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5 Reasons In Person Car Auctions May Be Going, Going, Gone

With Online Car Auctions Gaining Popularity, Live Car Auctions May Become a Relic of the Past

crowd at car auction

The auctioneer’s hammer of the traditional car auction selling block might soon be used to hammer nails in the coffin of traditional “tent” car auctions. Even though Mecum Auctions posted sales of over $217 million at their recent Kissimmee, Florida auction and Barrett-Jackson proclaimed their Arizona auction “the most successful auction in fifty years,” car auctions as we know them may soon disappear. There are five reasons for their potential demise.

Traditional Car Auctions

Crowds at live car auctions may soon disappear.

Auction houses have been around for ages and usually auction more than cars, though our focus is on their automotive auctions specifically. Most auction companies host a few on-site, live auctions scattered across the country every year.

Barrett-Jackson has four annual auctions and just concluded their largest one in Arizona, selling 1,857 vehicles. Mecum will host fifteen auctions in the U.S. this year and kicked started their sales in Kissimmee, Florida. This particular auction became the first collector car auction to surpass sales of $200 million. So why exactly do we think in-person car auctions are dinosaurs breathing their last breaths?

The Demise of Car Auctions: Online Competition

Bringing cars to a live auction may soon be archaic.

In 2021, COVID-19 caused many car auctions to postpone or cancel their live auctions. Some companies reverted to online sales with some limited success, and it appears that the crowds and buyers have started to flock back to the auctions.

However, in the past few years, more online car auction sites have sprouted up and gained popularity. And some sites are becoming increasingly selective with their listings — these are not daily drivers that you might find on Craigslist. Some sites focus on specific brands and marquees, while others are broader in scope.

Bring A Trailer, for example, had success in 2021 with sales of $828 million from 17,846 vehicles exchanging hands.  The co-founder of Bring a Trailer, Randy Nonnenberg, attributes the success of the site to the variety of cars offered, often at a still reasonable price, with “something for everyone.”

In an interview, John Wiley, manager of Valuation Analytics with Hagerty Insurance, made note of Bring A Trailer’s “huge growth” adding that “the online sites followed by Hagerty have doubled sales every year since 2015.” That is explosive growth which Wiley does not see changing in 2022.

Last year, Barrett-Jackson bought ClassicCars.com and developed a spin-off AutoHunter.com. Craig Jackson, CEO of Barrett-Jackson, noted recently, “You’ve got to be in the middle of it.” He added that the company had a JavaScript app in 1995 and quickly developed its capability to support online bidding during his live auctions.

Craig Jackson, CEO of Barrett-Jackson, has branched into online auctions.

Most recently, Arizona Auction Week was held at the end of January 2022. Two auction houses from 2020 did not return to host sales, and the number of vehicles for sale dropped slightly from 2020 to 2022. It seems the rise of strictly online car auctions has put a dent in traditional auction sales. Here are the five reasons why.

1. Commissions

This 1955 Mercedes-Benz Gullwing sold for $6,825,000, the highest sale during the 2022 Arizona Auction Week.

Traditional auction houses charge the winning bidder an additional fee, known as a buyer’s premium. This is generally about 10% of the winning bid. Recently many auction houses have raised their buyer’s premium to 12% on the first $250,000 of a purchase price and then 10% on any additional bid price. So if a car sold for $100,000 the buyer would have to pay a fee to the auction house of an additional $10,000+ before taking possession of the car.

Plus, most auction houses deduct a seller’s fee, typically 10%, from the sale price. So with the car selling for $100,000, the seller would only receive $90,000.

Meanwhile, in the example above, the auction house would receive about $20,000+ for their services in selling the vehicle.

By comparison, most online sites are charging a single flat fee, often under $250, for the seller. For the buyer, most sites charge 5% of the winning bid and cap their fee at $5,000. That leaves a lot more cash on the table for both the buyer and seller, especially so on high-value vehicles.

2. Timing

Gooding & Co displayed cars in Scottsdale, Arizona but then held an online auction.

While auctions are held nearly year-round, if a seller wants to work with one auction house they are limited to a small number of weekends when live auction sales are held.

If a buyer wants to place a bid at a nearby auction, they may only have one yearly auction to choose from. Additionally, a buyer will have to wait until an auction house offers up a car they want. So, in general, the opportunity to buy from a traditional auction house is limited.

Online car auction sales, on the other hand, offer cars continuously. On February 1, 2022, Bring A Trailer alone had 85 auctions ending. Once accepted for listing, a seller can sell their car, often within a month. Buyers, meanwhile, can indicate what vehicle(s) they are seeking and register to get notified when a listing matches their selections.

Wiley says one challenge online sites are facing is they often have to turn away potential listings, as they don’t want their sites offering too many cars at one time. He doesn’t see this backlog of cars for sale ending soon, but luckily for sellers, there are more and more online auction sites poping up all the time.

3. Transaction Costs

With an online auction, after the site collects its fees, the buyer and seller work out the final purchase processes. The buyer will have to contact their state directly for any related sales tax and registration fees.

Most traditional auction houses will collect a state sales tax unless the buyer is a licensed car dealer or proves the car is leaving the state where the sale was made. Those out-of-state transports are still generally reported to the buyer’s home state revenue department.

4. Transportation and Travel Costs

Trailering a car to an auction site can be expensive.

For in-person auctions, a seller must pay to have their vehicle transported to the auction site. Those costs can easily exceed $2,500. If the seller decides to attend the auction to answer questions and promote their car, they will incur additional travel costs.

With an online sale, a seller has no trailering fees and can answer questions from home. If they need to review their files or maintenance records, they are more easily available as well. Generally, it’s the buyer’s responsibility to arrange for pickup or transportation after an online auction closes.

5. Community

There is no denying a traditional car auction involves lots of players and plenty of drama. Attendees will comment about the car on the auction block and urge higher bids. Seeing two rivals raising their bids for a car is exciting (and expensive).

Most online car auction sites allow members to log on, make comments, or ask questions about the car on sale. Nonnenberg notes his site promotes “accessibility” to the car auctions and attracts a younger, affluent audience.

The online community tends to be very knowledgeable about the cars and can point out discrepancies in the car’s description or ask specific questions. All of these comments are available for all to see and review.

Most online sites mandate a large number of pictures showing the car and any existing defects. Videos of a cold start and a cruise in the neighborhood are the new expectation on these sites. At some traditional auctions, the seller/owner is not on-site and potential buyers are relying on some vague description in the catalog.

Car Auctions: The Online Future

To demonstrate the breadth of the online auctions here are some cars that were successfully sold while the traditional auctions were held in Arizona:

Most traditional auction houses are starting online sites to supplement their dwindling on-site auctions. Jackson acknowledged “the internet is bringing a lot of people in” to the collector car arena.

And Wiley expects the online sites will help increase interest in the collector car market for these auction houses. But the real challenge is which auction houses can survive the shift and stay in the market while developing a strong online presence. Only time will tell.

About Mark Bach

Mark C. Bach is a well preserved automotive junkie with 30W oil in his veins and remembers feeler gauges and brake springs. He has a love for all things that move, especially old-school muscle cars. Bach covers the car auctions and the automotive scene and writes for a variety of outlets, including Chevy Classics, Round-Up Publications and eBay Motors, and maintains Route66pubco.com.