The concept of this article came about during a very enjoyable lunch with Paul Frost, one of the founders of www.motorbase.com, while I was recounting some auction stories. Although Paul is very much an auction fan, he felt that he and readers of Motorbase would welcome a clear, plain-English explanation of how auctions really work. So here goes.

Introduction:
The first question a potential Seller will ask is: do I want to handle the transaction myself, or do I want professional assistance?

One approach will involve a fair amount of time with only a limited chance of a satisfactory outcome but the advantage of not owing anybody else a share of the sale proceeds. The other will involve negligible time, a greater chance of a satisfactory conclusion but having to share a percentage of those sale proceeds. Sometimes an auctioneer is the first port of call; sometimes the last resort!  But, whenever you make the call you should receive an honest, dispassionate view of your pride and joy's value. You may not like to hear it or necessarily even agree with it - but it should be an accurate assessment given the contemporary market climate.

Different auctioneers charge different Seller's Commissions and Buyer's Premium rates. Bonhams is not the cheapest, but neither is it the most expensive. When selecting your auctioneer look beyond "we're cheap" headlines and determine whether the House is actually offering good value for money, the appropriate service, and the likelihood of achieving the appropriate result for your car. Feel free to ask what percentage of motor cars the Auctioneer normally sells during the auction, and what percentage that sell, reach the published estimates. You'll notice a difference.

The Process:
An Auctioneer will offer 'Lots' (in this case were concentrating on Motor Cars) for sale on behalf of a Seller. The Auctioneer acts as Agent for the Seller. The Seller will complete a Vehicle Entry Form (at least, that's what Bonhams call them) which is the contract to consign the Motor Car to sale.

This Entry Form will ask for the Seller's contact details; details of the car; and any Reserve price (see below) the Seller wants to put on the sale. Auctioneers need the cars descriptive info for two reasons; a) to enable them to describe the motor car properly in the Auction Catalogue; and b) to achieve a warranty from the Seller - so in this description... be honest!  Bonhams try to inspect every car during this consignment process to assist the Seller and to gauge its condition for ourselves. However it is impossible to do so in every case. They collate this information to prepare the catalogue description that will appear not only in the printed Catalogue but also on the Website.

The Seller and Auctioneer then agree the Reserve price. This is the confidential minimum price level below which the motor car cannot be sold. Motor cars usually carry a reserve but sometimes they are offered 'Without Reserve'. This means that the car will then sell for the highest bid whatever it may be, no matter how high, nor how low. There are marketing advantages to offering your car 'without reserve' but it does carry obvious risk. Much depends upon the type of car, and we may advise against adopting such a measure.

In any event the motor car will carry an Estimate which will indicate a spread of value eg. 14,000-18,000 that the auctioneer feels the car is likely to sell for at auction. More often than not at Bonhams these are pretty accurate, but sometimes we're wrong, with cars selling for more, or indeed less than Estimate. The golden rule is whatever you may feel about the Estimate, if you're interested in the car, do bid - you may well secure the car.

The legal bit: Hammer prices and fees:
I won't bore you too much but legally there are three contracts during a transaction; between Agent (the Auctioneer) and Seller; between Agent and Buyer; and between Seller and Buyer. This basically covers aspects such as offering the Lot in good faith with clear title; acknowledgement that the Agent can collect fees (Seller's Commission/Buyer's Premium); and the Buyer acknowledging that he or she really is in a position to follow through with the purchase. The Buyer also agrees to pay the Premium to the Agent.

If it sells, the 'Hammer Price' (the successful bid price) will be subject to a Buyer's Premium. VAT is levied on this Buyer's Premium. It is very rare for the car itself to be subject to VAT, but it does happen. The Auctioneer will indicate this in the catalogue. The Seller will also have a commission deducted on the selling Hammer Price. This will range from the published rates, to those that may have been individually negotiated. Expect to do a deal if you have a valuable car, an entire collection, or wish to sell with very modest - or no - reserves. Do note that some auctioneers charge a 'minimum commission' fee.

The only other charge is the Entry Fee. The cost is usually dependent on the size of catalogue entry, but may include other aspects such as a professional wash/wax that Bonhams provide. If your car does not sell it should only be the Entry Fee that you would have to pay. However, transportation to the sale venue and professional photography are extras that should be factored-in if applicable. Again, an Auctioneer should be in a position to arrange this for you if required.

So lets recap on the golden rules for sellers and buyers:

Sellers responsibilities

• You must describe the car accurately.
• You must inform the auctioneer at the time of consignment if you have finance - or any other liens - on the car.
• Once contracted to the Sale, you must deliver the car. If you don't, you will have to pay a withdrawal charge.
• Never bid on your own car, or manipulate bidding in any way.
• Take time to put your car's history file in nice order. It always sends a good message.
• Attend to dirty/tatty wheel arches, boots, interior, under-bonnet prior to delivery
• Please deliver with at least tank of petrol
• Please ensure the battery is charged
• If unusual/early car, starting instructions are useful

Buyers responsibilities:

• Attend the Sale with suitable identification such as a passport. If you're new to the Auctioneer, it is advisable to take a bank reference too. If in doubt speak to the Auctioneer in advance.
• You will need to Register to Bid, providing your personal details and accepting that your bid will be made under the Conditions of Sale the Terms by which you are bound. You must accept that if you successfully bid on a car, you must follow through with the purchase. You do not get a cooling off period and you're not buying an option. At first glance this may appear scary, but it need not be.
• Look at the car carefully; sometimes owners are in attendance (or contactable) for you to talk to; inspect the cars file; appoint an engineer; but most of all talk to the Auctioneer as early as possible. They should be able to help you achieve all of the above so that you're comfortable.
• The Seller has a duty to be honest about their car. If the Seller has been patently deceptive with regard to invisibles such as engine condition for example, expect the Auctioneer to mediate. However, the Conditions of Sale are weighted. Buyers must accept that the ultimate responsibility does lie with them to satisfy themselves concerning the condition, integrity and completeness of the car.
• All good auctioneers should employ freelance engineers to be in attendance. Bonhams have three from the moment cars arrive. They're there to help us to help you - they will show you around the car and tell you objectively what it is like.
• If you want to take the car away on the day of Sale, ensure you've got a method of payment that will supply cleared funds. Cash (there is a limit of 5,000 at Bonhams' sales due to money laundering regulations), Debit/credit cards, guaranteed cheques etc.
• Accept to pay uplift and storage charges if you cannot pay/collect by the day following sale.
• Auctioneers should have Transport and Insurance representatives on site should you require assistance.
• You don't have to be at the Sale to bid. You can also bid by telephone, or leave an absentee bid, or appoint a friend or agent who can attend on your behalf.
  

Summary:
 Selling - and certainly buying - at Auction is only daunting if you are unaware of the process. Bonhams do recognise that there are psychological hurdles for a new potential buyer to overcome and they endeavour to address all these issues to enable customers to bid with knowledge and confidence.

And it really is as simple as that. If you know what you're doing you have peace of mind. Bonhams alone will sell over 500 cars per year in the UK and the national average of cars sold at auction comfortably exceeds 1,000. Add the number of unsuccessful bidders at each auction and you probably have 5,000 people participating per year. Everyone is welcome to attend Sales, even if you have no intention of bidding. Come along, have a look, get a feel, become familiar.

When it is time to buy, or to sell, it will feel like second nature.

James Knight has been a specialist in the Collectors' Motor Car auction industry since 1984, taking his first sale as an auctioneer in 1991. He has handled in excess 15,000 motor cars on behalf of sellers and buyers over a 23 year period.