Classic Car AUCTIONS And The LAW (And Other Regulations)

[00:00:00]Right. If you're a follower of classic car auctions, you're probably aware there's been, how should you say, a little bit of noise on YouTube about um maybe auction practices and how classic car auctions work and how car auctions work. And I thought while I'm down here at S SWVA for their um April classic car auction, I would grab Owen, who is their classic car specialist. And what you may not be aware of is S SWVA, how many vehicles do you sell a year down here?

[00:00:27]It's roughly about 10,000 vehicles a year.

[00:00:30]>> So, I thought of all the people I want to talk to about what the the law and all that kind of thing is with regard to auctions, Owen would be a good one because they have a weekly um sort of car auction here for regular cars part exchanges and that and you also do commercial sales.

[00:00:45]>> Commercial sales. Yeah.

[00:00:46]>> So, you know, if if anyone's going to know the answers to a lot of the questions which I've seen on the internet and hopefully we're going to cover them all in the next sort 15 minutes. So Owen, are you ready? I am ready. Let's go for it.

[00:00:59]>> Let's One of the big comments I've seen is it's an unregulated industry. Um, you know, they don't have to comply with any laws, etc., etc. So, where where do we stand on that?

[00:01:11]>> So, there there is there is regulation, but what I would say is auctions are probably one of the most unregulated sales industries out there.

[00:01:20]>> Okay. Um in regards to um buy a comeback in bits and pieces, you know, if you're a motor trader and you're selling cars off a forcourt, it has to be um as described. Usually warranties involved and bits and pieces like that, but auctions are um not exempt from any rules, but are protected under the solar scene rules, which is what auctions have always used. Um and so it's not unregulated. There are many of um many organizations and groups like NAMO which I'm sure we'll come on to in a minute who are involved in making sure that orchestras are as transparent as possible and as you know um as helpful as possible and making sure that customers aren't you know burnt, scolded you know and so on.

[00:02:01]>> And is there any difference between like regular car auctions of you know your 3 to 15 year old cars that you do on a regular basis and to classic car sales?

[00:02:11]So with our classic well with our general car sales we are open to the trade and public but what I would say is that with public we are we don't do online and that's because they're not given the opportunity to view those cars like they would be with the classics.

[00:02:23]With our classics we're open to again trade and private buyers. Um but they can bid online by telephone by commission. That's because we offer our open viewing days where it's all transparent. Any issues that we have uh that we know of um are listed on the website. Um so we we with the classics we are as transparent as possible. The cars out for the general sales are all inspected done under Nama grading that's on exterior condition and again if there's major things like it being a non-runner uh then we we list and denote that sort of stuff as well.

[00:02:52]>> Okay. Talk about NAMA then cuz NA organization that people probably haven't heard of and to be honest until recently I hadn't.

[00:02:59]>> Yeah. So, Nama um are basically the the national group of motor auctions and they they they they protect >> um it's mostly to do with auctions like uh certain other bigger named auctions in the country um beginning with B and G and so on and M. Um but they uh they do all the grading for them. So, it's all to a certain spec. So you they're graded you to one, one being the best, you being ungraded, and then it goes all the way down to five for being the very worst on bodywork condition. Um, and it all has to meet certain pricing criteria. So if if the damage is estimated to cost a certain price, it will be a certain grade and it all depends on the age and of the vehicle as well. Um, so yeah, it's all all looked after by them and they're there to set the guidelines for us is what is acceptable in terms of a grade so we're not misleading customers. Uh and there's all descript there's all descriptions of what each grade should be online. So it's that's publicly access publicly accessible information. Um and yeah, so that's to give as much transparency to buyers as possible.

[00:04:04]>> And just to be clear, NAMA, National Association of Motor Auctions, it isn't an obligation for auction houses to um be a part of that organization. So but presumably on their website, you would see that they are >> Yeah. So we we um before we moved here weren't using we were part of Nama but we weren't using their grading system.

