3/14/2011-How to buy at auction
March 14, 2011
Filed under Features
First-ever expo event teaches keys to used profitability
INDIANAPOLIS – In seconds, they were gone. One by one, motorcycles were sold to eager dealers ready to turn them over to retail customers.
At National Powersport Auctions’ (NPA) first-ever live Dealer Expo auction, experienced buyers and newcomers alike were given the chance to participate in bidding. Motorcycles, ATVs, UTVs and PWC were sold at a slower pace than usual, NPA staff explained, with about 50 moving every hour. By the time the auction began, 118 vehicles had been placed on the block, ready for the highest bidder. More than 150 dealers participated on site, with hundreds of others joining online.
But before the real auction began, Justyn Amstutz, vice president of sales and marketing for NPA, hosted a buying seminar and two mock auctions to encourage new buyers to participate.
Auctions, a preowned inventory resource, shouldn’t be entered lightly or foolishly, Amstutz explained in his seminar. Dealers should have a plan and be prepared before they even step in the door of an auction facility.
First, he suggests, dealers should determine which auction destination they prefer. There are many auction companies in the industry, including NPA, ADESA, Eastern Powersports Auctions, Manheim Specialty Auctions and others, and each company has several locations. Generally first-time buyers choose the location closest to their dealership, Amstutz said. Others choose a destination location to coincide with vacation or a facility that stocks a higher number of desired inventory. NPA’s Atlanta facility, for example, sells more sport bikes when compared to the other NPA locations.
Before attending, dealers should do their research. Auction companies list the vehicles anticipated to be sold at the auction long before the day of the event, so dealers can view the list, sift through the models to find those best for their market and research the value of each. Value guides are available through NADA, Kelley Blue Book, Black Book and the websites of most auction companies.
“Determine what you want to purchase and how much you’re willing to pay before you go to an auction,” Amstutz advised.
Pricing can be somewhat complicated, especially for a new buyer. First, a bidder has to realize the price bid is not the final price to be paid. On top of the bid, dealers have to pay fees and transportation costs. Also, they should take into account detailing costs and any reconditioning that has to be done before the unit can reach the sales floor.
To figure out what they should pay, buyers need to figure out how much they’re willing to bid, how much ancillary fees will be and how much consumers in their markets will be willing to pay for the units. A 15-17 percent preowned margin with auctioned-purchased units is average, Amstutz said.
Though some dealers have complained prices at auction go beyond their budget, Amstutz explained different vehicles retail for different prices depending on the market, so what may be an inflated price for one dealer may be a deal for another.
“The prices are never too high. The question is how much can you sell the unit for at your store,” he said.
Making the bid
Amstutz encourages all dealers considering buying from auctions to give them a try. His tips for first-timers include: arrive early, notify the auction company how you will pay for any purchases, pick up an updated catalog, ask questions, listen carefully to announcements, don’t get emotional during the bidding process, clearly signal each bid, make your bidder’s badge visible and address any issues immediately.
“Spend enough time at an auction, so you know how it works, so you don’t get burnt out,” he added.
Powersports auctions move fast, with units usually selling every 18-22 seconds, so bidders have to be prepared and pay attention. NPA prepares for new bidders by placing a sticker on their badges, so everyone on staff knows those dealers might have extra questions. Amstutz suggests all first-timers bid on at least a few units during their first visit, so they can get an understanding for the process and participate. Auction companies, he explained, want lifetime customers, not one-time bidders, so they work to make dealers feel comfortable.
With NPA, bikes are auctioned off where they’re parked in the facility, with the auctioneer, clerk and sellers’ financial representatives moving on a rolling cart. A ringmaster stands in front of the cart, taking bids and communicating with the auctioneer, and another NPA employee holds a flag in front of the unit being bid on and writes the badge number of the winning bidder on a sheet attached to each unit. A screen in front of the auctioneer shows the current asking price.
Most units go to the highest bidder, while others have a reserve, known with NPA as a “subject to” sale. The “subject to” condition often isn’t revealed until after the last bid is received for a unit. The highest bidder is told it’s a “subject to” sale, which means, it is subject to the seller accepting the price, which didn’t reach the reserve. “Subject to” approval may take until the end of the day, so once the highest bidder is notified of the hold, he or she can agree to wait or pass on the sale, at which point the “subject to” sale would move to the next highest bidder. Some “subject to” sales are approved or unapproved on the spot by sellers’ financial representatives.
Most auction companies have online simulcast bidding during live auctions. Amstutz suggests all bidders attend a live auction first to get the feel of the pace and the action before attending online.
Eighty-six percent of NPA’s business is done online, so there are always more bidders than one sees on an auction floor. The bidding works with the click of a button and is live just like the bidder is on the floor. Online bidders, however, cannot turn down “subject to” sales.
At the live auction, online bids are shown to the auctioneer from a clerk’s computer. Online bidders can type notes to the auctioneer for clarification. Online bids are yelled out by the auctioneer, and the name of the online bidder appears on the bid screen.
Figuring it all out
The auctions move fast; there’s no doubt. But they’re fruitful for many preowned dealers looking to increase their inventory.
The key is to diligently research, be prepared and participate.
“You don’t want to gamble when you’re going to an auction,” Amstutz explained. “You’re always going to lose.” PSB