Buying a Collector Car at Auction
By Tom Benford
Purchasing a collector car at an auction is becoming more and more popular every year, and, although we're frequently seeing tasty models going for astronomical prices, that doesn't necessarily mean that you can't snatch up a real bargain — if you're savvy enough. There are some major differences between actual on-site auctions and online car auctions, however, including the requirements for bidding on each. And, since your recourse if something goes bad on these transactions differs as well, it's best to arm yourself with knowledge.
"Going once, going twice, gone!" These are the words you hear just as the gavel drops, followed by "Sold to bidder number (whatever your number is) for the high bid of (whatever the final amount is)." If you're the high bidder, you get a huge adrenaline rush as the realization that you just won the auction sinks in. You are now the proud owner of the car that was your car the minute you laid eyes upon it. But you didn't just show up with a pocket full of money and join the bidding; there were several things that led up to this happy ending.
As I noted earlier, there are on-site auctions and then there are online auctions; both are substantially different from each other, so let's take a good look at each.
On-site auctions are held by such companies as Kruse International, Barrett-Jackson, Mecum High Performance Auctions, Silver Collector Car Auctions, and Carlisle Auctions at the various events held at Carlisle, PA, among others. These are well-known and well-respected auction companies with excellent track records and reputations.
The advantages of purchasing your collector car at an on-site auction are that you'll have a good opportunity to inspect the vehicle in person before it comes on the block, there will be a lengthy description of the vehicle and its features and options, and the auction company will have done some due diligence to make sure that the cars credentials (VIN number matches title, etc.) are in order. In the event of some misrepresentation, the auction company may also intervene and solve such problems if they are reported by the buyer within twenty-four hours of the sale.
Other advantages of on-site auctions are that they may (but not always) have services available that could be useful to buyers including financing, insurance and vehicle transport services. And, if you're the buyer, another advantage is that the expenses of the sale, including the commission the auction company gets, are usually paid by the seller, which is good news for you.
Be aware, however, that some auctions do charge a "buyer's premium," which means that you'll have to pay a percentage of the final bid price to the auction company (this is in addition to the actual final bid price). Since these companies also charge a "seller's premium," they collect on both sides of the sale, and this is known as "double-ending."
The downsides of on-site auctions are that they may be far away from where you live, so travel and lodging expenses have to be figured in. Also, if you're the winning bidder, you'll have to get the vehicle from the auction site to your home, either by driving it or having it transported, so this has to be considered as well. You also may want to trailer the vehicle home yourself, which is something else to take into consideration.
Without a doubt, eBay Motors is the most viewed and most-used on-line automotive auction, and a huge number of collectible makes and models are bought and sold every week on it, and there are lots of other on-line auctions coming on strong as well. Now, while these online auctions are indeed gaining in popularity, there are several downsides to them, so they're not at the top of my list for buying a collector car this way. To be perfectly honest, the only real advantages are that they are convenient, since you can bid without leaving the comfort of your home and that they offer quick gratification — you know if you've won the bidding as soon as the auction is over. That's about it for the plus side.
Now for the disadvantages, and there are many. First and foremost, you're bidding, literally, on a pig in a poke. In most cases, you can't physically inspect the car and you're relying on the honor system. Whenever you're buying a used car, the honor system is strained to some degree, and often it is to the point of outright misrepresentation and lying. After all, the seller wants to move the vehicle, so he's bound to put some extra spin on it to make it sound better than it actually is.
Throw into the mix the fact that dealers are very often the ones offering the tasty collectible vehicles for sale on these online auctions, and that compounds the problem by several orders of magnitude. Now don't get me wrong here; there are indeed some very reputable dealers who offer vehicles via online auctions. Unfortunately, they are also the bad apples, since this type of auction readily lends itself to the unscrupulous and even to outright swindlers and crooks.
That having been said, if you're hell-bent on getting involved in online auctions for a collector vehicle, here are some things to remember. First, don't place a bid on the vehicle before you know more about it. Contact the seller with a list of questions regarding the car's actual mileage, the number of previous owners, matching numbers, realistic description of its condition (not the blurb on the internet auction description), known problems and the availability of receipts for any work that has been done to the car. You also want to know about anything that is "incorrect" about it, especially if this is going to be an investment as well as a fun cruiser for you. Be sure to ask the seller to fax you a copy of the title and a tracing or digital photo of the VIN number. The reason for this is to establish there is no lien on the vehicle (the title will show if it is encumbered or clear).
Auction Terms Your Should Know and Understand
RESERVE — this means the seller has set a minimum price that he/she will accept for their collector vehicle at the auction. If this minimum (the reserve) is not met, the auctioneer will ask the seller if he or she wants to waive the reserve and accept the final bid; if the seller declines to accept it, the vehicle is not sold.