[00:04:25]Uh so our grading system wasn't nationally recognized you know wasn't compatible with other auction houses.

[00:04:31]Now we use Nama grading. So what is a one two or three at another auction house um you'll find the equivalent here and it you know cost of repair will be the same amount if you like.

[00:04:42]>> So if you saw a Nama grading and this is referring more to your your regular cars. It's not really to the because obviously these are >> these aren't >> these assessed on a individ individual basis even >> but the advantage you've got is that you know you got consistency when you go to different auction houses.

[00:04:59]>> Yeah. Exactly. Yeah. Exactly.

[00:05:00]>> So you talked about sort of descriptions and declaring sort of history of cars and so on. Is there a balance between obviously if you know apologies to the owners of this MGB but I'm just going to use this as an example is that they come to you and say oh this has had you know 20 grand spent on it's absolutely perfect and and so on >> and it yeah and obviously it's perception and but you look at it and you think well it's not quite so good and but then you do a history check where where do you you >> so I think the first point to know if we're talking about history checks is every single car that comes through here is HPI checked you know that and that will tell us whether it has been um in a category insurance loss and if it is that then we'll have to denote that. But yeah, in regards to an inspection of a classic vehicle much like this one, you know, regardless of what the what of what a vendor might tell you about the vehicle, at the end of the day it comes down to our perception of the vehicle and our inspection of the vehicle as to how much it should be worth and how it should be described. Um because you know I'm sure many of you know and as you know um doesn't matter how much money you spend sometimes it doesn't matter how much money you spend on a vehicle it's just never quite right and it will still have remnants and issues you know so it's if it's still got those things regardless of the expendenture on it we have to I I prefer to denote them things for transparency >> which comes full circle back to the early part where you just don't want you want people to you know >> be happy with what they've purchased and but be accepting also it's a it's an older Um thing on reserves, that's also a hot topic as we know. Um and there seems to have been issues with in certain locations with regard to putting reserves on at the last minute and so on. And it's a case of it's being sold up that if you put no reserve on, it'll earn more. Um and there's also answer that one first because I I'll roll on to the second bit.

[00:06:52]>> Yeah. So reserves are I think for for those who aren't familiar with auctions is always a sort of um topic that interests people. We I I we always offer reserves. We know we don't have a no reserve policy or anything like that.

[00:07:06]Some auction houses have no reserve sales or stuff that fits into a certain category has to be no reserve. We will offer a reserve on what we see fit. So basically any anything from £3,000 or over is basically eligible for reserve with us. Um, and if you ask for a reserve, you'll get a reserve because we're not going to force you into potentially giving your car away for less than what you want. It's worth noting those reserves have to be agreed.

[00:07:28]So, if we don't if I don't agree on value with a vendor, we're not going to go and price that car above what we think it's worth because of it. But that's his decision and he he or she may can take their car on and go where they like. That's that's part of it. But um if we're both in alignment with what we believe in, then it will come in and it's you know be estimated correctly and hopefully go on to make the money. Um the issue around no reserve is and it's very much very much like you say, especially with heavier lots, you never really know where it's going to finish up. Um, so coercing somebody into going into a no reserve agreement when you don't know how much that car is going to make and you know that they already wanted £15,000 more than what what it got for it isn't a wise decision. It's not the way that I believe auction houses should be doing their business. Um, but yeah, it's like like I say, if if the vendor comes to you and says, "I don't care what it makes, get it sold. No reserve by all means is the option." If they want X amount of money for it and you are in agreeance with that, then reserve is is the way to go.

[00:08:32]>> And how far up to the start of the auction can people change their mind?

[00:08:37]>> Yeah. So we get stuff agreed on the actual consignment of the vehicle. Okay.

[00:08:42]So the reserve we set then is the reserve it will be on the day. Okay. If you want to reduce that that's fine. Um but we have to keep things continuous because obviously estimates are based around reserve and there's there are rules around estimation. You know the reserve will always have to be within the estimate. There's rules around that.

