The era of auction

As South Africa struggles to survive rating-agency downgrades and a second recession in eight years, buying on auction may become a fleet owner’s default choice. ANLERIE DE WET looks at the auction industry and what first-time buyers and sellers need to know

Fanie Bielderman, senior executive of Aucor, says the South African auction market is bound to grow in popularity over traditional retail sales platforms, against a backdrop of the country’s negative economic outlook.

“While there will be a lag effect in the impact of the country’s downgraded status by international rating agencies, South Africans can expect the maturing auction sector to expand as a sales platform option,” says Bielderman.

“We are seeing a surge in the number of people attending vehicle auctions – a trend which we predict will translate into greater numbers of qualified and cash buyers at auctions.”

“The South African auction industry has proved to be robust during economic booms and downturns. This is because corporate asset disposals are initiated for a variety of reasons, including when they become redundant, or there are surplus assets,” says Bielderman.

“In such cases, the role of experienced auctioneers is pivotal to realising greater value for corporate assets through a simple, transparent and auditable process,” he adds.

Although the auction industry has much to offer vehicle buyers and sellers, Bielderman warns them to do their homework to ensure that the auctioneers are registered and credible.

“Buying or selling at an auction through a credible auctioneer is a high-value/low-risk proposition. It is, therefore, important to find out whether the auctioneer is compliant with the Consumer Protection Act and affiliated to professional bodies. The goods on auction should also be easily viewable at proper brick-and-mortar facilities,” explains Bielderman.

Although one should be careful to use a legitimate vehicle auctioning company, there can be benefits for both buyers and sellers who use this method.

Everhard Ferreira, assistant marketing manager at NUco Auctioneers, recommends that truck and commercial-vehicle owners sell their vehicles through auctions, because, more often than not, the client is the end user.

“As the end user, the client is normally willing to pay a decent price to acquire a specific product. The reason for this is that sometimes products that suit the specific needs of the client may be difficult to find,” says Ferreira.

“Sellers should always stay in the loop, in terms of where the demand is and what market forecasts looks like, in order to make sound decisions on what products to sell and when. They should also provide the auctioneer with as much information as possible about the product and make sure that the necessary paperwork is in order.”

Shannon Winterstein, co-founder of WH Auctioneers, says sellers should understand that not all auctioneers are the same. “Sellers should work with an auctioneer who understands their particular asset and can guide them professionally to get the best result and fulfil their expectations,” she says.

“Sellers should understand the market and be realistic in terms of pricing their products. Lastly, auctions aren’t a venue to dump damaged and broken assets. There can be a come-back should the item have undisclosed problems that a seller knows about.”

Winterstein warns that an auctioneer who doesn’t understand a commodity may not have a database or marketing schedule that draws in the right buyers. “We suggest that the seller finds out about the auctioneer’s experience in the type of assets that they want to sell and talks to buyers and sellers who have used their service,” she says.

Ferreira says prospective vehicle owners who want to buy on auction should know that trucks and commercial vehicles are usually bought for significantly less than market-related prices.

Auctions can offer a quick, easy and convenient platform for buyers. “They get to decide beforehand what an asset is worth and bid up to that amount. It is also a safe system where buyers are guaranteed that the paperwork will be in order,” says Winterstein.

“Before going to the auction, buyers should gain as much knowledge as they can about the product that they are interested in buying. They should also attend the viewing day and ask relevant questions about the product,” explains Ferreira.

“If need be, they should bring their own mechanic to inspect and start the truck in order to make a sound decision on the potential purchase. Buyers should carefully read through all the terms and conditions during registration before each auction and have all the necessary documents at hand,” adds Ferreira.

To register as a bidder at an auction, a deposit is payable before, or on the day of, the auction. This deposit is refundable if no items are purchased during the auction.

Winterstein says every auctioneer has different cost schedules and that they usually rely on a combination of a seller’s commission or a buyer’s premium – which is usually ten percent – and that paper fees may also be involved.

He adds: “When selecting an auctioneer, don’t just think about the commission charged, but rather what service you will be getting. Marketing databases are imperative as the more buyers there are at an auction the better.”

Ferreira says: “When it comes to the cost of buying on auction, it is important to allow for VAT, which is charged on the sale amount at the end of each auction. This applies to all items sold, unless it is specifically stated that there is no VAT payable on a particular item,” stresses Ferreira.

The key to buying and selling on auction is to be prepared. If buyers are willing to go the extra mile to save money during a difficult economy, then the South African auction industry may just skyrocket past the online sphere.