Buying at auction
Once regarded as an outlet for vehicles in their twilight years in search of one last owner before heading for the breakers yard, auctions have upped their game. They are now big players in the corporate ‘remarketing’ business, helping blue-chip companies realise strong residual values for their used vehicles. It is fair to say that car and van auctions have led the way in this respect, helping to disperse the huge number of used vans that have come onto the market as a result of booming new van sales. So-called ‘branded auctions’ that harness the strong identity of some of Britain’s biggest van fleets and contract hire companies have done wonders for the image and status of auctions. This is something the truck and trailer market is beginning to exploit, too.
Vehicles entered for auction come from contract hire companies, rental businesses, finance houses, manufacturers and operators. There will also be some from the used truck and van trade.
Used truck dealers at auctions
Buyers tend to be split between used-vehicle dealers sourcing stock and operators looking to cut out the middle man. In the case of trucks, the majority of buyers are traders, whereas many more end-users are to be found at van sales. Most of the main auction sites hold truck sales once a fortnight. Van sales normally are held at least weekly because there are so many more to sell.
There are also what are known in the truck business as ‘Saturday sales’. These are one-off auctions conducted by an auction house on the premises of an operator who has ceased trading for one reason or another. It is normal for everything to be sold on the day, with items having no reserve price.
AUCTION STOCK PROFILE
The auction business classifies trucks and trailers into one of three categories; late-year, domestic and export.
Late-year denotes trucks that are no more than two years old. It could have been repossessed by a finance-house, which is using the auction to demonstrate that it has achieved the vehicle’s true market value. Trailers often stay with their first owner for around 10 years so late-year trailers maybe up five years old.
Domestic covers trucks aged between three and six years. The focus here of late has been on trucks registered on or after 1 October 2006. These are the Euro-4 models with exhaust emission levels low to comply with the latest tier of London’s Low Emission Zone, which took effect on 3 January 2012. Prices for similar trucks registered in September 2006 and those in October can be as much as £5,000 apart. However, clean seven-year-old Euro-3 trucks still find homes with operators who have little need to enter the LEZ.
In this category you are likely to find batches of vehicles coming from a single fleet. If that happens to be a high-profile or well-respected fleet then auction houses are likely to promote and market that connection, hoping to raise both interest and residual values.
The core of the export category right now are Euro-3 and older trucks, mostly with manual (as opposed to automated) gearboxes and a low level of electronics. This market is driven by buyers in countries that need more low-cost trucks and where the exhaust emission rules are some way behind those of the European Union. African, Middle Eastern and certain eastern European countries figure prominently in the list of destinations. Right-hand-drive markets are naturally the keenest customers. Russia, formerly a reliable export destination, now accepts trucks that are no more than three years old. One-off events can distort the market. The hiatus in the Japanese truck industry caused by the tsunami of March 2011 led to buyers from Australia, Malaysia and New Zealand turning to the UK to source late-year right-hand-drive trucks.
PREPARING AND RESEARCHING FOR AUCTIONS
It is essential to do your homework. Don’t rely on luck; there is too much competition for vehicles to get away with it. If you are an auction novice, a couple of dry runs to sales are highly recommended to get a feel for what goes on. They will also help you gauge how much you can expect to pay, allowing you to relate price to condition. Cross-reference those prices with other sources of information such as fellow operators, dealer forecourts, the used trucks advertisements in Commercial Motor, websites, and the trade guides CAP Red Book and Glasses Guide. The more sources you use, the more reliable the information. Outlying top and bottom prices serve as useful boundaries for the price band.
It is advisable to focus your search on a narrow range of potential vehicles. It is probably unrealistic to pinpoint a particular model in the hope that exactly that will be available. On the other hand, a completely open mind could lead to a rash purchase you will later regret. There will always be another auction, so it is better to come away with nothing. The other golden rule is, of course, set your budget and stick to it.
WHAT TO LOOK FOR AT AUCTIONS
Vehicles at auction are “sold as seen,” with all the risks that this phrase suggests. Nevertheless, the cautious buyer can take some steps to reduce those risks. The first source of information is the auction catalogue. The entries will often reveal if the vehicle is still covered by a valid MoT certificate, but it pays to enquire if the vehicle was sent for auction with any form of service history such as inspection records and repair bills and tachograph calibration or two-yearly check certificates. Auction houses urge sellers to provide these.
The truck’s odometer is often omitted from catalogue entries. On some it is plainly at odds with the age of the truck. It is best to play safe and disregard odometer readings unless they are described by the auction house as ‘warranted.’ That means that the vendor claims to have evidence that verifies the odometer reading.
