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Just down the road from where I live, Bidco now holds an auction of up 120 cars on behalf of Absa every fortnight or so.
It's good fun. There are a lot of risks, especially for those who just can't resist a good bargain, but there are opportunities for picking up a good car at the auctions.
The chances of getting a piece of junk are greater though, and it's especially easy to forget about the 14% VAT and the 5% commission that have to be added to the auction price.
The Bidco auction at which I once again put my foot in it last week might be a good example. For those who haven't attended such an auction before, or haven't gone and done something stupid at one yet, the following may be a useful guide.
How it works
Bidco, and all other auctioneers, require every prospective buyer to pay a R5 000 deposit. That's not just small change. And a cheque that's likely to bounce isn't good enough: no, they want an internet transfer or a bank-guaranteed cheque.
Just remember, the deposit is safely in Bidco's account. If you make a mess-up with your bidding, you can walk away from the bid, but the R5 000 stays with Bidco.
Bidco parks the cars conveniently for everyone to see, and on every windscreen the following information is provided: make of vehicle, year, kilometres travelled and the possible retail price, of course taken from the mysterious blue book that all car dealers use.
For example: 2004 Toyota Corolla, 80 000 km, retail R100 000.
Start by looking at the R100 000. That's not anything like the price you want to pay. That's probably what it will fetch on a showroom floor.
Start by deducting 30% from the given selling price. Or, even easier: just multiply the price in the windscreen by 70%. So in this example: Do not pay more than R70 000 for this Toyota.
But now, this is where the buyer has to be very careful. At the auction, the buyer also has to pay the 14% VAT and 5% commission to Bidco, plus a further R450 in admin costs. All that is 20% on top of the buying price.
So, now reduce the R70 000 in the example by another 20%, or just multiply the R70 000 by 80%. That gives R56 000 or, if you like figures, that's 56% of the supposed retail price of R100 000 on the windscreen.
There's more...
But that's still not the end of your problems. Someone who fails to keep up with his repayments and forces Absa to repossess the car may well not have bothered to look after the car and have it serviced regularly either.
And, remember, many of the new cars need a so-called major cambelt service at 100 000 kilometres. The cambelt service can easily cost R10 000, especially if it's a French car.
So it might be a good idea to deduct another R5 000 from the R56 000, because even the Toyota will need a major service at 100 000 kilometres.
What's what
The easiest thing for a prospective buyer is to look at that possible retail price, divide it by two, and write that in your auction catalogue and buyer's guide as the maximum price you are prepared to bid.
But even then things can go wrong. Just ask Vic. He wanted to bid on every vehicle that didn't reach 50% of the retail price, and in the end he returned home with a thing that he didn't want at all - and let's not even mention what the rest of the family had to say about it.
On Friday, I followed the prices of about 50 vehicles at the auction, and my 50% of the retail price actually worked quite well.
A Mini Cooper reached 71% of the retail price. After VAT and Bidco's commission, the bid price was 87% of the possible retail price.
Worldwide, the Mini Cooper is recognised as the car that keeps its value best of all. A Land Rover Discovery with a retail price of R428 000 could only attract a bid of R225 000, or 52% of the retail price.
The formula of about 50% of the retail price of the car worked excellently.
Oh, oops, except for the old Mercedes 500 with a retail price of R231 000. Nobody wanted to buy it for that. The best offer was R81 000 or only 35% of the retail price.
It was also striking that European cars, especially from other countries but Germany, didn't do well at the auction. And black cars always remain popular.
There are plenty of opportunities for the prospective private buyer, and financing is also available. Just don't think any particular car is very cheap unless it's going for less than 50% of the retail price.
Don't buy it and think you can sell it later to a dealer or someone else for a profit. Forget that. There are many second-hand car dealers at the auctions, and they know when a car is a bargain.
For beginners and others who are addicts, it might be a good idea not to register. Don't pay your R5 000 deposit.
Then you aren't allowed to bid, and for weeks after that you'll be able to hold forth over the braai on Saturday afternoons about how they couldn't catch you out because you could see from a mile what a piece of junk that car was, rather than having to explain sheepishly just why you bought that old crate.
- Fin24.com