NO RESERVE — means the vehicle being sold at auction will go for whatever the high bid on it is; there is no pre-set bid threshold that must be met. There is always a minimum starting bid, however, although this may also be waived at the seller's discretion.
DOUBLE-ENDING — this describes an auction that charges a "buyer's premium" (commission) and a "seller's premium" (commission) when the auction ends successfully. The auction company collects a commission from both parties at the end, hence the name.
Participating in double-ending auctions is not a good idea and should be avoided unless you absolutely must have the car being offered. There are many other auctions available that don't charge a "buyer's premium," so participating in a double-ending auction is just adding to other costs including your bidder's registration fee, the final bid on the car and the expenses of getting it home from the auction. Why incur additional expenses if you don't have to? You're better off using that extra money to restore or refresh a slightly-less-perfect collector vehicle rather than helping to make the auction company's wallet fatter.
RING MAN — this is a unisex term for a male or female auction employee who calls out bids and points to the bidder so the auctioneer knows from whom and where the bid came. It is the job of the ring man or ring men (since there are usually several scattered throughout the buyers area) to keep the pace of the auction fast and to build the bidding frenzy, urging bidders to keep bidding higher. Don't forget for one second that even though the ring man acts friendly, kibitzes and jokes with you, he or she is not your friend; the ring man's job is to drive your bids up so the seller gets the most money for the vehicle and the auction gets the biggest commission - and that's at your expense.
SHILL BID — this is a false auction bid placed on an on-line auction by the seller's friend, accomplice, relative or even himself using an alter-email ego to increase the bids against you in order to drive the price up on the vehicle.
But there's more. Ask the seller to email you additional digital photos of the car showing multiple views (15-20 shots at the minimum) of all four sides, engine compartment, interior including the seats, door panels, dash, instruments and the odometer showing the mileage (compare this number to the mileage shown on the title — the odometer figure should be somewhat higher). You also want to know about any collisions the car was involved in — replaced fenders, body filler on the rear quarters, etc.
You might also ask the seller to shoot a videotape that shows all of the above views as well as his commentary if you're really interested in the car, assuring the seller you'll return the tape if you don't win the auction or decide against bidding on it. These are not unreasonable requests if you're a serious candidate for buying the car and the seller is serious about doing a deal — especially when you're talking about a serious amount of money.
Okay, so let's say the seller is very accommodating and has provided you with everything you requested. You like the car very much and you're ready to place a bid. As soon as you do, you're outbid by another. You counter, and you're outbid again. You figure someone else is really hot for this car, too, but you may be dead wrong here. You may be bidding against a shill bidder, a common practice used by sellers to drive the final price of the vehicle up. And, yes, this is against eBay rules and just about every other auction's rules, not to mention that it is morally wrong. But nobody would ever think of doing such a thing, would they? Oh, yes, did the seller mention that this Hemi 'Cuda Convertible with the 6-Pack was only driven by a little grandmother to church on Sundays in the description? Don't be a babe in the woods here!
Although all of the major online auctions try to take active measures to prevent shill bidding, in reality, there's not too much they can really do about it. The same way that locks are meant to keep honest people out, the unscrupulous seller will find a way to use shill bidders to rig his online auction.
The real downside is that there's very little recourse for the buyer and the seller if the online auction goes awry for some reason or either party fails to live up to their end of the bargain. The auction host will give a warning, which is really just a slap on the wrist, but that's about it. I don't mean to be a naysayer here, but somebody's got to tell you the facts of life, and this time it was my turn.
Registering to Buy
In comparison to online auctions, on-site auctions are really the safest and most sensible way to purchase a collector vehicle on a competitive-bidding basis. And, when you consider that many of the major auction companies conduct several auctions each year at many sites around the country, this is definitely a venue you may want to seriously consider.
Every on-site auction requires bidders to be registered. The registration process establishes that the bidder, should he or she be successful, is financially capable of completing the transaction and that he or she is, indeed, a real player. To register for an on-site automotive auction, you will usually be required to provide all or most of these items:
- a copy of your valid driver's license
- a photograph of yourself
- contact information (bidder name, address, phone number, email address, cell phone)
- social security number
- your signature on the bidding contract
And, 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
The auction company also charges a bidder registration fee and has a minimum for the bid limit. Using Barrett-Jackson's 2007 Scottsdale auction as an example, the bidder registration fee was $400 for early registration and $500 for on-site registration; the minimum bid limit was $30,000 (that means that bidders had to prove they were capable of bidding a minimum of $30,000, although they were under no obligation to do so). The bidder registration fee is refundable, however, if you purchase a car as the winning bidder.