It is also useful to consider who is selling the vehicle. Regular sellers like finance houses and contract hire companies build a reputation based on the standard of the vehicle they are selling, and the auction house will market the brand accordingly. You may recognise the former owner’s livery: if it is part of a ‘branded’ sale the truck will be labelled with the vendor’s name. In general, van buyers have access to more information about the condition of a particular vehicle because auction houses recognise that more van buyers are end-users who need more help. This has led to schemes such as Manheim Remarketing’s 21-point pre-sale check list listing known defects. Van buyers can also turn to usedvanexpert.co.uk, a website listed common faults with individual models. Truck buyers cannot expect that level of information and must be prepared to do more detective work for themselves, perhaps talking direct to the vendor to glean some more information.
Basic information such as date of first registration, engine capacity and its tax band are available free of charge from the DVLA’s online service, available through the direct.gov.uk and searching under ‘vehicle check services.’
A check round the truck in the auction compound will at least reveal obvious defects such as panel damage, windscreen chips and cracks, dented wheel rims, marginal or mismatched tyres and tread wear patterns that are indicative of steering or alignment problems. None of these are difficult to rectify but the cost of doing so needs to be factored into the price you are prepared to bid. And the cost of the work has to viable when set against the vehicle’s market value. The truck will run through the auction only once before it is parked up again so the canny buyer will make sure he is there to see it started, assessing how readily it turns over and fires up, and checking to see what comes out of the exhaust pipe.
ONLINE AUCTION BIDDING
A thinly populated auction hall does not necessarily mean that there is little interest in the sale. Manheim reports that half of its trucks are bought from people bidding online; other auction houses report that the proportion is nearer to 25%. Either way, online bidding reflects a high degree of confidence in the auction house as well as the vehicle seller. This is not something that the auction novice should try. It is more appropriate to the purchase of cars and vans coming from big, well-known fleets where the risks concerning condition and service history are smaller and where vehicles are accompanied by a declaration of roadworthiness and condition.
The bidding process normally is displayed on screens on the wall of the auction hall, so that potential buyers are aware of rival bids via the internet as well those from around them. The auctioneer will also differentiate the two channels, referring to ‘bid in the hall’ and ‘bid online.’
Some auctions require buyers to register first, completing a registration form for which in return they will be issued with a bidder’s number and catalogue.
The popular perception of auctions garnered from television is that bidding is best done by lurking at the back of the hall and merely raising an eyebrow. Auction houses advise exactly the opposite: make yourself highly visible to the auctioneer and bid clearly by raising your hand. Establish eye contact with the auctioneer to make sure he has seen your bid and acknowledged it. Buyers who are too meek or too subtle can miss out.
It is your choice whether you start bidding from the word go or delay until the price is nearer what you expect to pay. Price increments tend to be wider when the bidding starts - £1,000, £500, or £250. The steps get smaller, sometimes as little £25, when bids are nearing their peak. At this point buyers often make a slashing movement with their hand or paperwork to indicate that they wish to halve the increment. If bidding is strong one has to follow the auctioneer’s lead on how quickly the price moves up.
The other tip is to bid quickly if you want to make sure of securing your target. Auctions have no time for hesitancy, so buyers must have a clear plan of action and execute it without delay.
An alternative strategy is to submit a commission bid before the auction. This will be included in the sale process and it guarantees that your budget limit cannot be exceeded in the heat of the moment. Similarly, online bidders can submit a starting price and a top limit before the sale.
"Establish eye contact with the auctioneer...Buyers who are meek or too subtle can miss out."
There are two important phrases to listen out for as the auctioneer conducts the sale: ‘provisional’ and ‘on sale.’ ‘Provisional’ means that the bid is below the reserve price set by the vendor. In that case, the auctioneer’s hammer does not fall and it is up to the auction house to liaise with the vendor to see if he is prepared to accept the bid. There are three possible outcomes – yes, no, or a willingness to haggle to bridge the gap between reserve and bid to complete sale.
Once the reserve is met during bidding the auctioneer will announce that the vehicle is ‘on sale.’ That often tends to stimulate bidding because buyers know that the vehicle will be sold when the hammer falls.
Once the hammer falls the bid cannot be withdrawn. Regular trade buyers are likely to be known by the auctioneer and will have a credit account to handle their payments. Any other buyer must give his name and address to the auctioneer and may be asked for proof of identity. At this point, buyers must also pay a deposit, typically 10-15% of the selling price, subject to a minimum that is normally £500- £1,000.
Most auctions set a deadline of between 24 hours and five days for the balance to be paid. If paying by cheque then you will probably have to wait until the cheque is cleared before you can take the vehicle. There is no such delay if paying by cash, credit/debit card. However, there are strings attached to some of these payment methods. For example, many auction houses do not accept cash payments of more than £9,000: this prevents them falling foul of money laundering regulations. There may also be a ‘transaction fee’ of anything from 1-4% for cash or credit card payments.
There is also a ‘buyer’s premium’ to be paid. This varies considerably depending on the value of the vehicle and the level of risk as perceived by the auction house. This fee is reckoned to cover the cost of the auction house providing indemnity that the vehicle is not stolen nor has outstanding finance still owing on it, or that an odometer reading said to be warranted turns out to be incorrect. The auction house should have a published scale of buyer’s premiums. Charges may range from £100 to £500 and are subject to VAT.
