It’s commonly believed that buying a car on auction is cheaper than buying from a dealership. While this may be true, there are other factors to consider.
There are, for example, many car auctioneers in South Africa, and the banks typically have their own auction houses from which they sell repossessed assets.
Rudolf Mahoney, head of brand and communication at Wesbank, responds to some frequently asked questions and gives some tips for buying a car on auction.
1. Why buy a car at an auction?
Mahoney says that cars are generally cheaper on auction, but this varies depending on model and make.
“There’s the trade price on a car and the retail price at which a dealership will sell a car. The difference is the margin the dealer makes. A car that’s sold at an auction is often closer to the trade value than the retail price,” he explains.
2. What are the risks attached to buying a car on auction?
The vehicles that are sold on auction are sold “as is”, meaning that you purchase the car with all of its problems and benefits. If it has issues, you’ll be responsible for fixing them.
“You need to add a big margin for the ‘what if’ factor, so that you’re not left out of pocket. An auction is the only exclusion to the Consumer Protection Act (CPA), meaning the act doesn’t offer the buyer any protection,” says Mahoney.
To mitigate the risk to its customers, Wesbank engages DEKRA to inspect all vehicles prior to auction. Some issues are fixed at this time, Mahoney notes.
3. Fees and documents
Mahoney says that a registration fee or deposit may be required to secure your place at an auction, by way of indicating a genuine intention to purchase. The deposit can go towards any purchase that you make, and if you don’t buy anything, the deposit will be refunded.
In terms of documentation, Mahoney says, “You must bring FICA documents, including your ID and proof of residence.”
4. What should you do to prepare?
Your first step, Mahoney says, is to inspect auction catalogues, many of which are available online. Having identified a vehicle of interest that fits within your budget, it’s well worthwhile conducting a pre-inspection. In Wesbank’s case, this can be done the day before the auction.
“While you can't test drive the car,” Mahoney says, “you can bring mechanics and start it, allowing you to do a thorough check.
“Once a car is bought, payment can be made via electronic transfer, or through a release note from a reputable financial institution.”
Mahoney cautions that there are no guarantees or warranties that come with an auctioned car. However, warranty and service products may be available for purchase.