Comparing autodealers to auction houses makes no sense

Comparing autodealers to auction houses makes no sense

A few weeks ago, the ClassicCars.com Journal published an article about the auctions at the Monterey Car Week of last August. According to this article, each auction there had generated more money in a weekend than an American auto dealer would make in a whole year. Apparently, an official of one of the auction houses had made a remark in that sense.

 

The author of the article actually dug up the average sales turnover of American auto dealers according to the National Auto Dealers Association. That figure is USD 59.6 million for 2016.

And each of the auction houses that were present at this years Monterey Car Week made a turnover in that weekend that was more than this figure of 59.6 million dollar.

Wrong for 3 reasons

The comparison is however utterly wrong, for the simple reason that a car dealership is a completely different sort of business than an auction house. Here are three reasons why.

1. The auction house has a lot more freedom to decide what cars they sell and at what price
The dealership sells new cars. The price of those cars is set by the manufacturer, there is not much room for the dealer to play with the price and raise his margin.

On top of that, the dealer is obliged to sell all the models that the manufacturer has in stock, that includes the cars that are hard to sell.

An auction house sells classic cars, used cars, that is. They do not own these cars and don’t carry much risk. Also, the auction house can decide how much they want for the car, together with the owner they can set a reserve.

The auction house can even decide not to take on a certain car, when they think it will not be possible to sell it at a proper price.

2. An auto dealership is a much more complicated sort of business than an auction house
The auto dealer where you and I buy our daily driver combines all sorts of activities.

They have new cars in stock, they sell used cars, they have a workshop, they do maintenance on cars of customers, they may have a body shop for damage repair, they may even do rentals. 

And while they are busy doing all those things, they have to make sure that they live up to the standards of their brand, or else their manufacturer will give them a hard time.

In an auction house, all activities are aimed at one thing: marketing. And as they do this on their own account, they are their own boss and nobody will tell them how to run their business.

 

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3. There are more auction houses then just the ones we see at Monterey
In the article, ClassicCars.com Journal compares the sales of the auctions at this years Monterey Car Week to the average sales of ALL auto dealers of the USA.

That, of course, is a faulty comparison. If you want to compare, then either compare the Monterey-auctions to the top 10 dealerships of the USA, or compare all American dealerships to all auction houses.

In total, there are at least 28 auction houses in the USA that more or less specialize in classic and collector’s cars. Many of them also do other objects, like real estate or art. Most of these 28 auction houses sell relatively ordinary classic cars.

Go see for yourself, we have a list of them on this website.

At most auction houses, classic car auctions are not about Ferrari’s of 7 million dollar or Duesenbergs of 2 million, but they are about Chevrolets, Fords and Volkswagens, about custom cars, hot rods and occasionally a gasser. 

Quite a lot of them do sales of project cars and barnfinds as well. In most cases, cars at auctions in the USA are sold for sums of 10,000 to 100,000 dollar. That is not a way to make 60 million dollar in a weekend.

And that is the bottom line of it all.

Autodealers have to work their butts off to make a living. And for many auction houses, the situation is not much different. That is basically the only thing in which you can compare auction houses to autodealers: they’re all struggling to make a buck. 

 

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