Buying Vehicles at an Auction
It is essential for road safety that road users share our roads in vehicles that are roadworthy, well maintained and insured. Few vehicle owners are fortunate to buy a brand new vehicle. Most of us have to buy used cars out of hand, via a dealership or at an auction.
Buying a used car is however always a risk and something to be done with caution. In this section, we would like to consider the buying of vehicles on auctions, discuss the pros and cons and offer some advice to the prospective vehicle buyer!
The Law / Consumer Protection Act
In South Africa, the rights of the consumer are protected through legislation aptly named the Consumer Protection Act. The first step for any vehicle buyer would be to ensure that the auction centre is compliant with the Consumer Protection Act.
This Act requires from the auction centre to fulfil certain obligations including:
- The display of any faults of the car in writing for the public to view. Even faults like a noisy engine should be displayed to the public.
- Prohibiting an auctioneer from knowingly misrepresenting the value, composition, structure, character, quality or manufacture of the goods put up for sale at an auction.
- Affording consumers a reasonable period of time and opportunity to inspect the goods on offer prior to the commencement of an auction. [No fee may be charged for such opportunity.]
Nature of Vehicle Auction
What is a vehicle auction and how does it differ from buying a vehicle through a dealer/dealership?
- When the vehicle buyer goes to a dealership, the dealer sells him a car. When he, however, goes to an auction, he buys a car.
- At an auction, the onus is on the buyer to inspect and assess the product he wishes to buy - The auction house is merely facilitating a transaction between the seller and buyer; it’s not their job to sell the consumer a good car.
- Prior to auction day, there is a viewing day where you can look at the cars that will be auctioned.
- Prospective buyers are allowed to bring their own mechanic to examine the engine in more detail.
- Auction cars are not available for test-driving – so the potential buyer needs to be sure about the condition of the vehicle he is bidding on.
- Most of the vehicle auctioned have been repossessed by banks and other financial institutions.
- On the day of the auction potential, buyers pay a deposit and get a number to be registered as a buyer.
- In order to register on auction, FICA documentation is required - [Identity documentation, Utility Bill] - No vehicles may be released without the required documentation.
- Bidders or appointed representatives of interested buyers are assembled on the floor and actively bid in the auction by being physically present.
- The process is usually fast and buyers are required to remain alert and focused on the bidding process!
- Once the buyer pays the “purchase fee” and other expenses such as Value Added Tax he could be the proud owner of a car.
- The buyer is expected to pay for the purchase in full on the same day and to remove the vehicle from the auction premises.
- Payment could in most instances be made by bank-guaranteed cheque, bank cheque or electronic transfer.
- There has been a significant increase in vehicle buying transactions done through online auction platforms.
- Newcomers to online auctions are usually provided with training and educational videos by auctioneers to guide users through the process of online and real-time auctions.
- Bidders can bid through a combination of online and live bidding.
- When bidding is not a real-time, live-stream auction, bids can be placed online for a specified period of time, often a week, after which time the bidding process closes. Only then does the seller consider the offers placed during the period.
- Online auctions are beneficial to both buyers and sellers since buyers are not required to travel to a specified location to participate, while sellers are exposed to a larger potential buyer audience.
- Bidding online offers consumers a convenient, measured and transparent method of buying and selling and offers secure payment.
Benefits of Buying a Used Car at an Auction
- Most buyers recognize that they may be able to buy a vehicle at much cheaper than if compared to cars sold at conventional car dealerships and distributors.
- This may be well below current market value. [Some estimate a potential saving as much as 30%]
- Retailers can't compete with auction prices, so you could potentially find a well-conditioned car at a very reduced price.
- The buyer with the skills to repair the small dents and minor mechanical problems will quickly realise the true potential of a used car on auction.
- Some of these vehicles include vintage cars that could almost be seen as “collectors' items”.
- Not all vehicles are ancient - the fortunate buyer may still be able to find a vehicle within warranty.
- There is usually a huge variety of cars offered to attract as many potential buyers as possible to the auction.
- Some auction houses hold weekly used car auctions, selling everything from passenger and commercial vehicles, through to 4WDs, trucks and utility vehicles.
- The patient buyer willing to wait a week or a month may find that the exact model he desires becomes available rather soon.
4. Ability to do research
- Many auction houses allow potential buyers to view information on the vehicles to be auctioned online prior to the auction.
- This could include condition reports detailing issues with the car – such as major mechanical problems, dents and any other damage.
- The information may allow the potential buyer to do some research and enquire from others as to what fair value should be both for the vehicle and estimated costs of repair/ improvements.
5. Fleet Vehicles
- There is some extra value for money to be found in auctions of government and fleet vehicles.
- Some corporates, organizations or state departments often update their vehicles after a set number of years or kilometres and put them up for auction.
- The main benefit of these vehicles is that their service history is often complete and documented – most companies service these vehicles in line with the manufacturer’s recommendations.
- The potential buyer may know exactly what the car’s been used for.
6. Repossessed Vehicles
- Buyers may find good value in a repossessed car.
- Repossessed cars are often a favourite among buyers as there is less chance that anything is wrong with the vehicle.
- Repossessed vehicles are usually sold at auction so that the money can be recouped quickly, not because it can’t be sold elsewhere due to mechanical issues.
