Buying at Auction: A Practical Guide
Classic car auctions can be exciting events, but to the inexperienced they can also be very daunting. For those who buy without doing their homework first, an auction can result in very expensive mistakes. This short guide is designed to help those who know little or nothing about the auction process to avoid potential problems.
1. Plan ahead
If you have never been to a classic car auction before it is a good idea to attend at least one as a spectator so you can become familiar with how the event is run, what entry requirements there may be, how bids are made etc.
When you decide to attend an auction as a potential bidder, it is sensible to determine beforehand which lot or lots you are interested in bidding for and what your top bid will be before the auction starts. If possible, it would be worth making enquiries with the marque expert (where possible) to find out if a car you are interested in has a known history – whether good or bad.
In addition, become familiar with the buyer’s premium, how it is calculated on top of the hammer price (including VAT) and therefore what your total outlay will be. By doing this you avoid the risk of getting swept up in the excitement of the moment and buying something you do not want or cannot justify for a price you cannot afford.
2. Visit a reputable auction house
There are many classic car auctions each year. Some will be expensive, glamorous affairs offering cars worth many millions of pounds and others will be more modest events with cars of lower value for sale. Regardless of your budget, choose a reputable auction house by doing some research online. While using a recognised name is no guarantee that problems will not arise, doing business with an established organisation is preferable to dealing with a newly formed company operating from a car park!
Take advantage as far as you can of any opportunities to inspect the car or cars that your are interested in. Check the auction terms to find out the limits of what you can ask for (such a having a mechanic give the car a quick check over) and the times when viewing/inspections are allowed (you do not want to find you have missed out on a golden opportunity to inspect the car before the day of the auction). In addition, find out if you can ask for the car to be started, or if you can attend a test drive on the day before the auction.
These investigations will help you to discover hidden problems and decide if the car is worth bidding for. Unscrupulous vendors sometimes use auctions to pass on problem cars to the unwary, so be warned!
4. Terms and conditions
The contractual side of auctions is generally governed by a set of written terms and conditions. It is worth taking the time to read them to familiarise yourself with your rights and obligations. For example, when will payment be due if you are a successful bidder? Will you have to provide evidence of your ability to pay to the auctioneer before the auction, etc?
In addition to the above, the auction terms and conditions are also likely to limit the liability of the auctioneer and one area in which this is most likely to be the case is in relation to the description of the lots which is given. Normally auctioneers simply repeat the descriptions given to them by the vendor (for whom they act) and will not take steps to provide any independent verification of the accuracy of that information. If a description turns out to be wrong, then your claim (if any) would be against the vendor rather than the auctioneer.
6. Ownership – what now?
A successful purchase at an auction is traditionally announced by the fall of the hammer by the auctioneer. If you are the successful buyer, once the hammer comes down you will likely be bound by the obligation to pay the hammer price to the auction house. In addition you will also be responsible for the payment of any “buyer’s premium” to the auction house.
The full extent of your obligations will be set out in detail in the terms and conditions for the auction. You may be fixed with an obligation to remove your new purchase from the auction site within a short timeframe and you will also become liable to arrange for insurance.
If the car breaks down on the way home or fails in some other way, then whether you can return it will depend to a large extent on the terms governing the sale. It is common for most auction terms to restrict or remove any ability to return a car following an auction. It is unlikely that any warranties will have been given to you. You were probably fixed with the responsibility of satisfying yourself that the car is usable precisely so you cannot blame anyone else if the worst happens. This is why it is important to check a car as thoroughly as you can before bidding.
Goodman Derrick LLP’s Collector Car Team has many years experience of dealing with the legal issues arising from auction sales. If you have an enquiry concerning this area then please contact either Martin Emmison or Nigel Adams of the Collector Car Team on 0207 404 0606. This guide is for general information and interest only and should not be relied upon as providing specific legal advice.