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Used cars: When the price is right

The market for used cars is stronger than at any time since the turn of the millennium, with private buyers turning away from new cars and opting for used vehicles instead.

For dealers, there are significant opportunities to make good returns from the used car market if they take the right approach.

Auction giant BCA revealed recently in its annual used car report that the total value of used cars sold is now greater than that of new vehicles – the first time this has happened since the Nineties.

The report, produced in association with Sewells Information and Research, gets under the skin of buyers, revealing that although having the right vehicle is most important to them, service and price are also vital. Therefore, before you go to auction, know what you are going to buy and, more importantly, know what your buyers will want.

Know your own market well

David Manchester, managing director of Charters Peugeot and chairman of the Peugeot dealer council, buys about 75 cars per month and sells 100 at auction. He says: “You must know your own market. At each of my sites, there is a slight variation in what sells well and what does not. Colour is important, along with specification and condition.”

When it comes time to attend an auction, send trained employees. Senior management at the dealership should get involved.

Manchester adds: “You must experience the auction for yourself, it can be a daunting place, but there is a lot of money at stake.”

Managers at Charters have received specialist auction training from auction giant BCA and also meet for regular reviews and refresher sessions.

#AM_ART_SPLIT# Training is available for all staff

BCA runs a dealer training programme for the industry. The half-day programme covers the key topics of valuing vehicles, effective use of auction, part-exchange appraisal and setting reserves. The courses also cover light commercial vehicles.

Another of Britain’s biggest auction companies, Manheim Auctions, runs three courses for dealer personnel across its network, covering how an auction works, appraisals and estimating, and there is also a two-day course on the ‘back to basics’ of used car management.

Once in the auction hall, beginners should just watch and learn, often attending more than once before they bid, according to Manheim’s dealer director Alan Cureton.

Valuation is an important skill

Many people make errors when valuing vehicles. Dave Burden, BCA’s general manager – dealers, says: “This is not about simply looking a price up in a guide, but the ability to value a vehicle profitably for the benefit of the business.

“Errors usually begin with a poor part-exchange appraisal, particularly when a franchised dealer is presented with another make in exchange. Over-valuations are regularly caused by poor condition not being picked up at the time, or the specification being wrong. This can make an expensive deal that could still be having ramifications weeks or even months down the line.”

#AM_ART_SPLIT# Make the right decision quickly

For Philip Maskell, chairman of the Retail Automotive Alliance, this is a vital issue as the group expects to remarket about 45,000 cars through Manheim Auctions this year.

The RAA was formed a year ago by 22 privately owned dealer groups with a combined turnover of £2.4bn. It quickly shifted from dealing with a portfolio of traders to an auction policy for vehicles that members were not going to retail themselves.

Currently 77% of cars are selling first time, with a target of 80%. To achieve this, personal commitment is vital. Maskell says: “You must have a skilled member of staff at the auction, or at the least have someone available immediately by phone, They will help the auctioneer and make quick decisions if cars don’t make their reserve.”

To ensure reserves are accurate, vehicles need to be as close to ‘ready to retail’ as possible. Whether buying or selling, the messages are very similar, and focus on the fact that education, commitment and attention to detail are the keys to success when using auctions.

Top tips for the auction hall

Buyers

  • Do your research. Get as much information from auction suppliers and the market as possible.
  • Return to the auction centre on sale days and simply look and listen to get fully acclimatized with the market and the fast pace of the auction itself.
  • When you are confident enough to bid, return and buy one specific type of vehicle for your business – pre-determine the criteria of what you are looking for.
  • Arrive early at the auction centre and locate the vehicles you are interested in.
  • Check the associated documentation and vendor declarations so that you are certain they are the right vehicles for you.
  • Make sure the auctioneer can see you and bid clearly with your hand or catalogue.
  • Set a limit and stop bidding when you reach it. Sellers
  • Take stock of what you want from auction: how many cars will you be selling; do you want them collected?
  • Contact your local auction and get them in to come and see you.
  • Agree a dealer commission for selling.
  • Ensure you have all your paperwork, such as V5s and MoTs
  • Go and visit your auction supplier so you can check out whether it’s the right place for your vehicles. Talk to some sellers and soak up the types of prices that different cars are making.
  • Set realistic reserve prices.
  • Attend the auction when your cars are being sold or be available by phone.
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