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One simple rule to get the most out of auctions

Today’s auction houses offer a plethora of stock and various convenient ways to buy it.

However, everyone must abide by one simple rule if they are to make the most of auctions – be clear on what you want to buy and how much you have to spend.

If you have never used auctions before, take time to understand how the process works, the vehicles on offer, which vendors will be there and the terms and conditions.

A first-time visitor should familiarise themselves with the layout of the site and be aware of who the auctioneer and auction manager are.

Mike Pilkington, managing director of Manheim Auctions and Remarketing, said: “Use the internet to search for stock at auction before committing time to a physical visit.

Remember that auctions are a way of sourcing stock of all different ages, mileages and types (car, van or truck) so franchised dealers shouldn’t restrict their focus to manufacturer auctions.

Auctions are a way of expanding the search for vehicles outside a narrow geographical area while a cost-effective delivery service is available at all centres.”

Pilkington felt a common mistake when buying at auction is focusing too much on the price guides when people should be thinking about what the vehicle can be retailed for.

Pilkington said: “A dealer would normally need only one buyer to attend an auction although using the online service a buyer can attend a number of sales at one time.

"If the auction is far away and the dealership prefers not to buy online, then specialist commission buyers offer their services.”

Manheim believes many dealers do not analyse their past sales or examine the information and statistics available from their used car locator to help understand what customers are looking for.

Avoid missed opportunities

Pilkington said buyers are often given a broad area to work to based on past success, which can mean opportunities are being missed because they are looking for stock which has never been made available.

Buyers can be opportunistic and buy a vehicle just because it represents good value and a profit opportunity rather than matching it to what people need.

If your business is buying and selling used vehicles then auctions should be part of it, according to British Car Auctions.

Tony Gannon, BCA’s communications director, said: “Even in the midst of what many see as the worst economic downturn in generations, auction remains busy and active.

“Since the turn of the year, the auction halls have been particularly hectic, with sold volumes and values rising.

"There are many new buyers attending for the first time and others have come back to auction as other sources have proved less profitable.”

The company, along with Manheim, believes a shortage of used car stock will be a problem in the future.

Gannon said extended cycles in the leasing sector and wholly-owned fleets will restrict supply, although if it does it will be possibly balanced by greater volumes from the dealer sector when new car sales improve.

Paul Storr spent 15 years as a disposal manager for various fleet and dealer groups, including Jardine Motor Group.

He believes buying at these types of auctions is ideal because if they are fleet vehicles they would have been regularly serviced and should be a straightforward sale.

Storr said: “If it is a branded sale it is usually part-exchange vehicles but the chances are they will probably be okay because they have come from a respected dealer group.

“It will have been maintained to the manufacturer’s standards and have the service book.”

Despite the huge rise in people buying vehicles online, Storr did not think internet buying was taking over.

He felt the internet was helping sales while the large auction houses were the way forward because they enable dealers to sell cars quickly, and therefore create cash flow.

Storr said any cars worth more than £10,000 should be marketed straight at dealers, while if a car does go to auction it must be aggressively advertised to potential buyers beforehand.

For Chris Hodgkinson, director of Auction Plus which puts vehicles to auction on behalf of dealers, auction houses are the best disposal route for surplus used cars.

They give the opportunity to put cars in front of hundreds of potential buyers and the competition generates the best price.

Hodgkinson said: “Auctions are time saving, quick and cost effective, improving cash flow and realised values.

“If you sell at auction then you need to put all unwanted stock through. Don’t let the direct trade cherry pick the best.

“Invest in appropriate preparation prior to sale and you’ll see the benefits in quicker turnover and better prices.”

According to Kevin Watson, operations director at Autotrade-Mail.com which helps dealers find and sell part-exchanges, showrooms are desperate for quality used cars because consumers are holding on to their cars due to a lack of buying confidence, although this is slowly returning. 

Online auction growth

Both Manheim and British Car Auctions have seen a rise in their online auction businesses over the past two years. Here, they tell AM about this growth.

Mike Pilkington, managing director of Manheim Auctions and Remarketing, said: “In 2009 we expect to sell 10% of all vehicles online compared with 3.5% in 2007. 

"The penetration of Simulcast (Manheim’s online auction system) in different product categories varies considerably. It is highest in manufacturer closed sales where it can account for 40% of vehicles sold compared to up to 20% in ex-fleet vehicles.

"Simulcast has recently started to gain traction in the sale of older, higher mileage, part-exchange stock and it is this segment that growth rates in online sales are highest in 2009.”

Tony Gannon, BCA’s communications director, said: “BCA now sells in excess of 5,000 vehicles online in the UK every month, approximately 5% of the volume handled by the company.

"It includes cars, vans and even trucks and buses. We often stage more than 30 Live Online sales every day, representing hundreds of vehicles, as well as dedicated online systems for manufacturers such as Audi.

“Numbers in both the UK and Europe have grown sharply, even through the downturn seen in 2008.

"Growth of some 300% in volume was experienced last year alone.”

Pros and cons of online auctions

What are the pros and cons of online auctions compared to physical auctions?

Pros of buying online 

  • Convenience. Travelling to and from auctions can be time consuming and costly.
  • Auctions have strict starting times, therefore getting stuck in traffic, breaking down etc could mean you miss out on a sale. This would not happen online.
  • The process of buying and selling online is straightforward. It is easy to keep track of multiple purchases and payments as everything is on-screen.
  • Potentially dealers could view several auctions at once online, giving them a much better chance of finding what they want.

Cons of buying online

  • Even the most detailed pictures and catalogues are no substitute for seeing the car with your own eyes. Being able to smell and touch a car will help you know whether, for example, it has been smoked in or is covered in pet hair.
  • By not being at an auction, dealers can “miss out” on meeting other dealers and therefore lose the opportunity to get a feel for the market.
  • You might miss out on the late-entered or uncatalogued cars that inevitably surface during the day.
  • If you are buying in volume, you will gain more insight into price trends by being physically present with the vehicles being sold.
  • In person it is easier to accurately gauge the cost of fixing any damage against your own criteria whereas online you may be more cautious and dismiss vehicles which require repair.
  •  

Tips to improve auction performance

Tony Gannon, British Car Auctions’ communications director, explained why auctions could be right for your business:

For over-age stock Quickly liquidate the money tied up in depreciating assets. Stock gets over-age for a number of reasons, but the basic fact is that it was not the right car for you in the first place.

To release the cash in part-exchange vehicles Not every part-exchange will suit your retail profile, so auctions can help you realise the cash in the asset, which can then be used to buy a more suitable vehicle. Many dealers use BCA as a ‘stock-swap’ – sell the blue one, buy the red one. Maybe you have too many of that model in that colour?

To broaden the mix of your forecourt stock Why restrict yourself to one or two sources for stock when auctions are offering hundreds of cars every day from a huge range of sellers?

To benchmark prices and gain market knowledge If you buy or sell through one channel, you may not be aware of what the market is really doing. Are you paying too much, or selling for too little?

To focus the dealership team on retail selling By letting the auction company take the strain
on part-exchange, over-age and non-retail quality vehicles.

 

 

 

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