The hammer price of commercial vehicles is also subject to VAT. Finally, auction houses may levy a fee (likely to be around £25) for completing the V5C (registration document) and sending it to the DVLA at Swansea to register the change of ownership on your behalf.
This combination of VAT, buyer’s premium and fees adds quite a sizeable chunk to the hammer price. Remember to include that in your budget. If unsure about any aspect of these charges, check with the auction house before bidding.
COLLECTING THE VEHICLE AFTER AUCTION
Once the full purchase price has been paid the vehicle keys and any paperwork will be handed over to the buyer. Auction houses like vehicles to be collected quickly so that there is room in their compounds for vehicles in the next sale. Most will try to be accommodating but if vehicles are left for more than a few days expect a daily storage charge.
Auction terms and conditions invariably include a clause to the effect that buyers must not take vehicles out onto the road if they contravene laws regarding safety and roadworthiness, or are uninsured. Using trade plates allows an untaxed vehicle to taken on the road for delivery to the buyer but that does not include a vehicle without an MOT. Trade plates offer exemption from the MOT only if the vehicle is being repaired or if being driven to a pre-booked MOT test. Many auctions offer a delivery service to help shift vehicles that cannot be driven off site.
The fall of the auctioneer’s hammer completes a contract of sale between the seller and the buyer. The auction house is said to be an agent of the seller and is not a party to the contract. Its terms and conditions normally state that neither seller nor buyer has any legal right of action against the auction house in respect of any matter arising out of the sale. The usual advice applies – read the small print.
If a buyer changes his mind after having paid his deposit and fails to pay the balance of the price, he forfeits the deposit. The deposit would only be refunded if the contract was rescinded in one of several circumstances. These include:
- The vehicle was an insurance write-off but this had not been announced by the auctioneer
- The odometer was described as ‘warranted’ but subsequently proves to be incorrect
- The vehicle was not sold “as seen” but the auctioneer failed to mention a major mechanical defect or otherwise misrepresented the vehicle
- The seller did not have the right or authority to sell the vehicle
As mentioned above, the buyer’s premium is meant to pay for an indemnity against these circumstances, so auction houses should be prepared to refund a buyer’s costs if the sale does not proceed for reasons such as those outlined above. Auction houses have clamped down vendors selling trucks with outstanding finance owed, and routinely run credit checks.
Most trucks and trailers are sold on an ‘as seen’ basis so there are very few occasions in which buyers have a legitimate complaint about what they have bought. Auction houses told us that they will attempt to mediate between buyer and seller to resolve some disputes. For example, in the event of a warranted odometer reading later proving to be incorrect, the auction house may persuade the seller to compensate the buyer rather than rescinding the sale.
Documents, keys and records
When collecting the vehicle the buyer should take care to ask for all available documentation. That includes MOT certificate, service records and tachograph calibration/two-yearly check records. Auction houses tell us that the latter are often not available, so inspect the plaque on the tachograph head (or, in the case of a truck with a digital tachograph, on the driver’s side door-pillar) to see if the tachograph is due for another check. Trucks with tail-lifts or cranes should be accompanied by their Lifting Operations and Lifting Equipment Regulations 1998 (LOLER) records of ‘statutory thorough examinations.’ Truck operators are expected to keep these on file, so the buyer should arrange a new examination and start afresh if previous records are missing.
If there is a locking filler cap on the fuel tank, check that key is included too. Either way, some buyers prefer to fit a new locking cap to ensure that they have control of all the keys.
Finally, remember to update any records, such as adding the vehicle to the O-licence and, where applicable, notifying your insurer. And if you decide to have the vehicle sprayed a different colour, the V5C registration document will have to be amended.
Shoreham Vehicle Auctions: www.shorehamvehicleauctions.com
British Car Auctions: www.british-car-auctions.co.uk
Commercial Vehicle Auctions: www.cva-auctions.co.uk
Protruck Auctions: www.protruckauctions.co.uk
HGVBay.com: www.hgvbay.com Malcolm Harrison: www.malcolmharrison.co.uk
Fleet Auction Group: www.fleetauctiongroup.com
Dingwall Motor Auctions: www.dingwallauctions.co.uk
South Western Vehicle Auctions: www.swva.co.uk
Stoodley Vehicle Auctions: www.stoodley.co.uk
Newport Auctions: www.newportauctions.co.uk
UK Van Salvage Auctions: www.ukvansalvageauctions.co.uk
Truck Auction World: www.truckauctionworld.com
RMI Motor Auctions: www.rmif.co.uk
Citizens Advice Bureau: www.citizensadvice.org.uk
DVLA (online vehicle check): www.direct.gov.uk
Used Van Expert: www.usedvanexpert.co.uk