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How to Buy a Car at Auction
Primer for Newbies
Refresher for Veterans
The scope and influence of collector car auctions has exploded onto the hobby over the last decade or so. Once the realm of a few small, family run operations, many have grown several times over, reaching sales numbers not dreamed of 20, or even 10 years ago. There are auctions for every niche, from low end drivers to seven figure works of art and engineering. While some of the old names have faded or disappeared (Kruse, Spectrum and Monterey come to mind), others have ridden the wave of increased interest in collector cars and the resulting upward swing of prices.
The big money has fueled slick, professional marketing, too. If you believe the hype, you'd think many auction companies can get sellers top dollar for their consignment while also offering great value to the buyer. That's quite an accomplishment, but hyperbole is to be expected to found in just about any marketing effort these days, regardless of where it comes from. Gone are the days where the cars spoke for themselves. Now we've got MBA's telling us about the cars and what a great addition they'll make to your asset portfolio! There's nothing inherently wrong with it, but to us it's unfortunate when the focus is less on the cars and more on the show.
Like anything, there are both advantages and disadvantages to buying at auction, and only you can decide if it's right for you. The biggest advantage, in our view, is that you have a wide variety of vehicles from which to choose, all in one place. If time is money, this may be the deciding argument for buying in this venue. No wasting of your valuable time running around looking at one disappointment after another.
Additionally, most medium and large auctions have vendors offering important services to assist you in the purchase. If needed, professional appraisers, knowledgeable experts, financing sources and transportation companies are there for your convenience.
Finally, a few auctions (Silver comes to mind) have an "escape clause" in their consignment contract for certain situations covering major mechanical components. Basically, if the vehicle turns out to be something less than represented by the seller and meets the criteria of the clause (these vary widely-ask the auction company), the auction house will not release the sale proceeds and the seller either has to make things right or withdraw from the transaction.
This is not only a tremendous service to the buyer, it also bolsters the auction companies' reputation and encourages people to buy cars, knowing that if things are seriously wrong they have an out. Call the auction company ahead of the sale and ask them what their policy is in regards to this. Often it's posted on their website.
Be aware, though, that this is the exception. Most auction companies go out of their way to distance themselves from any problems with a vehicle or its representation, seeking to shift the entire burden of liability onto the seller and buyer. Still, if a bidder feels he's been misled and can show complicity (proof that auction company knowingly withheld information or used illegal bidding practices), all the legal mumbo jumbo in the world won't let them completely off the hook. The object, of course, is not to get yourself into a situation where you are faced with either being taken, or pursuing the costly legal route.
Of course, there are some disadvantages of buying at auction. One of the most important is the inability to drive the vehicle or to have it checked out mechanically before purchase. Once a vehicle is checked in at the auction, it is not allowed to leave the holding area. We have seen exceptions to this, but usually because either the buyer or seller has a little "pull" with the auction company. Unless they are able to check out a vehicle beforehand or know the seller, many serious collectors who drive their cars regularly avoid auctions altogether because of this.
Another pitfall: fake and bogus cars. While counterfeit muscle cars, made up classics, vehicles that look terrific but drive poorly, and other valuable fakes can be found everywhere, they seem to have a knack for showing up at auction, consigned by less than honorable, or simply unknowing, sellers. This is likely because of the finality of the sale, and the fact that often the buyer and seller are from different states, making recourse more difficult. In many instances the buyer is completely clueless, and may not find out until quite some time after the purchase. Remember, Caveat emptor, buyer beware!
The Buying Process
We strongly encourage you to attend a couple collector car auctions before you actually jump in and bid. Ideally, these will be smaller, local auctions where you can follow the bidding a little easier than at the big sales. Observe the action, learn to ignore the shrill hype that often accompanies the bidding and focus on the ring men, the caller, and the bidders. A glossary of auction terms that are essential to understand is provided (see sidebar).
You're looking through your favorite magazine (Collector Car Market Review) or website (collectorcarmarket.com) and discover that the car of your dreams is being run across the block at a nearby collector car auction next month. You just have to have it. This is where you start your research. Contact the auction company and ask for full details of the car. Ask specific and pointed questions. If they cannot answer your questions in a satisfactory manner, ask them if you can speak to the consignor. They may or may not allow it (for various reasons). In either case, write down both the questions and the answers.
If you do get to speak to the consignor and you're willing to travel a bit, ask him if you can go look at the car before he brings it to the auction. While auction companies may frown upon this, it's perfectly acceptable. You and the seller are not seeking to circumvent the auction cycle, you simply want a closer look at the vehicle. Based upon all this, formulate a price range that you want to stick to at the auction.
