Merlin Car Auctions is surging ahead at breakneck speed
THE first thing that strikes you about Merlin Car Auctions is the breakneck speed of its growth.
Five years ago, 5,000 cars a year were being sold under Merlin's hammer. This year, that figure is likely to come in at more than 62,000.
The surge in activity comes as the overall motor industry languishes in brutal trading conditions which saw a record 58 dealerships go to the wall last year.
Ironically, the tough economic climate that forced those dealerships to pull down the shutters is a big part of what's driving Merlin's growth.
"From the start of 2007, we've seen a steady increase in the number of repossessions coming to us for auction," says Merlin Car Auction boss David Byrne.
"Every major bank in the country is dealing with us now to dispose of their assets."
The "assets" in question are everything from sporty little numbers to luxury saloons to commercial vans to the humble second family car no longer deemed a necessity.
The banks and finance houses bring them to Merlin for a speedy and public sale. Cars coming in on a Monday can go under the hammer that Wednesday with payment passed on just a week later.
The cars are offered to the 1,000-plus buyers that crowd Merlin's forecourts in Naas and the Kylemore Road in Dublin several times a week, as well as online bidders.
For its troubles, Merlin gets a €140 to €180 handling fee to cover engineers' reports and pre-sale preparation, as well as 5pc of the car's value to a maximum of €600.
"It's a win-win for everybody," says Mr Byrne. "The banks get their money quickly and private individuals can come along and buy cars at trade prices."
The surge in repossessions isn't the only thing which is driving Merlin's recessionary boom, as struggling dealers in need of cash submit some of their stock to the auction house.
Then there is the increasingly auction-friendly public. On the buyer side, Mr Byrne says people are moving away from "going to the dealer around the corner because it's what they always did" and are instead seeking out value.
Keen to increase the percentage of trade coming from individuals, Merlin has been actively pushing the value credentials of its auctions with ad campaigns, while a YouTube video demystifies the auction process by portraying it as "child's play".
Cash-strapped punters selling cars also help keep Merlin's wheels spinning round. Last summer, the auction house began a nationwide tour of a "cash for cars" scheme that allows sellers to hand over their car to Merlin and get paid on the spot.
The tour began with Merlin's van pitching up in the main urban centres like Cork and Dublin. Then, Mr Byrne's team became more discerning.
"We looked at smaller towns where there were high levels of unemployment, where people needed cash flow," he says unapologetically.
"We are the only avenue where you can walk in to us on a given day with your car and its papers and we'll give you cash on the spot."
The touring Merlin operation can buy "30, 40, 50" cars in a day, as well as boosting the company's profile and "building the credibility of auctions".
"The idea isn't to make a profit on the car, it's to put the car through auction at what we paid for it," says Mr Byrne. "Our business is fees and volume."
As well as helping Merlin's top line, the recession has also given the auction division the opportunity to work on its costs. Light and heating bills are down 20pc after a recent move to Airtricity and the firm hopes to shave 40pc off its €250,000 transport bill this year, capitalising on the "competitiveness" in the transport market.
While the recessionary tide has undoubtedly lifted Merlin's boat, the auctions' growth has also been the result of substantial planning and investment.
In 2005, when its regular motor dealership Merlin Motors was still doing a booming trade, the Merlin group decided to expand the auction operations.
"We distinguished that what went up had to go down," says Mr Byrne. "With the way the finance houses were lending, we knew if the economy ever did slip we would see an influx in the level of surrenders going through public auction."
With that bigger future in mind, Merlin decided its auction business needed to relocate from its modest home in Ashbourne, Co Meath, which could hold about 350 cars. A site in Naas was secured, and €20m was invested in a state-of-the-art, under-canopy auction centre that could hold up to 1,000 cars. Naas opened in 2007, just as the repossessions curve began to tip upwards. Merlin then went on to launch a second auctions site on the Kylemore Road, where Merlin Motors already had a traditional dealership.
The two sites quickly built up to four auctions a week, offering both evening and weekend timeslots to attract maximum attendance. To heighten the buzz around auctions and secure more specialised sales, Merlin has also launched "themed" events, covering everything from prestige sales, liquidation sales, Japanese auctions, motor bike auctions and vintage auctions.
"It helps to keep the interest there," says Mr Byrne. "We had a Bentley in a prestige auction lately that cost €300,000 new and went for €60,000. That generated a lot of attention."
An online system that allows full participation in car auctions, the first of its kind in the UK and Ireland, has also helped Merlin to expand its hinterland and buyers are now coming from all over the country and the UK.
More recently, Merlin also diversified into the Corporate Services market, encouraging the big insolvency firms to use Merlin for auctioning more than just cars.
"We had a plant equipment and machinery auction a few weeks ago and that went really well," says Mr Byrne. "We are new to that market. We wouldn't see ourselves as one of the main players but it is something we're keen to grow in."
A new and improved website will be launched at the end of the month. Merlin is also keen to grow its geographical footprint "in the near future" and is actively investigating an auction site elsewhere.
The sum of all those efforts means Merlin believes it will sell €75m worth of cars this year, well up on the €52m worth sold in 2009, as weekly auction rates come in around the 1,200 to 1,300 mark. The 2011 target is for 1,500 cars to be sold at auction each week, as the Irish public converts to the concept and develops a love of auctions that will endure beyond the recession.