Auctions: Buying wisely
The number of vehicle auctions – all now run on-line during the pandemic – has increased massively. There are bargains, perhaps, but caveat emptor…
Auctions of coach and bus fleets are, at the moment, an uncomfortable truth. The current succession of sales are, very sadly, at the behest of a liquidator, as operators continue to succumb to the current crisis in the industry.
It’s also a fact that prices being achieved at auction are significantly below the aspirations you may have for your own fleet, and certainly below the residuals before the pandemic arrived. It would be easy to put this down to the ‘fire sale’ nature of auctions but, temporarily, the asset value of coaches in particular has been hit hard by the lack of business, and thus fewer ways to make the investment pay by operating them.
It needs to be added that auctions are very much the sales at which the words ‘caveat emptor’ have meaning. You get what you pay for, with all faults, and no redress with the auctioneer if the vehicle has been accurately described. In this respect, buying at auction carries some risk.
It must also be said that this may be the case, on paper, with many dealer sales, especially of older vehicles. The difference is that the dealer you buy from may want to establish a business relationship, and provide some aftersales help should things go wrong; it’s by no means guaranteed, nor in the paperwork, but if a dealer foresees another opportunity to trade with you in the future, they may take the view that losing a little on a used sale could return on a subsequent sale to you. No auctioneer has this motivation.
So, buying at auction may result in you getting a bargain or a pup, and you must take all of this risk.
Preparing to buy at auction
All of this will seem like common sense, but it’s surprising how many buyers fall foul of some golden rules.
The first is that, without even seeing the auction catalogue, you have a strategy which guides you to look for the vehicle you actually need to make more profit. Buy with your head, not your heart, and if the vehicle you have in mind isn’t in the auction catalogue, wait until it crops up in another or, indeed, search dealer stock for the right vehicle.
It’s easy to be blinded by a bargain, but no matter how cheap a vehicle may be, if there is no business to make it profitable, it is wasted money.
Secondly, budget carefully, especially if you intend selling a vehicle as part of your trade-off. In the current climate, you need to be entirely realistic about the price you will achieve, and preferably have realised this price by selling before you buy, so you know exactly how much money you have in hand; right now, cash is king, even if you can see bargains at auction.
Commit your buying price to paper by running a few figures based on your experience, rather than ‘winging it.’ The price you want to pay needs a fixed upper limit, to which you must include auction costs and any other costs associated with the transaction, including the diesel and maybe wages to get the vehicle home.
If you know the operator whose vehicles are being sold, you may be know what to expect in terms of additional maintenance the vehicle may need back at base. If not, you need to add a figure which reflects this work, potentially. If you get lucky and the vehicle is serviceable, be happy. Remember, maintenance can be the first expense to be spared as a company hits hard times.
If you intend buying an unfamiliar chassis or body type, it really is worth finding an operator who runs similar vehicles and asking for their experience of running them. They are not ‘invested’ in your purchase, so you should get some unbiased information. All vehicle types have their own weak points. The first task in checking the vehicle over is knowing where to look for problems, and having an idea of what the remedial work will cost, if needed.
Currently, almost all vehicle auctions are run with on-line bidding because of social distancing rules, but they will all have viewing days when you can have a good prod around.
Clearly, the first task is to get a copy of the catalogue and focus on vehicles which match your needs most closely. Before attending the viewing day, create a tick list of areas to check, including the condition of consumables such as tyres. You are unlikely to have access to a vehicle lift for inspection, so bear this in mind.
You also need to have a price ceiling committed to paper, assuming you see a fully serviceable vehicle. This is the price at which you, in your business, can make a profit from it. Bear in mind that residuals are currently poor. You could take the view that those residuals will recover in 2021, and factor that into your bid. Above all, you need to deduct from your bid the auction costs, and be prepared to reduce the bid further….
At the viewing, all faults you spot which need correction must be deducted from the bid price, if at your cost. When you leave the viewing, you should have a firm idea of your top bid.
You will need, of course, to register with the auctioneer and on the day of the auction, have your monies readied, according to the payment regime operated by the auctioneer. Usually, this will take the form of a deposit immediately payable followed by the balance on collection. Auctioneers, especially if acting for a liquidator, demand very prompt collection of vehicles, which is worth planning ahead of the auction.