As auction houses continue to choke the supply of cars to classic car dealers, debate in the office has turned to why so many people are selling their cars at auction and, more importantly, why you would choose buy a car at one.
While dealer stock can remain unsold for many months or even years, auctions manage to sell around 70% of their stock (in 2014 at least) in a matter of hours, and we can’t help thinking that it doesn’t make sense.
The obvious reason for this is that buyers think they might pick up a bargain at auction, but we don’t see too many of those these days (even if they are in the minds of the buyers). There are also more and more dealer cars going through the auctions and there are only two reasons a dealer puts a classic car into the auctions – because they can’t or won’t sell it.
If you go to buy a car from a dealer you can test drive it, inspect it at your leisure, negotiate a price and have the peace of mind, a warranty and the protection that the Sale of Goods Act brings. At auction you pay your money and take your chance. The more we thought about the reasons why someone would chose the latter, the more perplexed we became.
“So what is it that drives people to spend more money on a car at auction than they would have to pay in a showroom? Our dealer had the answer – the will to win”
Fortunately the answer came to us via a dealer last week. The trader in question had a nice example of an xxxx (names changed to protect the innocent) which had been there for a number of months. Eventually he got a serious enquiry from a customer who, over the course of a couple of weeks, took up a lot of the dealer’s time, demanded a discount (fair enough) and finally an independent inspection, before he would consider going ahead.
The customer then dropped off the radar and the dealer decided to put the car through an auction to hasten his stock turn. He was delighted when the car sold for many thousands of pounds more than he had advertised it for. Just a few days later he got a phone call from the customer who had previously been interested in the car. Said customer had called to let him know he’d bought a better car at auction, but probably wished he hadn’t when the dealer let him know that the car he had bought from the auction – uninspected, with no warranty, no come-back and at a premium – was the very same car he’d rejected in the showroom.
So what is it that drives people to spend more money on a car at auction than they would have to pay in a showroom? Our dealer had the answer – the will to win – and I reckon he’s bang on.
The reality is that as auctions continue to throttle the supply of stock to the trade, more dealers end up bidding at auction against punters and then reselling from their showrooms with margin added. When the cars don’t sell and find their way back into the auctions, the very same punters can end up buying them for even more money – an extremely vicious circle.
Don’t get me wrong – auctions are an extremely important part of the classic car market and culture. In addition to providing a monster shot of adrenalin for bidders and a great spectacle for everyone else, with a good eye, detailed research and luck it is possible to get a really great buy at auction. Just spare a thought for classic car dealers – it’s in all our interests to look after them, so use them or lose them.
Edward Legge is Director of Commercial Development at Classic and Sports Finance.