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Buying a classic car at an auction? Come prepared.
Adapted from an article that originally appeared in Mecum Magazine. LightStream is the financing partner for Mecum Auctions.
Every Mecum Auction is a universe of wonderful possibilities.
Classic cars? Check.
British roadsters? Check.
Retro styling? Oh yeah.
Bona fide antiques? Got those.
American muscle? You bet.
Maybe you love all of the above, and the many other categories of classic cars just waiting to be discovered at classic car auctions, including the many events put on coast to coast every year by LightStream partner Mecum Auctions. If you’re like us, you face a unique challenge amidst that amazing automotive abundance, when your inside voice is bound to be chattering something like this:
I feel like a kid in a candy store! How do I begin to narrow down my choices and give myself the best chance to take ownership of the classic car I really want?
“There are really two ways to identify the car that’s right for you,” said John Kramen, Consignment Director and NBC TV Commentator / Analyst for Mecum Auctions.
You can take the methodical approach, which involves conducting extensive research, looking at books, examining auction data at Mecum.com and checking sites like Kelley Blue Book, and then showing up at the event with a flashlight and mirrors, ready to kick tires and look under hoods.
Or you can take the more spontaneous route, knowing that you want something, but giving yourself permission to play the field a little – show up on auction day, look around and see what strikes your fancy.
With either approach (and a little luck), you can score a distinctive vehicle that reflects your personal taste. But remember that an auction is a competitive event, and there are thousands in the immediate vicinity who love classic cars as much as you do. With that in mind, Kraman shared some tips to help you improve your odds of winning the car of your dreams.
Condition-grade the car
Is it a driver-quality car that you can use and enjoy right away? Or is it an investment that you may want to restore, enhance and hold on to? Of course, if you are making an investment, you have to be mindful of the likely return on that investment. In either case, whether you are making an investment or acquiring a vehicle to tool around in on weekends, plan to thoroughly pre-inspect the vehicle so you can avoid any surprises.
Once you’re clear on investment vs. hobby, you’re ready to think about how much you want to spend.
“Driver-quality cars are often much more affordable for the budget-minded,” said Kraman. And there are segments of driver-quality cars that are going to be more affordable than others. For instance, a two-door convertible is going to command a higher price than a four-door sedan, which might come in 20 to 30% below the convertible coupe.
You might also consider picking up a version of your desired vehicle that is slightly less than absolute top of the line. For instance, while an SS 39X Chevelle might go for $30,000 to $35,000, you could likely find a ‘straight’ version of the same vintage Chevelle that might go for $20,000 to $22,000.
“It still gives you the pride of ownership, and the look and feel of that distinctive vehicle,” said Kraman.
Auction day: something for everyone
And, he says, Mecum provides a wide spectrum of opportunities for ownership. In other words, you do not have to have the financial resources of a hedge fund manager in order to get into the classic car game.
Mecum carefully manages the inventory of cars at every auction to provide solid, stable investments, as well as entry-level cars for purchase, said Kraman. More affordable cars are generally going to be available on the first day of the event. On that day it’s important to show up prepared and ready for action. Cars cross the block in an average of two minutes, and there’s a lot of intense excitement.
“People should understand that they are going to be overwhelmed by the scale of the event,” said Kraman. “It’s going to be fast-paced and non-stop, so plan to get there early enough to look around and see what’s going on, and to get a good look at the cars that you are interested in.”
Once you’re done looking, you can practice on paper, actually writing down bids for your particular target car, and noticing your reactions to them. This mental rehearsal can help you get used to the process and steady your nerves when your car comes up.
The wingman: to have or have not?
“Having a wingman has its pluses and minuses. If you know someone who can keep calm and give an objective view of things, that can work well,“ said Kraman. On the other hand, if your friend is a collector, he or she may have strong opinions that could get in the way of your own decision-making process. So tread carefully when you enlist auction-day assistance.
Once you have an idea of the vehicle you want (and have conducted as much research as you need to feel comfortable), and you’ve familiarized yourself with the auction process, it’s a good idea to plan your financing, as a classic car is not a small purchase.
Get a no-fee loan with a low rate
Some car buyers liquidate their savings or investments, or even tap into their home equity. These are not always good options, however. A better alternative is to finance the vehicle directly. Most traditional brick-and-mortar lenders are unlikely to give out loans for classic cars.
“Most lenders approach car loans from a collateral perspective,” said Todd Nelson, Business Development Director with LightStream. The problem is that for cars, the value is based on the Kelly Blue Book value — at least as far as the bank is concerned. However, it can be difficult to get an accurate assessment of a classic car. Market value is a rather subjective measure, especially if it’s not fully restored, and you’re vying with competitors in the heat of a split-second decision.
For borrowers with good to excellent credit who have done their homework and know what they want, there is a way to remove that pressure and bid with complete confidence. LightStream offers financing for classic cars at low rates. The online loan experience is fast and easy, with no fees and no prepayment penalties.
If you prize a low rate and control of the loan process almost as much as finding the right classic car, financing from LightStream can be an attractive option.
“We’ve helped a lot of people finance cars at Mecum auctions,” said Nelson. “It’s a lot of fun to work with people who’ve been good with their credit, and who now want to achieve one of their life’s dreams.”
How do you know exactly how much to bid?
“There’s no real science to determining the right price to pay for a car,” said Kraman. Many bidders have found themselves going 10% or so over their maximum planned bid, and that’s not completely crazy, he said. But it’s important to keep in mind some related expenses: Mecum adds 8% to the sales price; and there will be a sales tax that depends upon the state in which the auction occurs. You must also consider how you’re going to get the vehicle home: Drive it, trailer it, or contract with a transport company to move it.
“Have your finances ready in advance so you don’t get stuck,” said Kraman. And if you know you’re not ready to buy yet, it might be a good idea to see a Mecum Auction in advance. “Come and attend as a spectator,” he said. “There’s no pressure, and it’ll be the best car show you’ve ever seen.”