More and more people are buying classic cars at auction – with mixed results. Our complete guide to classic car auctions will help you get the most out of them.
2015 will be a record year for UK auctions. The number of auctions has increased dramatically over the last two years as hopeful sellers and hungry buyers both look for a result. It may sound obvious, but buying from auction is totally different from buying from a dealer so when you are scanning the auction catalogues and results it is worth remembering the following.
Auction results don’t represent the market as a whole
According to classic car insurance experts Hagerty, only around 5% of classic cars are sold at auction. As a wise man once said “it only takes two guys to get dumb in a room” to drive a price way past it’s realistic value.
Auction estimates and results can confuse
Before you consider buying at auction, you will no doubt have had a look at some auction estimates and results. Estimates generally represent what an auction house thinks the car will sell for rather than a being a true reflection of its value. “Lowballing” is the practice of giving a low estimate to drive interest in a lot and quite often this can be by many tens of thousands of pounds. This low mileage Ferrari 512
is a good example – estimated way below market value at £67-100,000 and selling for a sensible £240,000.
Although auction estimates do not include the buyer’s premium (or commission), auction results are given with the buyers premium included (generally 10-15%), so quite often people think a car has exceeded its estimate when it hasn’t. It is worth noting that results are regularly reported erroneously even in the classic car media because of this!
The hammer price is the price sold for at auction when the auctioneer brings the hammer down. The buyers premium is then added + any local taxes. In the UK VAT will also need to be paid on the buyers premium – so if the buyer’s premium works out at £10,000 on top of a £100,000 hammer price, there will be a further £2000 of VAT @20% to pay.
Auction descriptions carry no warranty.
If you take time to read the small print in an auction catalogue, you will notice that auction houses do not warrant their descriptions – in other words, if the description is incorrect, tough. CAVEAT EMPTOR – buyer beware! Descriptions of classic car lots are often taken direct from the vendor so are generally subjective. Watch out for the following phrases that indicate there may be a question over the details.
We are advised by the owner that…..
The mileage is believed to be genuine…..
It is assumed that…
Subject to confirmation….
The vendor will provide….
Don’t take anything for granted – check all the details first hand yourself. An “extensive service history” may not be be quite what you consider to be extensive or it may not be available at all before or after the auction. Don’t count on being forwarded all the paperwork after the sale because that may not happen however reputable the auction house or indeed the seller. This goes for any provenance and ownership documents as well – if they are not physically available to view they may not exist – and buyers have no recourse.
- Matching numbers – verify this yourself. If you purchase a car and discover it isn’t matching numbers you won’t be able to hand it back*.
- Foreign cars – check the ownership details and if any import tax or duty is due on the vehicle. If you buy a car with disputed ownership then you have bought yourself a problem. In our experience this can often be a problem on cars imported from Italy.*
- Documentation – if you don’t see it, it may not exist. Descriptions such as “subject to a £30,000 restoration” are meaningless if you can’t produce receipts*.
- FIA certification – check that the documentation exists and is in date*
- Event eligibility – check this carefully, it may be assumed. “Mille Miglia eligible” definitely doesn’t mean that you have a guaranteed place on the event!
- History – many descriptions of vehicle history in auction catalogues are quite lengthy but you may find that the reality is that there is very little documentation available to support it. Assurances mean nothing.
What an auction description doesn’t say about a car is as important as what it does say.
Do your homework
Make sure you do as much homework on the car in question as possible. Google the registration number and chassis number in advance of the sale and make sure you get a full inspection and test drive if possible. If not, get an expert to have a really good look over the car on a preview day. Resources such as XKE Data
and car club registers can be invaluable. A lot of dealer cars go through the auction and much of the time the descriptions on the dealer website and auction site will be the same so a Google search should reveal if you can buy the car direct from a dealer.
Decide your bid strategy before you go to the auction and remember that the bids and final hammer price do not include the buyers premium and any relevant taxes. In the UK you will pay VAT on the buyers premium – so if the buyers premium is 10% and you win the auction at £100,000, you will pay a £10,000 buyers premium plus £2000 VAT (currently 20%) on that premium.
Stay calm – “it only takes two people to get dumb in a room” for a car to sell for far more than it is worth. Figure out what you are willing to pay and stick to it. The adrenalin and “will to win” means that many people get carried away. It is also worth remembering that you may well be bidding against dealers
Off the wall bids – in the UK auctioneers will take bids “off the wall”, so named because they are not real bids. This practice is perfectly legal provided the lot has not reached it’s reserve (so will not sell). Many people find this frustrating but if the lot dossen’t hit its reserve it won’t sell anyway. This is also known as chandelier bidding.
Vendor’s representatives – as above, it is legal for a representative of the vendor to bid on an item until it hits the reserve.
Phone bidding – phone bidding can be frustrating as you are reliant on the information the auctioneer will pass you and often they will encourage you to bid which you are in effect doing blind.
Internet bidding – is easy and if there is a live stream of the auction you can see what is going on. Remember there can be a delay between clicking the “bid” button and the auctioneer receiving it, so there is always a danger the hammer could go down before your bid is received. It is also important to check if there is a different buyers premium for bidding online – often they are higher by as much as 5-10%.
Absentee bids – if you can’t be there in person you can make an absentee bid by letting the auction house know what your maximum bid would be getting them to bid on your behalf. Ensure you clarify how this will be dealt with as it has been know for bids to be used as offers – in other words, you might end up paying your maximum bid even if a lower bid would have won the auction.
After the sale
Payment – auction houses will expect immediate payment
Arrange transport – this should be investigated before the sale as most auction houses will start to charge storage fees the day after the auction.
Classic car auctions can be a lot of fun and it is possible to pick up a bargain – but it is also possible to pay way over market value for a car. It’s easy to forget all the associated fees in the heat of the moment and being able to read between the lines of an auction description is a skill it takes time to develop, but this applies to buying from a dealer as well – the difference is that with a dealer you have some protection as a consumer.
Classic car auctions – the facts and figures.**
5% – approximate number of classic car sales that are made at auction globally per annum (Source: Hagerty)
12% – number of lots sold over estimate
20% – number of lots sold in upper half of estimate of more
27% – number of lots sold within estimate
28% – number of lots sold under estimate
42% – number of lots sold in lower half of estimate or less
60% – number of lots sold under bottom estimate or not sold
70% – number of lots sold
** Figures provided by Classic & Sports Finance from auctions monitored in 2014.
*Actual customer experience at auction.
Photo credit Thesupermat/ Wikimedia Commons