Classic Car Auction Market, Online vs Physical – Part 2
Following our recent article Online Auctions vs Physical, Jan 2021, we are pleased that we have received some positive comment. In the interest of open discussion and debate we have published a “fair comment” response from our friend and colleague at Silverstone Auctions, Managing Director, Nick Whale. Nick is a seasoned auctioneer with some interesting and valid points. Feel free to once again respond as this is a topical debate in the current market and worth discussion.
Here is Nick’s kind contribution –
“Your article on the classic car auction market is an excellent read. The arguments that assess the pro’s and con’s are largely well considered and the emergence of “on-line” only auction houses is a very relevant debate in the market today. Nobody can afford to ignore change, it is an inevitable part of life ~ and particularly business life where customer demand forces it through very rapidly.
There is, however, one point not considered at all. And it is the most relevant point in my view. And that is the assessment of auctioneers perceived charges verses the reality. In other words if the theoretical cost of a sale is 5% plus VAT from the seller and 12.5 % plus VAT from the buyer ~ what is the actual typical retained gross margin from the auction house? The uninformed would suggest it must be 17.5% plus VAT as indeed your article suggests. This argument is flawed. Completely flawed in fact because it does not take in to account the reserve price set by the vendor.
The vendor will always want a higher price than the market is willing to pay. That is the case in about 85% of auction sales in my experience. So – the only way to get the car sold and the auction house’s sale rate improved is to sacrifice margin and accept a smaller % return. So, in reality today, the 17.5% is used only to “bridge the gap” between seller expectation (his reserve price) and what the market is prepared to pay.
I would suggest that if truth were told the majority of physical auction houses gross margin today is not much higher than the on-line newcomers. The average classic car auction company’s retained gross margin will be measured in single figures for sure.
Your article falls well short of explaining this aspect to your reader. And it is really important. Not least because established physical auction houses do many things that on-line only auction houses do not.
- They research the cars value and history thoroughly. They carry out extensive due diligence on the car. They research the market fully to establish correct and accurate values on a weekly basis
- They HPI all cars and check as possible against prior history.
- They write the script and edit the customer script and commit the customer to signing off a full and detailed description
- They market the cars on several external websites nationally and globally
- They issue press releases and PR stories on all cars with a notable history
- They provide venues with refreshments and customer conveniences and professional staff to offer informed and educated opinions and help
- Most importantly they allow the vehicle to be viewed, started and test driven prior to bidding
- They withhold the funds from the seller for 7 days in order to make sure the buyer is protected for a period and is given a fair time to establish and validate the vehicle
- They promote the sale through at least 2 external bidding platforms and pay to market the Sale to the platforms database of auction buyers
- They provide a professional auctioneer who can fully exploit best price for the vendor
- They provide a vital live link to the vendor at point of sale to try and make a deal complete in real time
- They provide validated partner services such as collection/delivery/ insurance/independent inspections/ finance etc.
- As a combination of all of the above they create a better, safer and more professional buying experience
So it is an amazing service when you consider the average gross margin is measured in single figures nationally, and only marginally higher than an on- line auction house – that simply hands over the sellers contact details!”
Nick Whale, Managing Director, Silverstone Auctions
Let us know your thoughts. Have you bought from an auction recently? Share your experience with us.