What The Auction Results Are Actually Telling Us - Part Two

For our readers who haven't read Part One, please do, along with this article supporting our price hypothesis and details reported by Hagerty regarding vehicle valuations.

Before we get into the meat of this article, we will consider some details regarding Collector Car auctions. But this is NOT, in any way, meant to present these companies in a negative fashion. Not in the least. The auctions are the life blood to the hobby of Collector Cars. By turning the rather stodgy process of auctioning Classics into major events, they provide immeasurable market support. We include them only because they are part of the process we'd like to see evolve. 

To set the stage, let's take a step away from the Collector Car market for a moment and into the market for contemporary pre-owned cars. The details represent why it's time for a change within the Collector car market.

An Evolutionary Process Starting With VHR's
In the not too distant past, buying a used car was truly a gamble. There were no reliable or widespread methods to gauge the condition of available inventory, aside from literally kicking the tires and praying you didn't get "taken".

In 1984 technology began changing this shortfall with the introduction of Vehicle History Reports (VHR's). Today, an overwhelming percentage of advertised pre-owned vehicles now promote free access to these reports. Today it's safe to say the use of these records to establish a vehicle's history and condition is now, for all intents and purposes, standard practice when shopping for a quality used car.

Phase Two - Certified Pre-Owned Programs (CPO)
In the late 1990's manufacturers began these programs offering VHR's, inspections, reconditioning, warranties and special financing. The use of VHR's and CPO's have blossomed over the years and online classified services now bring easy access to both of these including a list of nearly every available used car into your home and your mobile device.

But Wait, There's More
In an effort to bring even greater transparency to the determined quality of a pre-owned vehicle, contemporary re-marketing companies, such as COX Automotive's Manheim Auctions, are now offering "on the spot" Vehicle Condition Grading reports
They combine all of the above  and additional inspections into a standard grading scheme for auctions designed to “enhance transparency and make it easier for auction buyers to select vehicles that they, and you, want to buy". A rather stunning achievement, considering over 10MM vehicles per year are transitioned through this process.

The Next Step
According to details noted by the National Auto Auction Association, the next step will be to include approximate reconditioning expenses for every vehicle in need of the same. 

Dealers who might bid on a vehicle will know the history, condition and a list of items needing attention. By addressing the majority of guesswork, a realistic price can be quickly estimated. After purchase and final reconditioning, shoppers will have access to a higher quality vehicle including records that confirm suggested repairs were completed.

Back To Classics
Per industry reports, the average used car retails for $15,374, while the average "Affordable" Classic is a hair under $25,000. Further, our research reflected the largest number of Classics sold at auction is between $25,000 and $75,000. Yet virtually EVERY Classic is sold "as is, where is" without any kind of a condition/grading report.

Most, If Not All, Classics Are Sold "As Is, Where Is" - But What Does That Mean?
In basic terms it means that regardless of what the consignor (seller) says about the vehicle or is communicated by the consignee (auction or dealer), it is up to the buyer to confirm absolutely everything and neither the seller nor the auction are liable in any way, shape or form. Here's an example:

"The Bidder is responsible for inspections and verification of condition, authenticity, and completeness of any lot purchased. No warranties or representations of any type whatsoever are made by (insert auction name here). Statements printed in catalogs, brochures, signs, and window cards, as well as verbal statements made by auctioneers or auction staff, are representations made by the consignor, and (insert auction name here) has no obligation to verify or authenticate any such claims or representations. Any announcements made at the time of sale supersede any earlier printed information. Except as herein provided, all lots are sold as is, where is, with no representations or warranties, expressed or implied."

No, That Doesn't Make The Auctions "Bad Guys"
With no available records nor verification of a Classic's condition by trained experts (unless individually purchased by an interested buyer) it's just the way it is. Our belief is that no reputable auction company or dealer has purposeful intentions to mislead. 

First, under existing conditions, it would be wildly impracticable for an auction to research and factually represent thousands of vehicles before attempting to sell them. 

Secondarily, missing or unconfirmed details forces auctions and dealers to simply convey what they have been told and leave it up to the buyer to verify before bidding. But, the results take the buying process back 50 years. (i.e. - "You can't go inside, you can't open any boxes. Do I hear $100?")
Market Conditions That Call For a Change
As noted above, there are several conditions indicating now is the time for a change:
  • There is a noticeable shift in the makeup of buyers - younger with less emotional attachment to Classic aged vehicles. They seek more information about their prospective purchase and are comfortable with advancements in technology that can assist them.
  • The only currently available method to establish the general condition and quality of a Classic is via individual vehicle inspections @ about $400 a car.
  • Values have been stagnant for years - With the exception of the most expensive Classics and while the market remains robust, the values of the most popular vehicles, have for the most part, remained stationary. This condition is now affecting high priced Classics that had increased values year over year for a decade. 
  • Our research indicates this is due to "self imposed" buyer limits based on two things;  undocumented condition (risk) and maximum budget ($25K to $75K).
  • While the total sale amounts, measured in dollars, is slightly lower year over year, the total number of vehicles sold at auction has been increasing. 
  • Auction events featuring 2,000 vehicles at a time are now common, making vehicle selection an overwhelming effort.
  • The technology to support the introduction and growth of graded vehicles is already here. It's called Garagistry®.
We Envision a Different Future
Imagine, along with us, an entirely new category of vehicles, which have been inspected with both condition and known deficiencies openly communicated to prospective buyers, at auction or otherwise. Now imagine walking into an auction, holding up your smart phone as saying, "Siri, show me all the Grade 2 cars here today."  
You'd be able to judge a Classic from your seat at the auction, great cars would likely sell for more and if your goal was to buy a "fixer upper" at a lower price you could do that too. You'd also know what items need attention. Yes, Classics will still be sold "As is, Where is" but shoppers will have a reasonable process to assess interesting vehicles rather than guessing what they are getting involved with.

Transparency Is The Key
It does not make a difference if your Classic is a "Spic N Span" (just what you can see) version or professionally and perfectly restored vehicle, the goal is to accurately record the details without any "shenanigans or puffery".  (AKA - If you want to lie, don't try). If the Garagistry concepts were in widespread use at the time, this kind of situation may have been preventable. (Read the court documents here). Again, it does not and should not place the auction company in a bad light.

The First Step Is Going To Be Up To You 
If you own a Classic of any type, you should begin the process recording every detail of your vehicle, including stories, photos, receipts and all known history. 

Of course we recommend opening a subscription to Garagistry® as the best way to do that. The more owners who complete the process, the faster the transition to these new concepts To assist you in these efforts, we are offering fully complimentary subscriptions to Garagistry®. Just use the code CCAD2017 here

Please note this SPECIAL offer will expire July 31, 2017.