The fees and minimum bid limits vary from auction to auction, but these are fair examples of what to expect. Upon submitting the fee and the requisite materials, you will be issued a bidder's pass or bidder's credentials, which can be picked up in person when you arrive at the auction. Once you have the pass or credentials, you're ready to place your bid(s) when the car comes up on the block.
A little auction trivia for you:
The first documented collector car to sell for $1 million in cash at a Kruse auction was a 1934 Duesenberg SJ La Grande long wheelbase dual-cowl phaeton. The car was sold to Tom Monaghan, founder of Domino's Pizza and the owner of the Detroit Tigers at the time.
Take Along an Expert
I've always been amazed at the number of "experts" I meet at car shows in general, and especially at high-end shows in particular; please note that the word experts is in quotes. But when it comes putting down your own hard-earned cash, you don't want an armchair expert giving you advice — you want somebody who really knows their stuff, inside and out, about collector vehicles, especially the marque you're interested in. But this person doesn't have to know everything about every model and year — just make sure he or she is at the top of their game when it comes to the particular year you're interested in acquiring.
Of course, reference books such as Chevrolet By The Numbers, my own Corvette Illustrated Encyclopedia and other such reference books are wonderful for giving you the lowdown on the facts, figures and specs on collectible vehicles, but you want someone with intimate knowledge of the particular model you've got your eye on to make sure everything is 'legit' — that the car is the real deal and all that it is touted to be.
So, for this reason, it's really a good idea to take along a real expert to give the third-degree to the particular vehicle you're interested in bidding on. The reasoning behind this is sound: you're probably going to be spending some major bucks bidding on this car, and you want to make sure that you're not overlooking any details during the inspection of the vehicle. Two passes are usually provided to registered buyers, so the extra expense of hiring an expert who can do a thorough inspection and an accurate appraisal is a very worthwhile investment before you cast your bid. Often, there are experts available for hire at the auction site or they can be contacted through referrals of the auction company itself. If this sounds like an extravagant expense to you, then you're probably not ready (or able) to part with the considerable cash it will take to win that dream car in the first place. Like they say, money talks — and you know what walks!
Using an Agent
If you can't physically attend an on-site auction yourself, another option is to use an agent to represent you and place bids on your behalf. Most of the larger collector car auction companies can and will accommodate this kind of absentee bidding.
Here's how this works. You register as a buyer but you stipulate that you will be doing proxy bidding. You can hire an independent agent to represent you, but in many instances the auction company will assign one of their staff to assist your proxy bidding. When the car you're interested in is in line to come onto the block, you establish contact over the phone with the agent who will be representing you. As the bidding progresses, the agent will let you know what the current bid is and you can tell him to bid the next increment or to stop bidding when you've reached your ceiling. If you win the auction, you can then make payment and delivery arrangements on the vehicle through the agent as well.
In the Heat of the Moment
The fast pace of a collector car auction, the excellent lighting that makes the cars look the best they possibly can and the excitement of being a "player" can easily blur common sense and good judgment. As soon as you cast your first bid a ring man will start hovering around you like a fly around honey and urge you to top the next bid, whatever that will be. That's his or her job, and it's very easy to get caught up in the bidding as it grows to a fever pitch.
Based on the advice of your expert, your own research and an accurate appraisal of what this vehicle is worth, set a realistic high-bid amount in your mind. If you really like the car, it's okay to exceed the appraisal value, but only by ten to fifteen percent; more than that and you're going to overpay. Let's say, for example, that the expert's appraisal figure is $40,000 for a particular collector vehicle. You really like it, so you set your ceiling bid at $46,000, which is fifteen percent over the appraisal. When the bidding goes to $46,500, it's time to bail out.
As much as you may like the car, try not to get emotionally attached to it before the bidding starts. It's not the only one of this year with these options out there, and tomorrow's another day. And, if by some chance, it really is a one-of-a-kind or a very-few-of-these-were-made vehicle that you're serious about owning, then you've got very deep pockets and you're going to do what you want anyway, regardless of the advice you get.
As hard as it may be, the most important thing to remember when the bidding frenzy starts is: "keep your cool and don't let your emotions rule."
Winning Bid = Purchase Contract
When you register as a buyer you'll receive an information packet that clearly details the auction company's terms and conditions. Make sure you read this information very carefully and ask questions if you need clarifications before you do any bidding. By participating as a bidder in the auction, you are legally bound to conform to these terms and conditions. The most important of these is that a winning bid is a contract to purchase and you are legally responsible to fulfill this contract. For that reason, do not place a bid that you don't intend to honor. If you win the auction, you can't simply change your mind and walk away; there will most assuredly be unpleasant — and expensive — legal ramifications.
So now you know what you need to know in order to go into a collector car auction with more than just a grin on your face and a starry-eyed look in your eyes. Have fun and, to paraphrase what they say about casino betting here in New Jersey, 'bid with your head — not over it!"