The auction companies act as agents for both the buyer and the seller — making a tidy commission in the process. The seller pays both a “consignment fee” and a “seller’s commission.” The buyer pays both a “bidders registration fee,” and a “buyers premium.” Fees and percentages vary between auction companies, but on a sale with a “hammer price” of $50,000, the auction company will earn an average of $6000. Not bad for 180 seconds on the auction block!
Once the car drives up on the auction block it is the auctioneers’ job to create a bidding frenzy on the vehicle. They do this in various ways including speaking very fast in what can only be described as a language that sounds like Jackie Gleason on steroids. Think Humnuhhhh… Humnuhhhh… Humnuhhhh…Do I Hear $50,000? Another tactic is to ask for bids that are very much in excess of the value of the car. They might look around the room asking for a $75,000 bid on a car that’s only worth $25,000. Of course they will settle for a bid of $15,000 and let the bid climb to the actual value of $25,000, but that $75,000 bid lingers in bidders minds much like an idea that a prosecutor plants in a jury’s mind even though a judge orders them to disregard it. Another practice used by auction companies is called “chandelier bidding” in which the auction company will make believe that they’ve received bids in order to advance the bidding up to the “reserve price.” The pace of bidding is often very fast and it is very difficult to differentiate a legitimate bid from a “chandelier bid.” Hard as it may be to believe, this practice is actually legal in many states.
The terms “reserve” and “no reserve” are commonly heard when a car drives up on “the block.” A car that is being sold at “no reserve” will sell to the highest bidder. It’s as simple as that. If a car is being sold “with a reserve,” it means that the owner has set a minimum price at which the auction company may sell the vehicle. If bidding does not reach that price, he/she does not have to sell…but he/she can by “lifting the reserve” which means that the car will then sell to the highest bidder. You might wonder why one might choose to risk selling a car at “no reserve”? Some people believe that selling a car at “no reserve” stimulates somewhat of a bidding frenzy since bidders know that the car is going to sell. Also, the consignment fee is lower when a seller consigns a car at “no reserve.” Others simply do not want to return home with their car, no matter what it might sell for. Think about that for a moment.
Statements such as “selling way below the car's restoration cost” do not refer to the costs incurred by the restoration shop, but rather the price that the owner of the vehicle paid for the restoration. Vehicles often sell at a fraction of the cost of the restoration. I’m not sure why there are no major classic car auctions in New York. The nearest major auction is held every February in Atlantic City.