, those charges don't apply. Sellers can also pay $75 to establish a minimum acceptable bid for their cars.
To get the word about CopartDirect out to potential customers, the company has started small, encouraging employees to tell their friends and family, and providing them business-card sized promotions of the service. Banners advertising the service have been strung up at Copart's 130 North American auto yards. And the company has purchased Google Inc. ads guaranteeing legitimate offers for sellers cars in about a week.
Copart's Fairfield operations center, from which it monitors its auctions.
Copart Inc.
Symbol: NASDAQ/CPRT
Business: Automotive sales
Headquarters: Fairfield
Founded: 1982
CEO: Willis Johnson
Employees: 350 in Fairfield
2007 revenue: $560.7 million
2007 income: $136.3 million
Address: 4665 Business Center Drive, Fairfield 94534
Phone: 707-639-5000
Web: www.copart.com
mfitzhugh@bizjournals.com | 925-598-1425
