Collector car auctions have exploded in popularity over the last decade, with Barrett-Jackson claiming their registered bidders over the last few years have tended to be first time buyers. Collector car auctions are not for everyone though. Generally cars being auctioned are in excellent condition, meaning the prices will be higher. You will likely not find any vehicles needing a lot of TLC or restoration, so if you are looking for a beater or a good fixer upper car you'd best look elsewhere.
Some of the larger collector car auctions are Barrett-Jackson Auction Company, Mecum Auctions, and Silver Auctions. Many of these larger and most hyped auction shows have some cars nearing the 1 million dollar amount, and some like Barrett-Jackson's Scottsdale, AZ show will have multiple cars over the $1 million mark (the 2012 Scottsdale, AZ show had 9 vehicles $1 million +, the highest at $2.9 million). Not everything is high priced though, one of the lowest winning bids was $22,000 (ok, so it was a 1988 Jeep Grand Wagoneer).
There are positives and negatives to buying at an auction. One of the big positives is that the auction companies do their due diligence in determining the authenticity of the seller's claims. They will have verified the VIN numbers match the title, and do proper research to determine the claims of matching numbers, original parts, special editions, etc. These high end auction companies want to keep their reputation, so they try to verify the seller's claims are accurate. In 2010 Barrett-Jackson pulled a car off the list shortly before the auction, when they had problems with a seller's claims it once belonged to Buddy Holly. Although in the fine print they generally state they are not liable for false claims made by sellers, most buyers can rest assured everything is on the up and up. Most auctions also provide help to connect the buyer with financing, insurance, and vehicle transportation service making the transaction easy as possible for the buyer.
Registering for the Auction
Anyone can attend an auction as a viewer, but you must be registered to be able to bid. Registration establishes that the bidder has the financial capability to complete the transaction once the auction has been won by the bidder. A WINNING BID is considered a legal contract to purchase, and you are legally responsible to fulfill this contract. Because of this, the auctioneer wants to verify you are able to make the purchase; Unable to make the purchase will make for an unhappy seller, and probable legal issues for the bidder unable to make the purchase. There is a standard minimum bid limit, which varies depending on the auction. Average minimum bid limits are around $30,000. This only means you need to be able to verify you are able to afford that amount, it doesn't mean you need to bid that high.
Registration fees generally are around $400 to $600 depending on the auction. This is paid to the auction company allowing you to bid in the auction, and this fee is usually refundable if you have placed a winning bid. All auctions charge a fee to the seller (Sellers Premium), which is a predetermined percentage of the winning bid amount. Some auctions also charge a fee to the buyer (Buyers Premium), so if you REALLY want a car that is being auctioned where a Buyer Premium is used go ahead, but keep in mind that there are auctions without a Buyers Premium so it may be best to wait. I have seen as high as a 10% Buyers Premium so beware of this beforehand.
To register for an automotive auction, you will usually be required to provide all or most of these items:
- Copy of your valid driver's license
- Photograph of yourself
- Contact information (bidder name, address, phone number, email address, cell phone)
- Social security number
- Your signature on the bidding contract
If you wish to pay for the vehicle with a personal or business check (as opposed to cash or a cashier's check):
- Bank or investment company name
- Checking account number
- Desired bid limit
- Bank address, contact name and phone number
- A bank letter of guarantee confirming you're good for the money
Consider attending at least one collector car auction before you start bidding. Observe the details and ignore the hype being created, focusing on the ringmen, caller, and bidder. Remember the ringmen and caller are working for the owner (and themselves) to get the highest possible price for any vehicle.
At the Auction
Collector car auctions, like any other auction, are designed to be a fast paced and exciting environment. Don't get sucked into the frenzy that can pull you in. Remember that the auction setting and stage is setup following a “science of sorts” to make the bidders excited and frantic, sort of like Las Vegas with all the lights, noise, etc. The lighting is setup perfectly to make the cars look shiny and enticing, the auctioneer is rambling at a loud and fast pace, cameras lights may be flashing, and as soon as you place a bid a "ring man" will be in your face urging you to outbid the next bid.
DON'T LET THESE DISTRACTIONS BLIND YOUR COMMON SENSE. Don't get emotionally attached to the car beforehand, as you don't know what the bidding price will get up to. If it stays low, it's a great opportunity for you. If it gets out of your comfortable price range, oh well. Someone else really wanted that vehicle. There will be other auctions and likely other ways to get that car you really want.
Here are some tidbits to help you have a successful day at the auction
Pre-Register to Bid - Some auctions require this now, but it can be done via the internet, phone, or mail. If you know you will be participating in the auction, this will save you time on auction day as you will not have to stand in the long registration lines. If you are looking for a particular car and you are not so sure you will be bidding, you may try and hold off on this as there are registration fees that are generally a few hundred dollars and are not refundable if you don’t purchase a vehicle.