What to be Cautious of when Buying Pre-Owned Cars at an Auction
The best advice is to always have a “Buyer Beware” attitude and to question everything. Do not rely on verbal promises and don’t trust sales talk! Always question why a vehicle is sold at auction and whether it is not the last place to sell cars that cannot be sold elsewhere.
Sold “As Is”
- Keep in mind that the vehicle is sold as is – what you see is what you get.
- You cannot take the car from the auction site to be checked out by a mechanic elsewhere.
- The vehicle you want to buy may not be second hand but 3rd, 4th or 5th hand etc.
- Unlike when you buy from a licensed dealership, there are no warranties, cooling-off periods or guarantees.
- Even with some legislative protection, there is not much of a safety net.
- The time and energy spent to limit damages by relying on this protection may be little consolation once you have made the wrong purchase.
Looks Can Be Deceiving
- Sellers could go to great lengths [and some do] to hide flaws and make the vehicle look desirable.
- Even though the vehicle may look shiny and new it may not be in good mechanical condition.
- You may need to check the legalities and whether the vehicle is not illegal and that ownership may legally be transferred to you.
- A good way to check is via the VIN (Vehicle Identification Number) on the build plaque in the engine bay, on the passenger side windshield and also on any registration documents. The VIN should match – otherwise this means that major parts have been replaced, indicating a serious accident.
Seeing is Not Feeling
- Most auction houses don’t allow you to take vehicles for a drive before placing a bid.
- You are buying with your eyes and don’t get to feel how the vehicle drives.
- You can turn the car on, listen to the engine, check under the bonnet and view any logbooks if they’re available – but that’s often the extent of it.
- There may be hidden costs you are not aware of…
- Ensure that you confirm what the “processing” fees might be before you start bidding.
- Costs may include an auctioneer’s commission and fees of obtaining registration papers.
- Should the vehicle not have a roadworthy certificate, then you need to organise a way to get it home.
- Be prepared for the costs of a roadworthy test and expenses needed to get it in a roadworthy condition.
Fraudsters and Dishonesty
- We need to be alert of dishonest sellers, buyers and even facilitators.
- Keep in mind that odometers can lie and some vehicle owners are not as trustworthy as we would like to believe.
- At any auction, there’s also a risk that ‘dummy bidders’ will artificially inflate the price (even though it’s illegal).
- Stay alert to “ghost bidding” and “vendor bidding” and methods that could be used to drive prices higher.
Tips / Suggestions for the Vehicle Buyer at an Auction
When a buyer purchases “out-of-hand” from a relative, colleague or friends he very often has some idea on the driving behaviour of the owner. When you buy at an auction it is up to you to do some extra research on the vehicle!
1. Preparedness and Informed Decision Making
- “There is nothing quite like inquiring” – Listen to the advice from experts and feedback from car buyers who have already acquired cars at such auctions.
- Do your homework well prior to the auction.
- Try to find a vehicle history report if available.
- Enquire whether the vehicles on auction is available on the website of the auctioneer and how much information on the vehicle is available.
- Research the car you want and what you should be paying for it before you go to the auction.
- Know what rights you have under the Consumer Protection Act and be ready to enforce them.
- Familiarize yourself with the auction process and the implications of bidding.
- Budget not only for the bid price but also for facilitation fees.
- Ask the auctioneer questions. Including those aimed at finding out where the asset comes from and why it is being sold.
2. Inspecting the Vehicle
- You have to buy with your eyes – use the opportunity to take someone along with an eye for detail.
- A good eye from someone with mechanical know-how can identify blemished bodywork or crash damage.
- Don’t be afraid to do a proper inspection - open all doors, hood, trunk, and look for the VIN stickers, and make sure they all match. If they don't the car is either stolen, or was in a wreck, and fixed with parts from another car.
- Be cautious of less-than-smooth sheet metal, paint overspray, wet carpet or puddles under the vehicle that could indicate structural and other weakness.
- Check for oil leaks, exhaust smoke and scan the tyres for uneven wear and tear.
- Use your little “Black Book” to establish the market value of a specific car or use your smartphone to scan car pricing web sites from the auction.
3. The Bidding Process
- The bidding process can be frantic, exciting and with only a few moments to make important decisions.
- Bidding requires your attention and focus -Do not get distracted!
- Remember that your right to retract extends only up to the point when the hammer has fallen.
- Buy based on fact and not emotion.
- Don't get caught up in the frenzy of a bidding war and spend too much for a car.
- There may be reasons other than market value why another is willing to bid on a specific vehicle – no need for you to compete!
- If a deal looks too good to be true – it probably is.
- Be prepared to pull out and walk away when the price goes beyond the price you have set your bid limit on.
- Don’t risk driving an uninsured vehicle away from the auction premises!
Car auctions have become an enticing alternative to vehicle buying through private sellers and dealerships.
In the current challenging economic environment, auctions offer the opportunity for the informed buyer with an appetite for the chase to use his skills to make a decent saving in buying his/her wheels.
The informed vehicle owner is a safer vehicle owner. May the advice and suggestions offered to the potential vehicle owner allow for safer vehicles and fewer frustrations!