One of the great features of online auctions is their transparency. You can see how many times a car has been listed, read all the comments for each listing, see what the previous high bid was and whether the car sold or not.
Also, at least with Bring a Trailer, by clicking on the bidder’s username, you can see what other cars they have bid on or sold, and whether they’ve been successful or not.
With in-person auctions, part of the way companies try to create a sense of value for a car is by using “chandelier” bids. These are bids made by the auction company and not by an actual bidder to get close to a reserve.
For instance, if the reserve is $100,000 on a Ferrari 400i 5-speed, even if there are no “real” bidders in the room (or on a phone or online), the auctioneer can call out a series of bids that get close to the reserve (“do I hear “$75k, $85k, $95k, ladies and gentlemen we are so close just one more bid would do the deal”.)
In fact, so long as they don’t place a bid that is MORE than the reserve, it generally legal for auction companies to place “chandelier bids” on behalf of the owner. With one exception. If the auction house places a bid of the reserve amount or more, then the auction house is legally required to actually purchase the car and pay the seller.
But if they place a bid near the reserve, the seller can always say, “We got to $95,000 so the car must be worth somewhere in that range.”
However, with online auctions, chandelier bids aren’t allowed. Each bid comes from unique users, establishing a history of who is bidding at what amount.
A recent case in point was a 2024 Porsche 911 Dakar that was listed on BaT three times. Each time we saw what bidders were willing to pay.
In August 2024 it was a no-sale at $318,000, in October of 2024 it didn’t sell at $300,000, and finally, on Feb 18, it found a new home at $306,000, excluding buyer’s premium. That’s $12k less than the first time out, but $6k more than the previous time.
All three times it was consigned and listed by one of BaT’s “Power Sellers.” The presentations all three times were of top-flight quality, so the presentation wasn’t what affected the bids.
The Dakar had 150 miles on it, so was essentially a new car. With a window sticker of $264k, the seller probably only took a mild haircut, depending on whether they paid a premium for the car, or there were various other taxes and fees involved.
In any event, the car’s consignor is not sending his kids to college on the net profit here.
I would find it mildly embarrassing to have an auction of one of my cars run three times before the car got sold, but again, that’s part of what happens with online bidding.
All of us in the peanut gallery can have a field day giving our free advice to the seller. For instance, there is no shortage of Dakars coming to market, and unless they turn out to be the Ford GT of this era, with 2,500 built they will soon start to depreciate.
Three-hundred grand is not a small sum of money to have tied up in a deprecating asset. You can get 4% from most banks on a 12-month CD, which works out an annual holding cost of $12,000, not including insurance, storage and upkeep.
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With an online auction, “chandelier” bids might not be happening by the auction company but sometimes it’s pretty obvious that shill bidding is going on. Case in point – a prominent seller on B.A.T. has an equally prominent bidder that regularly bids on his listings, mysteriously, always just below the reserve. Somehow, it doesn’t seem likely that a bidder is going to bid well over $100,000 on over a dozen different auctions by the same seller, that the two don’t know each other or at least have communicated directly at one time or another. Yet it happens frequently.
Am a complete Novice to car bidding. Speaking about “Chandelier and Shill” bidding are new unknown terms to me. Is there a “Primer” I can access that would educate me so I won’t be perceived as too much of a beginner in this game? Would certainly like to participate better in future bidding processes. An educated consumer is a better customer.
A buyer/seller who offers a car with 150 miles on it is not your typical collector. He or she is an investor whose choice of asset is a car. As Keith has already observed, there are risks and costs associated with cars that don’t apply to CDs, Index Funds, etc. For most of us, Investment Value or Investment Risk is tempered by the enjoyment and utility of owning the car. And oftentimes a strong emotional component. A car that you buy and sell without driving is also known as a kinetic sculpture. Or, as I like to think of it, an invitation to lose money.
I don’t doubt that one can make money buying and selling cars that you never drive, but I’d stick to something safer like deep-sea treasure hunting or third world internal organ sales.