Table of Contents
- Car demand is currently high during the COVID-19 pandemic as supply struggles to keep pace.
- That’s also impacted the auction industry. Car auction companies such as Hemmings Auctions, Bring a Trailer, and RM Sotheby’s have all seen very positive buyer and seller feedback during the pandemic.
- They reason that it’s because people aren’t going out or going on vacation as much, so they’re putting their money toward a nice car instead.
- Visit Business Insider’s homepage for more stories.
For many businesses, the COVID-19 pandemic brought a sharp halt in operations and a slow crawl back to normalcy, even if the world around them remains far from normal. But for car auctions, the pandemic brought a huge opportunity — and huge returns — in moving online.
To a degree, that online shift was already underway in order to grow business and reach new bidders. But some company leaders say the lack of in-person auction events has accelerated that move — and its growth potential — by several years.
Except for maybe a brief couple of weeks at the start of the outbreak, car demand is surprisingly high despite the COVID-19 pandemic. That’s been the case everywhere from the inflated used car market to the more niche side of things: car auctions.
For those who would rather bet against other buyers than haggle with a seller on Craigslist or at a dealership, the most fitting experience comes from auctions. And as the proliferation of online listings from companies like Hemmings Auctions, RM Sotheby’s, and Bring a Trailer have caught on, so has the popularity of the business model.
As much of the world around them reels from the impact of the pandemic, car auctions are thriving.
Pivoting to the internet
For Bring a Trailer, which has been online since its inception, and Hemmings Auctions, which launched as an online-only car auction site in August 2019, lockdowns and social distancing haven’t been much of an issue.
James Wyler, Hemmings Auctions’ auctions director, told Business Insider that from April to now, the company’s had way more bidders than ever before.
Bring a Trailer’s co-founder and CEO, Randy Nonnenberg, said that his company has seen an incredible increase in bidders as well. Of the 485,000 registered users on the site, more than 205,000 are registered to bid — up from 130,000 this time last year, he told Business Insider.
From August to October of 2019, Bring a Trailer sold 2,148 cars out of 3,172 listed, which works out to a 68% sale rate. From August to October of 2020, the site sold 3,136 cars out of 3,963, which is a 79% sale rate.
“That is a 47% increase in sold listings and our average listing sale price was also up 13%,” said Nonnenberg.
But for an auction company such as RM Sotheby’s, which started its auction business in the 1990s, the pivoting online took more effort.
Traditionally, the RM Sotheby’s auction calendar has always mirrored big gatherings of collectors and car events, such as Monterey Car Week and Amelia Island Concours Week. COVID-19 put a stop to all of that, as states imposed restrictions on large social gatherings and events scratched dates from their calendars.
But that didn’t spell the end for RM Sotheby’s. Luckily, some of the online architecture was already in place.
“It was a matter of life and death at that point,” RM Sotheby’s President Kenneth Ahn told Business Insider. “If we weren’t going to do live events, we’d have to go online to continue our business.
“Last year, we had started a push to digital auctions and were trying to learn and experiment with different things and different platforms. So we were able to go from completely physical [sales] to completely online [sales] in a matter of hours.”
At the time, the company thought it’d be lucky if even half of its sellers would be willing to shift to digital. But nobody really had a choice. Eight months into the pandemic’s impact on the US, the timeline for live events remains up in the air.
But RM Sotheby’s needn’t have worried.
Ahn said in the six months leading up to the shutdown — from about September 2019 through March 2020 — the average sale price of a car through RM Sotheby’s was $153,000. From March to September, the average sale price of a car online was $148,000 — a mere $5,000 difference, despite buyers only having photos and a description to go off of.
In June, the height of lockdowns in the US, a 2003 Ferrari Enzo and a 1985 Ferrari 288 GTO sold for more than $2 million apiece as part of the auction company’s Driving Into Summer online only auction. At the time, the $2.6 million Enzo broke the record for the most expensive car ever sold online.
“The fact that clients and buyers did not hesitate to bid on six- or seven-figure cars online, sight unseen, is amazing,” Ahn said. “Whatever effort we were trying to make last year in terms of online investment and growth opportunity, this has accelerated it by two to three years.”
A car is always a big purchase, especially if you’re prepared to drop six figures on it. You want to make sure that what you’re buying is the best quality that it can be, and seeing the car in person helps. It’s not as easy to buy a car based solely on some photos in a listing.
Launching as an online-only platform, Bring a Trailer foresaw this as an issue. To put buyers at ease, the company curates any and all listings that appear on its site. Anything that looks suspicious isn’t allowed.
Nonnenberg said every Bring a Trailer listing gets assigned to a reviewer on the team whose job it is to thoroughly research the car and go through everything the seller has submitted to give feedback and ask additional questions. It’s meant to prepare the seller adequately for the auction, so there’s a lot of back and forth before the listing even hits the site’s front page.
Nonnenberg called it a “human process with a lot of expertise behind it.”
“There needs to be oversight,” Nonnenberg said. “If not, a seller can say anything. We’ve listed 35,000 cars and we’ve learned some tricks of the trade. Sellers who are trying to be not truthful become obvious quickly through our vetting system.”
Indeed, in addition to Bring a Trailer’s own team, the site also features a lively comments section where users frequently chatter about the car, remark on its quality, and question the seller, who is also free to engage in the discussion.
Vetting sellers is also standard practice at Hemmings.