[00:08:59]So um we have to make sure that that figure stays continuous right up until the sale. Um because otherwise we've got start changing estimates around and it's really misleading for buyers who are genuinely genuinely interested potentially in your vehicle from being put off because of well they've just put another two grand on top of what they said it was going to be, you know. So you have to be fair, but I think because we're fair at the start of that process, you know, we never get that up up to the auction because we always try and make sure that we're we're both in agreeance, both parties in agreeance when consigning that vehicle.

[00:09:32]>> Now on to sourcing vehicles and obviously you've got 79 vehicles. Yeah.

[00:09:38]>> And it's really a case of it would be interesting for people at home to know how you go about um sourcing these because again there has been talk shall we say uh about customers or vendors selling cars on Auto Trader Car and Classic places like that getting phone calls saying we you know we can achieve a better price for you or equivalent price for you sell it through auction etc etc. Um, you know, I know you can only talk for yourself and just to clarify, this is not none of this is legal advice, legal guidance or anything like that. And obviously SV S SWVA can only talk on how they operate, but how would you get on like those 79 cars? How have they come to you? Okay, so it's different per auction house. Every auction house has a different way of dealing with things. At the end of the day, it comes down to how many consigners they've got um and how many organic inquiries are actually getting in. So the way we work, and I can only speak for ourselves, a lot of our inquiries are organic. So that means that the the vendor is coming to us, I have this car, I would like to sell it through auction, and we go through the process of valuation, appraisal um to to get it in. What does happen occasionally and what you'll see is with with star lots like the 190 that we've got in our sale E types the higher value lots are usually cherrypicked from either the back of classic car weekly classic car buyer car and classic um auto trader because those cars are not always guaranteed to come to you and as I'm sure you can appreciate as a business we need to make money so having a few of them boosts the look of the sale and also boosts some of the money that's made from it because at the end of the day it's a business and not a charity.

[00:11:18]So, um, that's what that's what does happen. Um, and some auction houses will use that route of cold calling, consignment a lot more than others.

[00:11:25]We're in a fortunate position where, you know, we get probably 70 organic inquiries that we actually complete per auction.

[00:11:33]>> Um, as a sort of average, um, bear in mind there will be more inquiries and that's probably more like over 100 inquiries you get, but obviously not everything that comes to you comes in.

[00:11:41]So, um, but yeah, there are other auction houses and the auction houses with more consigners where there's less organic inquiries to be shared around will send them out to go and get cars and bits and pieces and and there's no harm in doing that. It's perfectly allowed. It's the same as, you know, car and classic I know for sure do that.

[00:11:56]We'll phone people up to get it on their website into one of their online auctions. So, it's an it's it's a completely legitimate way of doing business. I' obviously I understand that some people would be preferred to not be cold called but if your number's online and live online then you know you have to be susceptible to stuff like that >> but it's not the core of how you operate it's a very it's the it's the top end not you're not here and I think it's very much the same for other auction houses as well is you're not going and scouting for Morris miners and MGB so on on um through the back of newspapers and bits and pieces what you're looking for is the creme de creme >> and going forward the car sort gone to auction, it's gone through. Um, few questions on that really is >> once the hammer's come down, if it hasn't achieved what the um vendor's accepting or or or its reserve, >> where does it on the two sides, where do you want to go with the car from there?

[00:12:51]And what happens for the vendor? Where are they, you know, where are their abilities to make a decision? So what we try and do is is always get the car sold on the day because nine times out of 10 somebody is sending a car to auction because they want it sold. Um especially with classics, you know, because there's all sorts of reasons for sale. Um you know, if it's if if it's usually if it's outside of enthusiast ownership, it's because there's been a bereavement or it's a deceased estate or something like that. So we'll always try to get the vehicle sold. Now whether that's um by achieving reserve on the day which nice and easy job done >> um or whether it's the fact that you know you might get a bid that's maybe £1,000 under your £5,000 reserve and we submit that bid. We do a negotiation with um the the seller and the buyer.

[00:13:32]There might be a um a cut on our fees perhaps to get that deal done because at the end of the day um it's better to have that car sold and what we usually say is your first bid is the best bid.

[00:13:42]Now that's not always the case. There are some some cars that just don't get the interest and don't make probably what they should make. And in that case, you just have to sort of go, well, you know, that's that's the way it's gone.

[00:13:50]We it's just that it's not reactive well to the advertising it's got and then we move on. But the majority we try to get sold and we do deals on our commission and bits and pieces to to get that gone because we want a fair agreement for ourselves and for the um buyer or seller as well. So, but if it can't be if a deal can't be completed and we run an online timed auction for our unsold lots. That's usually for the week afterwards. Again, we phone our vendors to see whether they want to be a part of that because some vendors will want to withdraw their car site straight away.

[00:14:17]And obviously, I know you're going to lead onto this in a second. If that seller wants to take their vehicle away at any point, even if it's on in an online timed auction, they're more than welcome to. The only time that we would say, and there is a bit of a sticky situation around it, a seller would want to withdraw their vehicle is on the leadup to like a day like tomorrow where we've got um 79 cars going under the hammer. they wanted to withdraw it today for tomorrow. There's going to be fees.

[00:14:42]We we asked for the fees on the the buyers premium and the commission on the reserve to be paid to be withdrawn because obviously there's advertising and marketing that's gone into that car as cost has gone into that car before it even goes to sale anyway. So um otherwise we'd just be losing money and people be pulling cars out here there and everywhere.

[00:14:58]>> Yeah. And and how would that what what price would you base that fee on?

[00:15:02]>> Yeah. So the fee would be based on the reserve price that we've agreed.

[00:15:05]>> All right. So, um, you know, if we if they're happy with the reserve, they should be happy to pay the fees on it.

[00:15:10]If they want to withdraw it if they've, you know, sold it privately outside of auction, you know, they should be happy to pay the fees to release it. Um, but that being said, once it's gone under the hammer, we have no obligation to keep hold of that car. They're free to take it. There's no fees involved. We don't do a non-sale fee or anything. Our only fees involved are our commission rates. So, >> okay. And once they've sold that car and it's achieved a sale, how soon would they get the money?

[00:15:32]>> Okay. So, we aim to do payments by the following Thursday. And that is um obviously that sounds like a long wait if you've sold a car on a week prior, but obviously as an auction house, that money is not ours. It's it's transferred. We're sort of a middleman.

[00:15:46]It'll come to us, our fees will come out of it, and then the rest will go to the the seller. So, u we have to wait for all that money to clear. Uh cuz some people pay on credit card or using finance. So, uh, you have to wait for that money to clear first before it can then be sent to to our vendors to ensure that we've got a nice safe secure payment ring where everybody's everybody's getting the right side of the deal.

[00:16:06]>> Okay. Now, if it goes pear-shaped and okay, I know you take £1,000 deposit from um, vendors. Someone's come along and paid £5,000 for a figure off the top of my head for for this and >> you've got the thousand deposit, but they don't pay the rest.

[00:16:21]>> How long do you wait and and how where does the responsibility fall? because you're the um you know you're the responsible party in the middle of this.

[00:16:30]>> So what we will usually try and do is is give a bit of a grace period. We we usually ask that payments are completed by like the following Monday um to to sort of save grace. But if there's somebody that's not coming forward after that point we'll give it a week and a half give them the opportunity obviously continuous phone calls to see whether they will be paying or not. If you have no luck then that is an unfortunate discussion that we have to have with our sellers. It happens very very very rarely. I think it's only happened twice in my time doing this and I've been doing this 5 years now.

[00:17:00]>> Okay.

[00:17:00]>> Um and um that's not for reasons like people don't want to pay. That's unfortunately we've had people pass away after buying a car and bits and pieces like that. So, but it does happen uh and it's a situation that you you you have to be prepared for, but that's just an unfortunate conversation we have to have with the seller and you explain the situation and you make an agreement to take it in the next sale or whatever and explain the situation in your catalog.

