Comparing auction results to dealers asking prices.....

How do you guys weigh the 10% buyer premium that auction houses put on cars? Do you include it in your idea of the current value of a car, or is it a tangent that doesn't relate to private sale value?

For example, let's say a car hammers at auction for $200k, so with buyer premium the "auction result" is $220k.

Now let's say you walk into a dealer who is asking $250k for a comparable car. Do you say, "one of these just sold for $200k" or "$220k"?

Gracias.

 

Others can answer this from the buyers perspective but you can only ever talk about gross sales prices incl. buyers premium (up to 17% at Artcurial). Dealers prices are often negotiable downwards so often include wriggle room to allow for the haggling and lack the reliability that you get with the better auctions. Just my 2 cents

 

220k. The same vig is included in a dealers price, its just upfront rather than on the back end

 

Agree with 220k -- that's the "all in" cost the buyer had to part with to take it home -- how much of that total was premium and how much was hammer price doesn't seem like it would matter at all.

 

Thanks all.

 

don't forget there is a listing fee for the seller to register the car for auction... typically in the 10% area +/- ... for total of 20% or more... the auction house can make a lot of money with a high sell through... a reason some auction houses will not take reserve pricing

 

This comes back to the question of what is the real value of the car? Is it the price the new owner paid (taxes not included)? Or is it the amount the seller put in his pocket? I would argue that it is the amount the seller was willing to take to part with the car.

 

That's the wholesale price

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This is a really good question. On one hand. the "all in" cost is what the market would bear. It's hard to argue that shouldn't be the benchmark for "market value". On the other hand, the net to the seller would be the "apples to apples" value of what a seller would actually earn in an open market that was not subject to premiums.

I don't know which one is right. I think the reason it's difficult to make sense of it is because the concept of a "buyers premium" is illogical in the context of natural markets. Normally the seller would be the one to pay the premium for the privilege of being able to sell the car in a weekend, versus incurring the cost and burden and effort of marketing that car for weeks or months in the open market. The buyers are the ones that are actually providing all of the liquidity in the entire market. In normal markets, the seller would pay most of the cost for benefit of expediency and the liquidity provider would not pay in any meaningful way beyond some transaction costs.

I'm not suggesting that the auction model should, or would, change, but I think the fact that the pricing structure differs a bit from normal business markets makes it more difficult to answer what seems to be an easy question.

 

Not sure where the complexity is - it's a bid ask spread. As basic can be.


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True, but what's different about it to me is that in most markets I expect the seller to bear most of the cost for the privilege of being able to move inventory in a hyper-efficient manner versus the slow inefficient market that is otherwise available to them (and that has significant costs in terms of time, effort, exposure to market price changes, very long turnover times for reuse of capital, etc). Instead, a large part of the cost for that efficient market is born by the liquidity provider (the buyer) instead of (or at least in addition to) the seller. The efficiency of the market is a bit of a benefit for the buyer also, but that efficiency also tends to drive up the price, so the large allocation of costs to the buyer still seems atypical to any normal business market. It seems backwards to me, but I may be overthinking it.

In any case, it seemed obvious at the beginning of the thread that the "all in" cost paid by the buyer is the right number for comparison, but now. based upon Foncool's comment, I think the "net" to the seller in the auction is the correct number for comparison to dealer price.

It is a normal bid/ask market, but the spread (I guess roughly about 20% with buyers and sellers premiums) is higher than most, so that normally fairly narrow transaction spread can't be ignored as easily.

 

20 percent is same as buying from a dealer.
If you buy wholesale you should.


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That's absolutely true. I stand by my comments about allocation of costs, but I agree that am overthinking the amount of the spread for the car market. I agree with you that the auction spread is not really that different than the retail auto market.

 

Yeh anything more than that and ur prob splitting hairs/noise etc

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This was done a couple of years ago when the US sales were 10% buyer's premium across the board. It shows how much the seller misses out compared to what the buyer pays at auction: https://k500.com/story-item/the-k500-insiders-guide-tochoosing-anauction

 

There are some interesting comments related to this in the comments section on the BringATrailer Daytona auction that ended yesterday. They were talking about the Daytona which sold at Amelia, where the seller pocketed around $500k and the buyer paid $600k... since the BaT Daytona made $590k (and didn't make reserve), it seems it was right in there.

 

Wholesale is the True Value!