How to Buy … Auction Services

Published in Fleet World, September 2010

Auctions are a real fleet success story, having revolutionised the way fleet vehicles are sold. They are efficient and generally achieve the fastest sale at the lowest risk. However – and here I am inviting irate auction-house managers to protest – most of the people who attend are motor traders who are buying stock for resale, so you will generally only achieve ‘trade’ prices when you sell at auction. These of course have to be lower than retail because the traders have to leave enough scope to achieve their margin on resale. Nonetheless, the speed and efficiency with which cars are sold at auction is impressive, and this can save you a lot of management time as well as money (including interest, depreciation, vehicle holding costs and marketing costs).

The auction house will advise you on valuation and setting a reserve price, and will offer you a vehicle collection and preparation service. A well-presented car will achieve a higher sale price, so do spend a modest amount preparing your vehicles, however bad the condition. You may think the vehicle is awful but someone will buy it so it pays to present it well.

Contrary to the general perception, when you sell a vehicle at auction your risk may not end when the hammer falls. It depends on what Selling Description you have chosen. Different auction houses adopt different selling descriptions, but the following are fairly typical:

1. No major mechanical faults – no major faults in the engine, gearbox, clutch, brakes or transmission.

2. Specified faults – the auctioneer will read out any particular defects that have been notified by the seller.

3. Sold as seen (and with all its faults, if any) – these are sold ‘as is’ and no warranties whatsoever are given by the seller.

4. On an engineer’s report – with the benefit of an engineer’s report produced by the auction house.

If the vehicle is described on the sales form as having No Major Mechanical Faults or Specified Faults, the purchaser has one hour after the end of the auction to complain to the auction house about any undisclosed mechanical defects they may discover. The auction house’s engineer will investigate this and if the complaint is justified they will contact the seller to negotiate a lower price to cover the cost of rectifying the fault. If the complaint is extremely serious, the engineer will cancel the sale.

It is always best to attend the auction in person to see the sale take place. That gives you the chance to see the condition of your vehicles and will help you to set accurate reserve prices. By attending in person you can amend your reserve prices according to how the bidding is going on the day. And if a car fails to attract the reserve price the auctioneer will help you do a deal there and then with the final bidders.

You should discuss your sale with the auction house and take their advice. You want to sell your cars when the right type of buyer is in the auction hall. Auctions hold special sales targeted at different buyers.

The auction houses publish lists of their fees and if you have a large fleet you will be able to negotiate a discount on these.

Do bear in mind that auctions are just one of the ways you can sell your fleet cars. You can also dispose of them through part-exchange, dealer buy-back arrangements, dealer sales agency, selling to the driver or a member of their family or even try to retail them to the general public through advertising or on the internet.

Professor Colin Tourick

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