Selling a car at auction - the pros and cons

By Stuart Johnston

While no significant advantage can be had by selling your car at an auction, the classic car market defies the rule by being the preferred method of achieving the best sale price.

The “Cons” of selling a car at auction.

Should you sell your car at an auction? The answer to this is generally a “no”, but in certain cases, it can work for you.

“Most motorcar auctions in South Africa are held comprising of cars that have been repossessed by finance houses,” says Gavin Spiller, a vehicle evaluator at one of South Africa’s biggest auction houses specialising in cars, Aucor.

“The cars we put under the auction hammer are generally there because the previous owners couldn’t afford to pay for them, according to their original financing contracts. The banks repossess the cars and then use an auction-house-like auction to sell these cars to the highest bidder at an auction. The banks want to recoup as much money as possible for the car to settle the outstanding amount on the finance contract.

“The reason for this is that the banks or finance houses themselves don’t have the structures within their organisations to sell the cars that they are forced to repossess, due to defaults on payments. So an organisation like ours manages that for these institutions. “

Private owners selling cars at auctions are very rare.

Spiller says that only very rarely will private owners put their cars up for public auction, and in these cases, it will most likely be a rare collectable car, such as a Ferrari or Porsche.

It is generally accepted that you can expect to pay between 10 to 15 per cent less than the retail trade price at an auction for any given car. This is why so many used car dealers attend auctions, which are their major source of acquiring stock for their showroom floors.

Why will you realise a lower price for your car at auction?

One of the biggest reasons for the prices being lower is that the cars at auction represent a bigger risk to the buyer than if they were offered for sale through a dealership. The biggest reason is that auction houses don’t allow any sort of test drives of cars prior to the auction. Prospective buyers do have a chance to view the car statically before the auction, but there are also no guarantees offered on the cars sold by auction.

So if you want to sell your private car through an auction, these same rules apply. You will get a lower price than if you sold it privately, or even to a dealer, who will have a chance to thoroughly assess your vehicle. And you will have to pay a sales commission to the auction house.

Are there any “Pros” to selling a car at auction?

“The exception to this rule is when it comes to classic cars,” says Spiller. “I recently attended an auction for classic cars where some exceptional prices were bid, prices that to my mind were well above average for classics on the South African market.

A classic car auction can be open to international bidders.

Classic car auctions are not unusual in South Africa and a few organisations hold them fairly regularly. Recently the Concours South Africa Auction at Steyn City saw a number of classic cars and motorcycles realise very high prices. One of the reasons for this was that the auction was advertised to international bidders, and some of the prices realised reflected these classics’ values on European or American markets.

A classic car auction, if properly advertised, will draw bidders that will have an accurate idea of the current value of a classic car, both locally and internationally. This can work for you, as a seller, because you then get bidders competing against each other and raising the sale price.

Fix a reserve price that you are happy with.

It is important to remember that if you do put your classic up for auction, to fix a realistic reserve price (the lowest price that you will accept on the car). That reserve price should include the sales commission you will have to pay to the auction house for including your car in their auction line-up. Don’t make the reserve too high, because the car may not sell.