CLEVELAND, Wis. — Thomas Hermann is the owner of Cleveland Salvage and Auto Sales in Cleveland, Wis.
His great-grandfather started the business in 1929.
The business has survived four generations — and the Great Depression. While Hermann said he never expected to be running the family business, he ended up following in his great-grandfather’s footsteps.
“All of the vehicles that are in our lot are bought usually for a specific thing, whether it is a drivetrain component, an engine or a transmission that commonly go bad,” Hermann said.
When he started running the business about 15 years ago, he said he knew almost every other wholesale dealer in the state. Around 2018, that started to change.
“I can remember vividly seeing some of these guys like Arlington, [and thinking], ‘Man why are they buying so many cars? Like, who is this?’” Hermann said.
Wholesale dealers like Hermann go to online auctions to bid on cars.
During these auctions, you can see the location of the business bidding on the cars.
Hermann said Arlington, Beaver Dam and Elkhorn randomly showed up and started outbidding locally owned businesses.
“So, when you always see the same place bidding, we all talk, you know,” Hermann explained. “‘Who is Arlington?’ ‘Is this a new yard?’ ‘What is going on and who is buying out of there?’”
There are currently 989 wholesale dealer licenses registered to a building at 101 Skyline Drive in Arlington, Wis.
Maura Schifalacqua is a section chief over the dealer and agent section with the Department of Motor Vehicles (DMV). She said the business in Arlington is one of many throughout Wisconsin that is known as a centralized dealer operation (CDO).
“We started to see these CDOs pop up in Wisconsin, probably in 2018, and that is where our number of licenses skyrocketed,” Schifalacqua said.
According to data from the Wisconsin Department of Transportation (WisDOT), in 2012 there were eight wholesale dealer licenses, in 2018 there were 21 and in 2022 there were 1,152 registered wholesale dealers registered in Wisconsin.
Schifalacqua said only 200 of those wholesale dealers actually live and work within the state.
“There is no residency requirement under the law that they have to live here in the state of Wisconsin to get a Wisconsin wholesale license,” Schifalacqua explained. “They are required to maintain a business facility in Wisconsin, but they are not required to be residents of Wisconsin.”
According to data from WisDOT, from 2019-2023, around the same time the number of wholesale dealer licenses skyrocketed, there were more than 155 million miles rolled back on vehicle odometers.
Bill Sepic is the president and CEO of the Wisconsin Automobile and Truck Dealers Association.
He said he believes out-of-state wholesale dealers are responsible for the odometer rollbacks.
“We have a number of people that are nefarious in what they are doing. Some of them are going out and selling direct to the consumers. Some of them are not changing the title,” Sepic said.
Sepic said he believes these out-of-state wholesale dealers are flocking to the state with the intention to sell vehicles to the public illegally and make a quick dollar.
“Number one: It has to be stopped,” Sepic said. “Our state has always prided itself on taking care of consumers, taking care of the individual citizens in Wisconsin and this affects them.”
Sepic said he had an elderly Wisconsin couple purchase a vehicle from an out-of-state wholesale dealer and the engine blew up shortly after it was purchased.
“I believe the car registered maybe 120,000 miles on it,” Sepic shared. “After the dealership took a look at it, they indicated that the car couldn’t have had any less than 350,000 miles on it.”
Sepic said he wants the DMV and WisDOT need to increase their enforcement on this issue.
He also said he wants the state Legislature to pass laws around out-of-state wholesale dealers.
“This is a consumer issue and if the Legislature wants to take care of the people in Wisconsin, they need to address this issue,” Sepic said.
In 2023, Assembly Bill 625 attempted to stop out-of-state wholesale dealers from taking advantage of the state of Wisconsin by putting restrictions on wholesale business locations.
If passed, the bill would have:
- Required wholesale dealers to maintain a permanent business location, with indoor office space in the state
- Restricted multiple wholesale dealers from being located under one roof
- Not allowed businesses to be located in common space or shared with other tenants
- Not allowed businesses to utilize spaces that are rented by the hour or day
- Not allow businesses to contain cubicles or be temporary, virtual or rotating
The bill did not pass, which has left small business owners, including Hermann, to fend for themselves.
“There were roughly 300 cars in this specific auction last week and [CDOs] got just under 10% of them,” Hermann said.
Hermann said CDOs are not playing the same rules and it makes it hard for others to compete.
“They are paying low rates, a daily rate, to get in there and then buying these cars or bidding against us for these vehicles and they are only supposed to be able to sell them to another wholesaler,” Hermann said.
Hermanns hope is that laws will be put in place before his — and many other wholesale dealers’ reputations — is completely ruined.
“I feel like it is hurting our industry. It is putting a black eye on our industry from used-car sales all the way to salvage dealers,” Hermann said.
Read 2023's Assembly Bill 625 below: