10 tips for buying a car on auction
With the economically devastating Covid-19 lockdown forcing many consumers to seek cheaper cars, auctions are one way that buyers could score a good bargain.
You could pick up a vehicle a lot cheaper than buying it from a dealer. Auctions are, after all, where many car dealerships source their stock before marking up the price and selling it to you, so you are in effect taking out the middle man.
But an educated consumer is a happy consumer, so if you have no previous experience in bidding it’s wise to arm yourself with some knowledge before diving headfirst into the auction scene.
Under present lockdown conditions, car auctions are being conducted online and limited physical contact will be allowed for viewing before the auction under strict hygiene conditions. With this in mind, we provide tips on buying a vehicle on auction:
1. Decide on which auction you want to participate in. Deal with auction houses that are reputable and not fly by night (social media and reviews are always a good indication). According to True Price, bank repossession auctions are the most genuine and their conversion rate of units on auction to sales achieved is high.
2. It’s a good idea to first attend an auction as an observer, which will enable you to familiarise yourself with the process. You can then also ask the auction staff to explain any aspect which remains unclear.
3. Auction houses allow you to inspect the vehicle beforehand and it’s very important to do so as you get a better feel touching the car and kicking the tyres than seeing a picture of the vehicle. You are not able to test drive the vehicle but you may do a static inspection and start the engine. It’s a good idea to take a technician with you when you inspect the vehicle.
4. Some of the bank auctions, for example MFC, supply a Dekra technical report before the vehicle going on auction, which gives the prospective bidder full details of what is wrong with it.
5. If the auction house does not fully disclose what is wrong with the vehicle and just states it’s sold voetstoets (as is), it’s a good idea to stay away. When buying a car privately or through an auction, it’s important to note that buyers don’t have recourse to the Consumer Proteccion Act as they do when they buy a vehicle from a dealership.
6. In the pre-auction inspection, check that all of the car’s documents are in order including roadworthy certificates and that licence fees are up to date. Check if it is still under warranty and/or a maintenance plan. Check its book value by spending a nominal amount on TransUnion’s FirstCheck online service, which will also provide the vehicle’s legal status, including whether it’s still under finance or flagged as stolen.
Check if there are any missing items like a spare wheel, tools, radios etc.
7. Decide on your budget before auction after taking into account any possible and probable reconditioning. Decide what vehicle you want to buy and the price range before you participate in your first auction. Take note that a buyer's commission, admin fee and VAT is added to the final bid price.
8. Ensure you have enough funds to cover the cost of the car beforehand. Auctions do not sell subject to finance and, once the hammer falls, you’re expected to stump up the money. Failure to pay for the vehicle can result in the sale being cancelled and your deposit forfeited.
Finance is available from all the bank repossession auctions; you just need to ensure your finance is pre-arranged before the sale.
9. A vehicle purchase is a huge investment so far better to take your time rather than just rush in. Your type of vehicle will come back on auction even though obviously every used car is different.
10. It’s important to read the rules of the auction thoroughly and if you are not happy, stay away.
Trevor Browse, Managing Executive, of MFC, a division of Nedbank, says he expects the current backlog in the repossession and auction process to flush out to normality from August 2020 to April 2021.
“This means high volumes later in 2020 which usually stimulates the used car market. This will be amplified by car rental de-fleeting due to the economic fallout on leisure and business travel,” he says.
“Given pricing pressures on new cars, we believe the used car market may become relatively more attractive, with high volumes at relatively lower prices.”