SEMA News - February 2011
Preparation and Partnership Are the Keys to Success
This series of SEMA News stories is based on the idea of using reliable and repeatable methods to ensure business success. In coming issues, we will delve into a range of topics aimed at developing Best Practices through knowledge, motivation and skills.
Perhaps the most significant benefit of consigning a collector or exotic vehicle to an auction is the extremely passionate pool of buyers drawn by such events.
In the November 2010 issue of SEMA News, we discussed how SEMA-member companies might use auctions to find the perfect vehicle to feature in promotions and advertising. Such vehicles can provide value well beyond their material worth by helping customers realize long-held dreams. In some cases, however, the effectiveness of even the optimal vehicle eventually diminishes, whether because of changing styles, a new marketing direction or other factors. The company may then wish to utilize an auction to divest itself of that property with either a minimal loss or—even better—a net gain because of appreciation. Perhaps the most significant benefit of consigning a collector or exotic vehicle to an auction is the extremely passionate pool of buyers drawn by such events.
“You’re putting your vehicle in a target-rich environment for people who have been prescreened and qualified to buy it,” said Steve Davis, president of the Barrett-Jackson Auction Co. “At an auction such as Barrett-Jackson, we do everything we can to market and promote your car so that virtually every person on the planet who is looking for your type of vehicle is aware that it’s being sold. The auction process also gives you the opportunity to interact with potential buyers, answer any questions they may have and point out features about the vehicle that they may not have even been aware of.”
Selecting an auction house requires due diligence, just as with any other commercial relationship. Look for stability, reputation and ethical standards. Barrett-Jackson is perhaps the best known vehicle auctioneer in the world. It has been conducting auctions for nearly 40 years and has developed proven techniques for attracting vehicle buyers. In addition to traditional advertising in large markets, the company has become a well-known attraction on the Speed Channel. But it’s most powerful tool may be its website.
“Within the auction-house world, no one comes close to Barrett-Jackson with regard to traffic on its website,” said Gary Bennett, the company’s VP of consignments. “That is undoubtedly the most powerful weapon in our arsenal.”
The site draws about 700 million hits a year, according to the company, and is in the top 10% most-trafficked sites in the two to three weeks leading up to each of its four auctions. It is constantly being updated as vehicles are accepted for sale, and that’s a prime reason why an auction like the one in Scottsdale, Arizona, on January 17–23 was predicted to pull a ratio of about four bidders to every car offered.
Getting started with one of the Barrett-Jackson auctions is as simple as submitting a preliminary consignment agreement. It is essentially an application that includes complete information about the vehicle, including year, make and model; interior and exterior color; engine size and type; modifications; vehicle condition and more. The agreement is available through the website but may also be obtained via regular mail or fax. Scanned images of the vehicle’s title (front and back) as well as any other pertinent documents and photos of the vehicle are required for an online application.
When the agreement has been submitted with the appropriate documentation and images, Barrett-Jackson’s staff screens the vehicle and, if it is given preliminary acceptance, it is assigned a lot number. The lot number indicates which day and approximately what time the vehicle will be called to the auction block.
Sometimes the ultimate buyer will be the guy about three deep behind the one you’re speaking with. Be approachable and knowledgeable.
“There is a great deal of thought on our side as to where we put the car and how it complements the cars around it during the auction,” Bennett said, “but the seller is in complete control of that process. He can opt in or opt out when he is assigned a lot number. There is a tremendous amount of flexibility in the process until he actually enters into a contract, where he accepts the number.”
Higher-end vehicles are scheduled for sale during premium hours—within the televised portion of a Barrett-Jackson auction, for instance—and are charged a premium fee for that placement. Scheduling vehicles in that type of priority system also serves buyers whose budgets may dictate concentrating on lower-priced vehicles and who can thus schedule their attendance for the times when vehicles in a selected price range will reach the auction block.
For an auction, such as Scottsdale, the premium-placement fee might range from $600–$1,500, and Barrett-Jackson charges a flat commission of 8% when the vehicle sells. The fees for other auction companies vary, as does the amount of time after the auction before the seller is paid. Barrett-Jackson guarantees payment no later than 21 banking days from the sale, but fee and payments schedules are another criterion to consider when selecting an auction company.
Vehicle owners are not required to attend the auction where their property will be sold, but it is in their best interests to be there, auction officials said. Barrett-Jackson also recommended that sellers create a “story board” that can be displayed with the vehicle and is large enough to be read from at least 8 feet away. The board should contain basic information about the vehicle and should be augmented with a handout card that can be taken away by potential buyers, giving them a tangible reminder of the vehicle that may spark further conversation or research as the vehicle approaches its time on the block.
“The story board and handout should tell enough about the car so that a potential buyer can ask reasonably intelligent follow-up questions of the seller,” Davis said. “That’s when the conversation really starts. They ask how long you’ve had the vehicle, where you got it, the ownership history—things you don’t have the time nor space to answer with a story board or a handout card. It’s important to be approachable during that time, to be as friendly, courteous and knowledgeable as possible. We do everything we can to achieve the ultimate value for your vehicle, but you should also be prepared to carve out some hours to get the best price. And remember as you’re talking to people that others are listening. Sometimes the ultimate buyer will be about three deep behind the guy you’re speaking with.”
Obviously, the car should be as meticulously maintained and detailed as possible, inside and out, and the seller should make the vehicle as accessible as he is. The hood and trunk should be open for inspection, though it’s fine to request no touching. If the seller must leave the vehicle, he should place a sign on the windshield saying when he will return. As Davis puts it: Cars are sold on the field, not on the auction block.”
“We work for you, but it’s a partnership,” he said. “We hope that you will put in an effort equal to ours. We want to get as much as we can for each car—but not out of greed. If we feel that a car is of greater value than the current bid, we’re going to try to pass along that information. It’s not only fair to the seller, but it also ensures that the buyer ultimately gets the value he’s bidding on. At the end of the day, it’s all about realizing the maximum value for everyone involved.”