Everything You Could Ever Need to Make a Killing at Auctions
Written by Research Team Government Auctions UK (type it in Google to find us)
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Make a Killing at NO RESERVE Government Auctions Part 12a
CARS AT AUCTION
Money to be Made
Auctions can be one of the very best places to buy second-hand motor vehicles. Part of the reason for this is that you, in effect, cut out the middle man - the retailer or dealer - and avoid having to pay for their services. The used car that you see for sale in garages and in dealers' showrooms have been bought at auction. Car auctions are therefore the equivalent of a used car dealer's 'wholesale' stockists. In other words, by choosing to buy from an auction, you eradicate the need for a dealer and keep for yourself the profit that the dealer would have made.
If you take the time and trouble to learn how car auctions operate you will also be able to make good purchases as well as learn which items should be steered clear of. You may even decide, having learned all about auctions and having visited them and even bought cars for your own use, to turn your hand to car dealing itself, whether that be on a part-time or a full-time basis. There are some tremendous profits to be made and it can also be an entertaining way to make a living.
Car auctions are certainly not the place to be if you do not know what you are doing. They can be fast, furious and you will have little time to examine a car fully. They are full of traders, most of who are experienced in the business of assessing the quality of cars quickly and accurately. However, you too should be able to do this in a very short time and will pick up the necessary skills relatively easily.
Perhaps the first thing to learn about car auctions is that for every 100 cars offered for sale there will usually only be a handful that are worthwhile buying. Your job is to become so knowledgeable about the pros and cons of used cars, that you will be able to judge which cars are worth a closer look and worth bidding for, and which must be totally ignored.
If you find that there is nothing available at the auction which is worth a bid, walk away without giving it a second thought. Never go to an auction with a pocketful of money and expect to drive a car away at the end of the day. If you go to an auction in this frame of mind you may fool yourself into bidding for something that you don't really want or you might pay more for a car than it is reasonably worth.
Of course there are good auctions and there are bad ones; some are very dodgy indeed. Generally however, you are quite safe with the large auction companies (such as ADT, British Car Auctions or Manheim) but the waste ground set-ups are to be avoided at all costs.
Look for affiliation to the Society of Motor Auctions (SMA) - a plaque bearing their crest should be displayed on the wall somewhere. Membership of the SMA is the nearest you will ever get at motor auctions to a guarantee of fair play and honesty.
Before going any further when you reach an auction the first thing you should do is check in the conditions of sale to see what the auction house guarantees. For example, if you buy a car and it turns out to be a stolen vehicle or still under a higher purchase agreement, will you get your money back without any problems. If you are in any doubt you can contact the Society of Motor Auctions (SMA), (or equivalent for your country)
At the Auction
At the motor auction there are usually two distinct areas.
There is the pound where cars can be viewed and inspected and an arena, or ring, where you will find the auctioneer and where the bidding and buying takes place. In the vast majority of cases a car will have a lot number on it and this indicates when it is due to go out from the pound and into the ring.
In addition, cars may have tickets on the windscreen which tell you some facts and figures about the car, for example, whether it has an MOT, and how long it lasts, what the car's mileage is and whether it is genuine, the year of manufacture and, crucially, whether it has been used as a taxi, public service vehicle, etc.
The amount of information displayed and the reliability of that information depends entirely on the respectability of the auction house - that is why it is essential to pick a good one, preferably one that is a member of the SMA. A general rule of thumb is that the more information that is given, the more credible the auction is likely to be. You may also be able to pick up further information from a sheet of photocopied paper or catalogue at the office. In many auctions, it is even necessary to buy the catalogue to gain entrance.
There are two categories of vehicle sold at auction:
1. Those that are sold as seen
2. and those that are sold with warranty.
As seen, basically means that you buy the car with all its faults and problems and have no recourse whatsoever, even if it blows up on the journey home. Many auctions will not give warranties to any car over a certain age. In this case, you will not know whether it has any serious problems or not. It is a real gamble to buy a car as seen at auctions and in the vast majority of cases the odds are stacked heavily against you.
Buying a car with warranty means that you only have a limited amount of time after the sale to drive it around and inspect it thoroughly. Usually, this amount of time is limited to one hour. However, check what after the sale means, as it could mean after the fall of the hammer, after the auction ends, or after you have paid your money and bought the car. It varies from auction house to auction house.
Buying a car with a warranty is almost as good as buying a car privately, and you have probably paid much less money for it. If you find a "major" mechanical fault, then you can take the car back and get your money returned. Again, what constitutes the definition of "major" varies from auction to auction, but you must always argue if you think you have a case. It is unlikely to mean, for example, that you are entitled to a full refund if the windscreen wipers don't work properly or it some of the lights are broken.
They are relatively cheap to fix. It also won't apply if you find that you don't like the car having bought it.
Cars generally go into auctions at two levels. Those which have a reserve price and those which are sold with no reserve. Basically, if a car has no reserve price then the highest bidder buys the car on the fall of the hammer, irrespective of whether, from the seller's perspective, it fetches a good price or a bad one.