Get There Early – Some auctions have viewings a day before the auction, this gives you time to look at the cars and have some time to make some important decisions. Get there early the morning of the auction also, many times there are a few late entries that were not in the catalog earlier, and many may not know about.
Don't Go Alone - Bring a friend with you, particularly someone like a mechanic or other collector car owner that can be helpful onsite. This person may help you see through your rosy colored glasses at a vehicle you love, but may not be what you are exactly bargaining for.
Stay Near the Vehicle - Try to stay near the desired car as much as possible. This will allow you to “scope out” the other potential buyers, and be in ears drop of hearing any information that may be important in your purchasing decision. If you stay near the car once it rolls onto the auction block, you will also have a small window to judge the sound and ride of the car, even though it may only be a few hundred feet. This is better than nothing, since you usually can't test drive them beforehand.
Hidden Costs - Find out BEFORE you bid on a car what the buyer's premium and other auction costs will be.
If you are traveling to another state to participate in an auction, you will have to pay that states sales tax unless you can supply the auction company with a bill of laden from a shipping company. Figuring out in advance how you will transport the vehicle is important, and there should be shipping companies available at the auction to work with.
Stay Late – Bargains can be found near the end of auctions when a lot of the bidders have been thinned out.
One main disadvantage of an auction is that you cannot drive the car beforehand, nor have a mechanic look at it in detail. Some collectors stay away from auctions mainly for this reason. Here is a little tip that I have heard people use successfully, allowing you to test drive the vehicle before the auction. For various reasons auction companies do not like to share the consignor's contact information, but I have heard of interested buyers contacting the auction company to ask questions about the vehicle, and they are given the consignor's contact info.
A sneaky way of doing this is by making a long list of detailed questions about the car, especially questions the auction company will likely not know. After spending some time expressing your interest and some questions unanswered, politely ask the auctioneer if you could be given the sellers contact info for further questioning. This doesn't always work, but if you show genuine interest in the car, the auction company may be more willing to share the information. Remember that the auction company gets a cut of the final sales amount, so the more information they can share to help drive up the bid of the vehicle, the better for them.
Going Once, Going Twice, Gone!
Once the auto rolls onto the bidding block, the auctioneer will try to open the bidding at a high level, but these rarely stay. Let someone else open the bidding, which will usually be a low ball bid, and follow the bidding for a few rounds before making any bid. Keeping your interest in the car to yourself is to your advantage early on as others go back and forth. Once it seems like a few have bowed out you can make your entrance.
Before you make your first bid, follow the activity and watch the bidders and ring men. If a certain bidder is being hounded by the ring men, this is a cautionary sign to you that this bidder may really want this car, or have deep pockets. The ring men are good at their jobs, which is to drive up the bid of the car as much as possible. They know how to read bidders, and what to look for in people that will be bidding high, and will squeeze out every dollar they can.
Once you enter the bidding, a ring man will be in your face putting pressure on you to keep bidding. Don't let them peer pressure you into bidding more than you were planning on. Politely tell them you are finished or past your personal bid limit. Keep in mind that the auction company is working for the consignor, and not you. Their obligation is to get as much money as they can for the owner, which the auction company also gets a percentage of. They are not in business to help a buyer get a good deal.
Don't make a bid right after the previous one, wait a few moments to confirm the last bid was a legitimate bid. Often times the auctioneer believes he has heard or seen a bid and announces it, and the ring men then reverse it. If you would have put a bid in before this was reversed, your bid would count, and you could have outbid yourself.
If the car doesn't sell, don't fret as you may still have a chance to get it. You can try to negotiate a sale with the seller after the failed auction, and this is common practice. This is often facilitated by the auction company, as the consignment contract usually states that they can collect normal auction fees from these sales. Even if the car is won in the auction, make it known to the seller that you are still interested and give your contact information. There's always a chance the bidder will change his or her mind, or their financing may fall through somehow.
Once you have the rights to purchase the vehicle, you need to pay for it and settle any buyers fees incurred. The auction companies will help you with this, as you usually need to go to a certain area and present yourself. Often times a ring man will guide you there. Make sure you get the title, receipt, and any other promised documentation. Some states require state sales tax be collected at the time of sale, but this can be worked around if you have a dealer's license or you will be using an ICC (Interstate Commerce Commissions) licensed transportation company. Most auctions have these carriers at their auctions and can connect you with them. If you are forced to pay sales tax in another state, your state may give a tax credit for taxes paid in other states also.
REMEMBER, a winning bid is a legal contractual agreement for purchase, and YOU WILL be held to this.
Chapter 5 - Buying a Classic Car on eBay