Make sure you get copies of the bidder forms via the auction companies website. You can also have them faxed or mailed to you. READ THEM CAREFULLY. Make sure you understand exactly what they mean and how the terms and conditions can affect you.
So the big day is here, and you're off to the auction. Let's go through this step by step.
1. You arrive at the sale. The first thing you want to do is go look at the car (if you haven't done so before the auction day). Inspect it closely as you would with any other prospective purchase-carefully. Try to find the owner, and ask questions. Since you will likely be unable to take the vehicle for a spin, ask direct unambiguous questions about the mechanical condition of the vehicle. How it drives, stops, runs, shifts, etc. A good seller will be with his vehicle during this period.
2. If you are satisfied, go to the bidder registration area and register to bid. We recommend you wait until now to do this. While it's possible to pre register by phone or web beforehand, you may decide not to bid at all once you've inspected the vehicle. You most likely will need to be "qualified" to bid. You'll need a photo id. Helpful here is an irrevocabal bank letter of credit, which you can get beforehand from your bank. You can also apply for a line of credit good at the sale only from one of the financing sources that may be present at the auction as a vendor or preferred provider.
3. After getting your bidder number, go to the auction pit and observe the action. Watch for who is bidding. Closely observe the players and how they operate. Try to determine if all the bids are real. During this time, finalize the maximum amount you want to pay for the vehicle. AND STICK TO IT! Make this decision now, when you are calm and calculating, not in the heat of the bidding. If the bid surpasses your maximum, WALK AWAY. This takes a lot of discipline, and we know it can be difficult (boy do we know!), but it's the best way to approach buying anything at auction.
4. Now your lot rolls onto the block. Typically, the auctioneer will try to open the bid at a high level, but these rarely stick. Wait for someone to jump in with the low ball bid and follow the activity (if any) for a few rounds. How are the ring men treating the bidders? Do they seem to be pressuring one bidder more than the other(s)? That's a sure sign to be cautious. Jump in when the bidding slows. If you need time, don't be rushed into your next bid. Try to sync up the bidder with the bid called to determine if the bidding is real. The last thing you want is to bid against yourself! If you have a strong suspicion you are, stop bidding.
At this point you'll likely feel the ring man put the full court press on you. "Don't let it get away for a few dollars" is one of their favorites, but there are plenty others. Stick to your guns and resist this pressure. Politely, but firmly, inform the ring man that you're all done. Remember, if the car doesn't sell, you can try negotiating a sale after the car is declared a no sale. This is accepted practice, and is often facilitated by the auction company as their consignment contract usually stipulates that they are entitled to collect normal auction fees from these sales. In fact, we recommend that you let it be known that you're still interested in the car even if it is declared sold. Sometimes the buyer "miraculously" bails on the deal and the car becomes available again. None of this is foolproof, of course, but it does improve your chances of getting a fair price.
Don't be discouraged if the whole thing seems bewildering. Even seasoned auction goers can miss key moments, losing out on a sale, paying too much, missing the chandelier bids, or dropping that reserve with the false hope of continued upward bidding. To think that you're going into a big-time auction with little to no experience and be in command of the situation is foolhardy-you're dealing with people who really know how to sell cars! Keep in mind that the auction company is working for the consignor, not for you. Their fiduciary responsibility is to work hard to get as much money as possible for the owner, not to get a good deal for the buyer!
Assuming that one way or another you've managed to purchase your dream car, what's next? You need to pay for the vehicle, and settle up any additional buyers fees. The auction companies are very good at making this a simple process. Usually, all you have to do is go to a well marked area and present yourself. They'll take it from there. You'll get the title, a receipt and any other pertinent documentation for the car. Make sure you get all of these. Some states require that the state's sales tax be collected at time of sale, regardless of whether you are going to register the car in a different state. Ways around this include possessing a dealer's license or utilizing an ICC (Interstate Commerce Commission) licensed transport company. These carriers are usually at these sales and the auction company should be able hook you up with one quickly. If not, most states will give a tax credit for taxes paid in other states. Check with your state's revenue department beforehand.
You've now successfully entered a brave new world: the often wild, wooly and unpredictable action in the collector car auction arena. Maintain a good attitude, keep your hand (and brain) on your wallet, and remember that at the end of the day everyone is just trying to make a buck. It really can be a lot of fun, and being aware of what is going on around you will make that far more likely.