“All of [the Hemmings Auctions] sellers are required to fill out a detailed questionnaire that provides many critical details about the condition of the vehicle’s mechanical, structural, interior, and exterior,” Wyler said. “This questionnaire ensures sellers are providing the details that bidders expect and is the basis of our professionally written listings.”
Still, though, Nonnenberg and Wyler recommended personally inspecting any vehicle before bidding on it. If a remote buyer wants to inspect a car before buying it, there are a few options.
“Typically folks have the seller bring the car to a local garage for a [pre-purchase inspection] where the car and all of its systems are given a once over to validate condition,” Wyler said. “If a mechanic finds issues with the vehicle the buyer can adjust their bidding strategy as they see fit. It’s much better to figure out those issues before you bid as opposed to after you’ve bought the car and it shows up at your house.”
“We always recommend that bidders travel to see the car if possible, which is one of the reasons we made listings seven days, and longer for premium listings,” Nonnenberg said.
It’s also possible for a buyer to communicate directly with the seller via the site and arrange for the car to be taken to a local shop, have a friend swing by for a look, or see a video walk-around.
“Most Bring a Trailer sellers are very open to that, particularly before the final day of the auction,” Nonnenberg said. “The bidder gets to choose the path that makes them most comfortable.”
RM Sotheby’s is a little different. Everything is sold through the company’s licensed dealers and auctioneers, not your random neighbor with a shiny classic Mustang and boastful words. “The biggest obligation of the dealer is to deliver the car with a clean title, as represented,” Ahn said.
For its digital pivot, RM Sotheby’s now provides more high-resolution images than ever, its own condition report, and its own specialists who comb through the car from nose to tail, assembling a document of answers to questions that a buyer might ask.
If a buyer finds something that isn’t as it’s described — depending on what the seller provided and RM Sotheby’s own research — RM Sotheby’s will work with the buyer. The company doesn’t release the funds to the seller until 20 days after the transaction, which gives the buyer a chance to look over their purchase. If there is indeed misrepresentation, then RM Sotheby’s will hold the seller accountable.
“This process does restrict scalability,” Ahn said. “But this way, there’s more of a guarantee. There’s a level of standard we have to uphold.”
What kind of buyers are fueling the online auction boom
As it turns out, a pandemic did nothing to dampen the appetite for classic and enthusiast cars. In fact, it seems to have increased it significantly.
Wyler of Hemmings Auctions has a few explanations for why this might be. “People aren’t going on vacation right now, so they have some money to spend,” he said. “Also, when times are uncertain, people like to put money into a concrete asset, like a classic car, instead of investing it elsewhere like the stock market.”
He also reasoned that many buyers in two-driver households are realizing that, thanks to many companies being flexible with employees working from home, their second car doesn’t have to be a daily driver. It can be an old classic. Most Hemmings buyers, Wyler said, are people who can afford a reliable car and a fun car.
“For most of our buyers and sellers, this is a third car for them,” he said. “I hear people saying they want to take [the car] to shows, enjoy the weather, go out to dinner in it.”
These buyers paint a stark picture of the two sides of the pandemic: Those who can and want to buy a pleasure vehicle while thousands of others slip into joblessness and millions find themselves in poverty.
But it’s not just the usual suspects buying their third or fourth (or fifth or sixth) cars. Online car auctions attract a far younger crowd than a traditional in-person auction. Ahn noticed that within the last six months of online sales, the average age of an RM Sotheby’s buyer went down by about nine years. And 40% of buyers are brand-new to the company, which speaks to greater access, reach, and awareness when you compare online sales to in-person ones.
There’s also the accessibility aspect. Because online auctions don’t require a vendor to pitch a tent, a staff of people to wash the cars, and other infrastructure costs, Nonnenberg said that fees at physical auctions tend to be higher than ones found online.
But for anyone thinking an online auction doesn’t have the same excitement of an in-person auction hasn’t watched the clock run out on a meticulously preserved, fourth-generation Toyota Supra (the one everyone is after) and the bids start reaching stratospheric levels. Watching those bids roll in in the final minutes is a spectator sport in itself.
Despite the online boom, Wyler said he’s prepared for market undulation.
“We plan for the worst and hope for the best,” Wyler said. “I don’t expect it to stick around, but hope that it does.”
Seasonality will have an effect, Wyler predicts. Winter will likely cool the market a bit, especially in the northeastern US.
“If people aren’t going back to restaurants or vacations and things stay as they are right now, I can see sales staying strong,” Wyler said. “I don’t know that they won’t [also stay strong] if things go back to normal, though, since everything is changed after COVID-19.”
The successes seen by Bring a Trailer, Hemmings, RM Sotheby’s, and others indicate that people are extremely willing to shop for a car online. COVID-19 seems to have only sped the process up.
That’s what gives Bring a Trailer an edge, Nonnenberg said. Being able to list online gives a seller access to far more bidders, commenters, and enthusiasts.
“There’s no limit to the ‘chairs’ in our ‘tent,'” he said.
Ahn doesn’t think this marks an end for in-person events, though. So much of live auctions, Ahn said, is about the social experience, networking, connecting, and talking cars.
“When live events come back, I think they will come roaring back,” Ahn said. He thinks that’ll be especially true for the high-end market.
“The $20-, $30-, $40-million cars, those are harder to sell online,” Ahn said. “Sales of the ‘mainstream’ and ‘more accessible cars’ will continue to grow online.”