When it’s time to buy a new truck, you might consider buying at an auction. Auctions can be a great place to purchase if you have your priorities in place and do your homework.
However, buying at an auction introduces a fair amount of risk. Think it’s risky to buy a new or used car? Buying at an auction takes that risk to a whole new level.
That being said, we purchase at auctions but we are extremely disciplined in are approach. We attend over 20 auctions a year in person and follow another 50 throughout the country. Aside from going to an auction to buy trucks, attending auctions can also help us forecast market conditions. If you are considering purchasing from an auction, you’ll need to do your homework.
Before we discuss the 5 tips on Buying at an auction it is important to learn why people buy and sell at auctions.
Why Companies and Individuals Sell Trucks at The Auction
There are many reasons individuals and companies sell at auctions. They include:
Certainty of Sale – If you choose to sell at an unreserved auction, you know when it leaves for the auction it isn’t coming back.
Forced sales – A company is forced by the bank or investors to sell at the auction.
Access to a wider variety of customers – Today most people can purchase from an auction on site or on-line, opening up a huge market place.
Excessive Inventory – Need to liquidate inventory.
Policy – Many companies and government agencies sell at the auction to keep everything above board.
Unit Unsellable Otherwise – Buyer beware, auctions are a preferred method for getting retail prices for junk. Sellers will hide problems, and trucks will look new and shiny when they hit the auction stage, even if they’re riddled with problems.
Liability – As long as you meet the auctions requirements the buyer takes responsibility for liability. Sellers can walk away knowing the buyer will not be returning to complain or seek retribution.
Big Pay Day – If you have what everyone wants, an auction can bring big profits, however there is no guarantees.
Convenience – For the customer who doesn’t want to deal with people looking at his product and haggling over price, auctions provide an easy way out.
Why Companies and Individuals Purchase Trucks an Auction
Bargains – Everyone loves a bargain and unreserved auctions afford customers a possibility of saving big money.
Good Selection in one spot – Some of the larger auctions can have a 100 of the unit you are looking to purchase.
Resell For Profit – Many dealers purchase the majority of their inventory from auctions.
They Have What You Need – If you need a specific spec on your truck and the auction has what you need, you will attend.
As you can see there are many reasons companies and individuals buy and sell at the auctions. The one thing that is for certain is that whether you are a buyer or a seller auctions are a gamble. How do you increase your odds of winning?
Here are 5 tips to help you take some of the risk out of your next auction purchase.
- Know Your Specs… And Then Don’t Ignore Them
- At a large auction, it’s easy to get overwhelmed with choices. You see the possibility of a great deals that are impossible to ignore and you start paying attention to these new and exciting options rather than what you’ve planned on.
- Before you go to an auction, know your specs. When you’re there, stick to them. Your specifications should act as a filter. Knowing exactly what you need will increase your odds of success by limiting your choices.
- At the end of the day, the truck you bring home needs to make you money. Make sure the truck you buy at an auction can do the job.
- Do The Math on the Deal
- Many buy at auctions because they’re enticed by the deals, but neglect to consider how much work the truck really needs. Remember– your time is money.
- For example, if you save $5,000 off the market price and then spend $3,200 dollars on parts and labor, plus work for a month in the shop, are you really getting a good deal?
- When you’re calculating how much you’re willing to spend on a truck, consider new parts, labor, and downtime (when the truck can’t be used). If you’re going to spend 50 hours repairing a truck you bought from an auction, then you have to consider your hourly labor rate into the price.
- Research The Market
- Before you go into an auction, you need to have a clear understanding of the retail market for the truck you are bidding on. A truck may seem like a good deal, but could actually be more like a giant headache.
- For example, we have several refurbished trucks in our yard that are ready for work and are priced lower than what people pay at auctions for a higher mileage truck in need of repair. People that understand the market would see that these refurbished trucks are a better deal than buying a truck at an auction that needs a lot of work.
- Understand The Fees and Expenses of Purchasing from an Auction
- When you’re bidding on items at an auction, you have to consider hidden fees that make the purchase more expensive than meets the eye. Every auction includes a buyer’s fee (each auction is different, but these fees range from 2%-10% of the total cost.) You should also consider how much it will cost to get the truck to your door. These fees add up quickly and what starts out as a good deal may change!
- Get Over Your Thirst for Winning
- You know your specs, have done the math, and have researched the market for the truck you want to buy. You fully understand the fees and expenses and go to the auction prepared to bring home a great piece of equipment. There is only one last item to remember. The biggest mistake buyer’s make at an auction is the need to win.
- Auctions intentionally create a frenzied atmosphere to keep you in the game, much like a casino in Las Vegas. We have seen the price of a truck be driven up to $10,000 – $15,000 over what someone would pay for retail. Many times an identical unit will be auctioned off after yours, and you realize that not only did you overpay, you really have no idea what you just purchased.
- Auctions are exciting, but try to keep your ego in check. You’re better off getting over your thirst for winning and making a smart, reasonable decision.
Buying a truck at an auction is a good idea if you’ve done your homework, but risky even for seasoned professionals. At Charter Trucks, we’re not bulletproof either. We’ve had a few situations where we haven’t followed our own guidelines, and the results were predictably undesirable.
When going to auctions, make sure that you know the retail value of the trucks you’re bidding on, and consider all additional fees. If you do, you’ll be well on your way to making a great purchase.