SEMA News - November 2010
Know the Auction Company and What to Expect
“An auction brings a very diverse group of vehicles in various conditions to one location so that a prospective buyer can walk down the line and literally compare one against the other, which is very difficult to do when you’re buying from a classified ad or even on the Internet,” said Steve Davis, president of the Barrett-Jackson Auction Company.
“Being up close and personal with the vehicle provides the opportunity to ask the seller questions and really look at the car. It gives you a benchmark so that you can compare one against the other to develop a sense of value based on real-world experience.”
Barrett-Jackson may be the most well-known auction company in the world, and the company was recently placed on a 2010 list of “The World’s Most Ethical Companies” by Ethisphere Institute, an international think-tank. Barrett-Jackson has sold vehicles in every model category, with winning bids ranging from as little as $5,000 to as much as $5 million, and the company’s officers point to the Ethisphere award as evidence of their dedication to acting in the best interests of both buyers and sellers. Davis advised that any prospective buyer take a close look at the auction house he may be dealing with to ensure that the experience is a good one.
“The auction that you attend is going to be determined by your goals,” Davis said. “Geographic location is a big part of it, and so is the type of cars being offered. You should also consider the style of the auction. A Barrett-Jackson auction is like a rock-and-roll concert, with things going on in every direction. But you should also think about the reputation of the auction company, how long it has been around and whether you can depend on the company to transfer the appropriate title documents. Make sure the company is a properly licensed dealer, the auctioneers know what they’re talking about, and that they are as passionate about the cars being offered as the people who are looking to buy or sell them are.”
Because of the sometimes extraordinary value of the cars that are auctioned at a Barrett-Jackson event, prospective buyers must go through a comprehensive screening process before they may bid on a vehicle in order to ensure that they are actually capable of paying for a car they are interested in. Many auction houses require deposits, but the usual procedure at Barrett-Jackson calls for a bank letter or bank guaranty ensuring that the buyer is financially sound. Gary Bennett, Barrett-Jackson’s vice president of consignments, said that the company follows up on each of these bank representations to ensure that they come from a legitimate financial institution. There is also a registration fee for buyers, which is collected in order to pay for this research.
Authorized bidders may signal in any way they would like. Auction personnel—sometimes called ring people—are stationed throughout the bidding area to watch for bids and ensure that they are recognized by the auctioneer with the hammer.
When a prospective buyer has passed the screening process, he is issued a bidder number and a credential that he wears around his neck. The credential includes a photo of the buyer for identification purposes, and the bidder number allows auction officials to confirm what the person’s credit limit is. Barrett-Jackson uses sophisticated technology during the auction, and security cameras can even zoom in on a credential to identify bidders and check credit limits during a bidding war—a frequent occurrence at an auction.
All vehicles at Barrett-Jackson auctions are accepted for consignment on a “no-reserve” basis. That means there is no minimum price for any vehicle offered for sale. The last person to bid is the person who will own the vehicle.
“To win a no-reserve auction—a true, legitimate no-reserve auction—you’re going to buy a vehicle for market value,” Davis said. “That market value is going to be dictated by what someone is willing to pay at that moment. There is no more accurate way of determining the value of a thing than that.”
As soon as Barrett-Jackson consigns a car—accepts it for auction—photos and information about it are posted to the company’s website. A buyer with questions about a particular vehicle can contact Barrett-Jackson for additional information, including the vehicle identification number (VIN) or other details, and Barrett-Jackson will contact the seller to get complete answers when necessary. Savvy buyers can thus confirm the authenticity of a particular vehicle by decoding the VIN, and buyers can also check history reports on post-’80 vehicles through services such as Carfax.
Barrett-Jackson conducts auctions in Orange County, California; Palm Beach, Florida; Las Vegas, Nevada; and Scottsdale, Arizona, where the company’s headquarters are located. At each event, the vehicles arrive on-site and are available for viewing well before they go onto the auction block. Prospective buyers are encouraged to talk with the sellers but, unlike at a dealership, climbing into a vehicle is frowned upon. Each vehicle is accompanied by a detailed description, which has been proofed and signed off on by the seller, and it is kept on the vehicle at all times.
During the auction process at a Barrett-Jackson event, authorized bidders may signal a bid in any way they like. There is no particular etiquette involved. Auction personnel—sometimes called ring people—are stationed throughout the bidding area to watch for bids and ensure that they are recognized by the auctioneer with the gavel or hammer.
“You can hoot, holler, wink, wave your hand, jump up and down, do whatever you want,” Davis said. “You just need to get the attention of the ring person, who will migrate toward you if they see that you’re a serious bidder. Once they realize you are in the hunt, you will have a ring man there who will recognize your bid. If you watch Barrett-Jackson auctions on SPEED Channel, you may hear those guys scream or yell or see them wave a flag.”
The ring people have a sixth sense about where the serious bidders are, Bennett said, and participants don’t need to make much of a gesture to be noticed. In fact, the biggest challenge the ring people have is that someone will inevitably stand up and wave at a friend across the room. That might be taken as a bid, but the ring people are trained to let the auctioneer know what is and is not a legitimate signal.
As soon as Barrett-Jackson accepts a vehicle for auction, photos and information about it are posted to the company’s website. A buyer with questions about a particular vehicle can contact Barrett-Jackson for additional information, including the vehicle identification number (VIN) or other details, and Barrett-Jackson will contact the seller to get complete answers when necessary. Savvy buyers can thus confirm a particular vehicle’s authenticity by decoding the VIN. Buyer’s can also check history reports on post-’80 vehicles through services such as Carfax.
Once an auction is concluded and a final bid is accepted, only a material misrepresentation can hinder the title transfer process. If there should happen to be a material problem—a fault in the vehicle that hadn’t been disclosed, for instance—Barrett-Jackson will attempt to mediate the dispute to the satisfaction of all parties. Contractually, however, the transfer of ownership takes place at the moment the hammer drops and the auctioneer makes a “sold” announcement. The winning bidder signs a clerk ticket—a bill of sale—and his bidder number is put on the ticket. He then takes the clerk ticket into the auction office and goes through the cashiering process.
There are a few other fees that are the same as those associated with any vehicle sale.
The winning bidder must pay the appropriate state sales tax and may pay a city tax, depending on where the auction took place. No sales taxes are collected for the state in which the auction was held if the vehicle will be shipped away, but the winner will need a bill of lading showing that the car is being shipped out of state. The shipper can provide a document saying where the vehicle is being picked up and where it is being shipped to. When the vehicle is delivered, it is incumbent upon the new owner to go to the local DMV, transfer the title and pay the appropriate taxes and license fees. Barrett-Jackson has three major enclosed transporter companies as sponsors, and they are on-site at each auction in case buyers require their services.
The most important best practice for automotive auctions is ensuring that the auction company is a well-established company with defined rules and transparent policies. “I encourage people to perform their due diligence,” Davis said. “Ask questions about how long the auction company has been in business, about their business practices and their auction practices. It’s the most important thing to look at when you decide to buy or sell at an auction.”
This series of SEMA News stories is based on the idea of using reliable and repeatable methods to ensure business success. In the coming issues, we will delve into a range of topics aimed at developing Best Practices through knowledge, motivation and skills.