The Auto Auction: Bidders Tips Bidder’s Strategy: Avoiding the Curse

The Auto Auction: Bidderês Tips Bidder’s Strategy: Avoiding the Curse

Sometimes even the best auction bidders can stumble and fall into psychological traps. Two such traps are known as the winner’s and loser’s curse.

The Winner’s Curse: Some people bid just to win. They overpay for a vehicle and erode or even eliminate any potential profit. In addition, if they overpay for a vehicle they are less likely to put money into appearance reconditioning or mechanical repair, thus making the vehicle less attractive to a retail customer.

The Loser’s Curse: Some people habitually bid below what an optimal strategy would dictate and regularly lose a vehicle to another bidder. The habitual low bidder may be afraid of risks or simply conservative. Either way, he doesn’t win.

The Cure: Search engines available on auction web sites, printed market reports, and guide books provide buyers with current auction values. An accurate appraisal of a vehicle’s condition is also critical. If a buyer does his homework and determines a vehicle’s actual value and the cost of the purchase before the auction, he is more likely to walk away with the vehicles he needs and make money when a vehicle is sold to a retail customer.

When Selling

Consign Early. The sooner your vehicles can be entered into the auction’s database the better. Buyers can find them earlier and put them on their buy lists.

Know the Market. Study print and online auction Market Reports to determine a vehicle’s worth. Take seasonal price adjustments into considerationãconvertibles do better in spring and summer and SUVs in cooler months.

Build a Reputation. Although no eBay-style feedback rating at auto auctions exists, buyers quickly form an opinion of you as a seller. The better your reputation, the more bidders you’ll have in your lane.

Appearance Matters. Reconditioning and detailing make a difference and can yield good returns.

When Buying

Do Your Homework. Take advantage of auction information systems. The night before the auction use the database search function on the auction’s web site to create your final buy list. On auction day, check the database from the kiosk for last-minute consignments. Finally, download the consignment database to your PDA and take it with you in the lots and lanes.

Arrive Early and Walk the Lot. There’s no substitute for doing a thorough preview of the vehicles you wish to purchase. Sort and prioritize your best picks and assign values to your favorites.

Make Yourself Known to the Auctioneer. It’s important to let the auctioneer or ring man know you are interested in a vehicle. There are many styles of bidding and the auctioneer will take note of yours.

Don’t lose the vehicle for the sake of $100. One more bid might get you the car you need.

The above was developed by Larry Tribble, owner and president of Southern Auto Auction, East Windsor, CT. It is excerpted from NADA Management Guide, A Dealer Guide to Auctions: Controlling Inventory, Increasing Profits, to be mailed next month to all NADA members. For more information or to order, call the National Automobile Dealers Association (NADA) at 800-252-6232, ext. 2 or 703-821-7227, or visit our website at NADA membersê price is $25 plus shipping; cost to non-members is $50 plus shipping.

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