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Auctions - How safe is it?

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Why, you might ask, do certain people get attracted to buying at auctions? 

Why would anyone want to a buy a car where he is not allowed to take it for a test drive and is given very little time to pre-examine the goods?
Perhaps if we all applied a little common sense it would become obvious that 95% of cars that end up at public auctions are one of the following:

  • Repossessed cars
  • Accident damaged cars
  • Stolen and recovered cars
  • Cars from dealers that they cannot get sold.

So why do people like to buy at auctions? Because they think they are going to get a bargain. So who, you might ask, would want to buy a repossessed car? If the owner could not afford the repayments, he most probably didn't service it either. I am not even going to discuss accident damaged or stolen cars. The final category is cars from dealers. So if the dealer couldn't sell the car, why would you want to buy it? In short, there are precious few genuinely desirable cars that make it to an auction.

Then we get to the actual auction itself. You are immediately under pressure as you are bidding against other buyers. The auctioneer waves the Buyers Book around announcing what the book retail value is and asks for an opening bid. You will note that most auctioneers stand on a chair or a ladder - this is so that he can easily see the whole audience and who is bidding. An auctioneer is the ultimate super-salesman. He is sarcastic, intimidating, speaks very loudly and very rapidly. This is ubiquitous amongst all auctioneers. In short, the entire performance they put up is there to bedazzle and impress you.

You must take note that bids are excluding VAT, but the auctioneer keeps shouting out what the book value is, which happens to include VAT. Then in the small print is also a clause which entitles the auctioneer to an admin fee - in many cases it is substantial, so make sure you read the conditions and fine print on your bidding card very carefully before you jump in and start making offers you might regret later.

Establish the correct book value after you have examined the car you want to bid on. Work out your starting offer and also your absolute maximum offer. Once you have those figures, deduct VAT, as well as the admin fee and you will then have a realistic set of offers to work on. Chances are your bid will not be successful as most people get swept up emotionally by the auctioneer and the VAT and other fees are soon forgotten in the excitement of the bidding process. 

I am not tarring all auctioneers with the same brush, but it is a common technique for them to put ghost bidders in the crowd. These guys will then artificially chase the prices up to where the auctioneer would like them to be. (The recent expose on 'Carte Blanche' amplifies and confirms my sentiment)

The other thing to be aware of is that you are not given the opportunity to thoroughly test the vehicle. If you are paying cash, the sale will be deemed to be Voetstoots - and you have no recourse back to the auctioneer if the car you bought gives problems. There is also very little protection for consumers under the Consumer Protection Act for cars bought at auctions.

Many of the bigger auction houses offer on the spot finance facilities. These are mainly the finance companies trying to sell all their repossessions. Auctioneers do not have to comply with the National Credit Act, like car dealers do, so be aware that your rights may be diminished.

I know of countless clients of mine that burnt their fingers buying supposed bargains at auctions and then deeply regretted it later. The current situation is that the major banks are repossessing cars nationally at the rate of between 4000 and 7000 per month. All of those cars need to be disposed of to make space for the next wave of repo's coming in.

Personally, I would not recommend anyone except the most experienced, cool and calculating people to buy at an auction. With forty years experience under my belt, I still find auctions too intimidating and risky and I would prefer to source my stock elsewhere and preferably from trusted sources and bona fide private sellers.

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