Provided you use your head, you can save 20% on the book price of the car you want by buying at an auction
Gavin Foster
Buying a second-hand car can be a tricky business. Do you go to a dealer or look for a cheap private deal? What happens if you buy a lemon that’s going to break down every two weeks? A stolen car? One that hasn’t been paid for and still belongs to the bank? A bright, shiny sedan built up from the sad remains of three wrecks?
One route more South Africans are taking is that of the auction. Although also fraught with danger for the unwary, those who go about their business intelligently can save a substantial amount on the book price of the car they’re after without ending up in any of the situations described above.
“When we started off in 1988 there was real auction fear” says Darryl Jacobson, managing director of Burchmores Car Auctions Limited.
“It’s only recently that people are starting to trust auctions. In 1988 only 20% of vehicles sold went to the private sector.” Today, the figure is 57%.
Of course, buying at an auction requires nerves of steel and a fair bit of savvy. “Provided you’re careful you can do very well,” says Elke Watson, manager of the Automobile Association’s legal services department.
“Do your homework. Ascertain the book value of the model you’re after before you start bidding. Know the conditions of the sale. And, importantly, go to the auction site a couple of days before the sale and check the car over. Take a mechanic with you, if necessary, make sure everything’s in order.”
Most auction sales are “voetstoots” deals there’s no warranty, and the buyer takes most of the risks. But there are exceptions.
“You still have certain rights” says Jacobson. “If you buy a 1600cc car, and it subsequently proves to have a 1300cc engine we’ll give a full refund. Similarly, if it turns out that the chassis had been welded to repair accident damage we’ll take the car back. But if you get home and find that the clutch is worn out that wouldn’t be covered.”
You can also make your own warranty arrangements late-model cars in good condition can be covered by one of the commercially available warranties before you take delivery.
So how does the process work? Firstly, you should visit the auction site a day or two before the sale, with your trusty mechanic in tow, and look over the merchandise.
Once you’ve selected a car and checked it out, go away and do your homework. What’s the book value, trade and retail, on that model car in its present condition? Are there any known problems that plague that model? If so, go back and check the car out again. What will it cost to fix the minor things that are sure to need fixing? Do a costing exercise and establish the maximum that you’re willing to bid. Then stick to that.
Remember that you’ll have to pay VAT on top of the price of the car, so factor that into your calculations.
If you need to arrange finance for the deal do this in principle, preferably, with your own bank, before the sale, at a favourable interest rate.
“Ensure that you understand fully the conditions of the sale. Confirm that the auctioneer guarantees that the vehicle is unencumbered there are no outstanding credit agreements and that your money will be refunded in the event of any serious latent defects turning up, such as the wrong capacity engine, or if the car has been built up from scrap,” says Lawcall’s Don Smart.
“Also get written confirmation that if the engine, chassis or other components prove to come from a stolen vehicle you will be fully compensated.”
Before you’re allowed to bid you’ll need to pay a refundable deposit of R2 000 to R3 000 to the auctioneers. Arrange a bank-guaranteed cheque for the necessary amount as many auctioneers won’t accept cash.
If your bid is successful you will be allowed two or three days to come up with the rest of the money after the deal is struck.
There are also disadvantages to buying at an auction. A private seller would not have to charge you VAT, which means that his selling price could be lower, while a purchase from a reputable dealer would offer a greater deal of security.
But the private seller could disappear after the sale, leaving you with no recourse whatsoever, and the dealer will obviously have VAT and a profit factored into his price, so will be more expensive. Provided you use your head, you can save yourself perhaps 20% on the book price of the car you want, by buying at an auction, without taking too much of a chance.