[00:17:22]um as it's you know comes down to us really to to whip our buyers into shape so to speak. So >> but it's it's the rarity rather than a very small rarity.

[00:17:31]>> Obviously as with anything you have to be prepared for the negatives in a situation but that like I say that is a very very minimal chance of that happening. So >> okay and the other thing that's come up is um vendors um leave a deposit. I think on the classic auction it's um £1,000 or 500.

[00:17:49]>> Yeah. Buyers do. Yeah.

[00:17:50]>> Buyers like Yeah. Yeah. buyers on uh leave that deposit, when do they get that back?

[00:17:55]>> So, the we do a pre-authorization deposit, okay? So, that money is not actually taken from you. Uh it's £1,000.

[00:18:02]That money is not taken from you. It's a bit like when you go to Tesco's and you get your fuel, they take £120 out on a pending transaction. So, £1,000 will be pending in your account for a week. If you're unsuccessful on sale day, then we we release that straight back to you. We our finance manager upstairs will manually go through and release each payment. Um and that will come back to you, release straight back to you. but it can take up to a week to arrive back with you physically because of bank security bits and pieces. If you're successful, then we'll take that deposit and you just pay the balance by bank transfer. So, you're not really losing anything, but if you non-payer, then we we will be taking that deposit. Yeah.

[00:18:36]>> Yeah. So, ju just to because I've had some involvement with that with my previous business is that >> I think the thing that people um would be reassured by is and obviously this is only the way you do it. auction house may operate differently is that money never actually leaves your account and never enters your account. It's ring fenced in in the >> it doesn't mean to say that you can use that money. You know, if if that's your last,000 in your bank account, you probably shouldn't be registering to bid in the first place. But if that's the last,000 in your bank account, then you won't be able to touch it, but it's in within your account. It's not actually left your account and come into come into our business. It's still with you and it's with you up until the point that you purchase vehicle. Now, just to go on to one point and the Facebook lawyers um in the comments have definitely been pulling this one out and I think it's one I've done a little bit of research on this and it does seem to have a certain level of interpretation and that's the distance selling regulations and I think this is one that there's a lot of misconception about because I think it depends on what the product is and yes and and the understanding. What's your your view? So our view on it is um is that with auctions is slightly different. So if as long as you're offering and it comes back to that point I said about earlier about between our general and classic sales. If you're offering a a private individual the chance to come and view a vehicle and they decide not to and to still continue to buy it online um and they're not happy with the goods that they've received, that's their responsibility for not viewing that vehicle and and using that appraisal opportunity given. That being said, there is caveats to the rule obviously, like if something is genuinely, you know, if if I described this car as concourse and it was rusting all around the arches and had no bonnet and no doors, then they would have a case, you know, and that would be unfair and that's exactly what we don't do. We are transparent with what we advertise um with what we know about vehicles. We will put in the description. Um but yeah, there it is a gray area. It is a gray area and unfort unfortunately there are caveats to all over the place and auctions are exempt from rules that maybe garages aren't and other sellers aren't. Um but it's it's one of them things that I would always advise that if you are unsure of a car's condition to either view it in person or give us a call you know get phone us up and ask us for an honest representation. We do walkounds. You know we're not going to lie to you. At the end of the day we're here to sell cars and we're here to keep people happy. We want people coming back. We want returning customers. We want good reviews. So, you only get good reviews from being honest. And that's what we try to be.

[00:21:04]>> Brilliant. Well, Owen, thank you for your time. I appreciate it's a really busy day here. You're setting up for the auction tomorrow. I really hope for you guys at home that has been some use. I think it's a very good walk through of how things should be done uh for car auctions. There are industry regulators uh out there, so it's not as wild west as as some people are claiming. And unfortunately there is some bad news stories at the moment which is not doing the whole industry uh any good really at all. So I hope that walkthrough's done you some good and if you enjoyed that please hit that subscribe button and we'll catch you next time.