While this may sound marvelous to an inexperienced buyer, particularly if they visited an auction on a cold day when hardly anyone turned up, normally no-reserve cars are at the lower end of the market, and in most cases you would be well off to avoid them altogether. If the car has a reserve price then you will usually not be told what it is. It is the auctioneer's and seller's secret. It is the price below which the seller is not prepared to let the car go and may prefer to keep it or indeed sell it privately.
If bids go above the reserve price, then the car will be sold to the highest bidder. If bids do not reach reserve, one of two things can happen. Either the auctioneer stops trying to raise the bids and lets the car go back to the pound without selling it, where it may again be offered at the next auction in a few days' time, or he will sell it "provisionally".
A provisional sale means that the highest bidder has an opportunity to negotiate, via the telephone in the office with the seller to perhaps agree on a compromise price, somewhere between the bidder's highest bid and the seller's reserve price. This is a fairly common occurrence, because most people who offer their cars at auctions prefer to have a reserve price.
Obviously the seller wants to get as much money as possible for their vehicle and people all too often consider their car to be worth more than others are actually prepared to pay for it.
Car Auction Do's and Don'ts
The most important thing NOT to do at an auction is to buy impulsively. Don't fall in love with anything and think that this car or that would be fun to drive around in for a while, or you might talk yourself into buying an attractive wreck.
As was mentioned earlier, for every 100 cars offered for sale at an auction, there are only likely to be a handful that are worth buying. Always attend an auction with the intention of leaving having wasted your time, but not your money.
Don't buy when you are desperate or time is limited. Plan well ahead. Travel comfortably to all auctions otherwise you will be psychologically more interested in purchasing. Always look at cars from a negative point of view in that they are full of faults and that it is your job to find them.
When you are viewing the cars in the pound you may detect slight faults. That is to be expected with anything that has been used. It may just be a slight scratch, a bald tyre, a missing wing mirror or blown exhaust - it really doesn't detract from the fact that it is still a good car and might go for a good price. It is wise therefore to take a notepad and pencil with you. Write down the lot number for the vehicle and jot down any notes on the car that you must take into consideration when you are judging how much to bid. Also, note any other facts and figures for your quick reference.
Cars and VAT
When making payment for a vehicle bought at auction it is advisable to be aware of the VAT situation. Remember that although VAT is not applicable on the sale of private cars through auction, commercial vans and other vehicles are subject to VAT. Check with the sales officer the VAT status of the vehicle you are interested in before you decide to bid on it. (This is not specific VAT or tax advise - check with the relevant office for the current situation)
Also, on top of the hammer price, you will have to pay a small charge for indemnity insurance. This is an extremely worthwhile fee that assures that you have "good title" to the car. This indemnity normally costs only 1 % of the hammer price.
Before driving the car away and no matter how short of cash you may be, never drive it out of the pound if you are in any doubt about the amount of petrol in the tank. Petrol gauges are not known for the accuracy or longevity. Most auction houses will not leave a car full of petrol and many have been known to siphon off petrol from a car with a full tank. If your car runs out of petrol the resulting pressure created by the engine being starved of fuel can cause deposits of rust and other dirt to be sucked up from the petrol tank through the filter into the engine. Always, when you have just bought a car and are driving somewhere, pull into the first petrol station you see and fill it up.
Never, whatever you do, buy a car from outside an auction on the street, even if it is offered to you at a bargain price. Consider that these cars are more than likely stolen and you will lose all of your money to a fraudster.
How to Judge a Car at Auction
When you are viewing at an auction, you are much more restricted in the amount of checks or tests that you can carry out on a car. Before performing any of the following tests take a look around the vehicle and get an overall impression of its condition. Assess whether it has been well looked after or badly treated. It doesn't matter if a car has a high mileage or is very old. If it has been looked after properly it can last for a long, long time to come.
Ask yourself, does the car sit properly or does it tilt to one side or at the back? The bumpers should be parallel to the ground. If the car is security coded, that is if its registration number is marked on each window, check that the number corresponds to the number on the plates, back and front. If not, then consult the registration document. It could be that a previous owner has kept his/her private plates, but it could also be that it is a stolen car which has had new number plates fitted.
When you visit the auction, bring along a small bag with a few tools and some handy items to help you carry out your checks. The following is a list of the basic items that you should bring with you when you are going to check the car:
- a torch for inspecting in and around the engine and underneath the car
- a small wire brush
- a magnet - particularly important for checking where filler has been used on metal bodied cars
- an old handkerchief to kneel on while inspecting the underneath or to wrap around the magnet so that it will not
- scratch the paintwork and to wipe oil off the dipstick
- a car price guide - to quickly approximate the valuations
- some screwdrivers
- a pair of pliers
It is always best to try and inspect the car in daylight or in dry weather conditions although this may
not always be possible at an auction.
Government Auctions UK Team