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I am considering buying a collector car at auction later this year. What should I be aware of?
Damen Bennion, head of the collector car team at Goodman Derrick and Simon Kidston, a former auctioneer and the founder of Kidston SA, have answered a reader's question in FT Money.
I have recently retired and have taken 25 per cent of the money in my pension as a tax-free cash lump sum. I have always wanted to buy a classic car and am considering buying a collector’s car at auction later this year. What should I be aware of?
Damen Bennion, a partner and head of the collector car team at Goodman Derrick, says going down the auction route to buy a classic car will require careful planning, but the following steps should help you navigate a successful purchase.
If you have never been to a collector car auction, my usual advice is to attend at least one as a spectator, so you have a better understanding of how it all works. In light of recent events, many sales are likely to be postponed or moved online, but that gives you more time to research the process as you weigh up your options.
Many collector car auctions are held each year. Some will be expensive, glamorous affairs offering cars worth millions of pounds and others more modest affairs. Regardless of your budget, choose a reputable auction house by doing some research online.
Once a potential purchase has been identified, make sure you use any opportunity to inspect the car, because it’s not unknown for vendors to use auctions to pass on problem cars to the unwary. Check if a test drive is feasible and whether your mechanic can give the car a quick check over, but at the very least ask for the car to be started.
Ask to see any documentation which comes with the car as this could provide evidence that the car is not all that it seems. For example, is there evidence of it having been well maintained by respected experts and are there invoices to support the work done?
If your pre-sale due diligence reveals no hidden issues and you decide a car is worth bidding for, the next step would be to read carefully the terms and conditions set out in the auction house’s sale catalogue. These will cover lots of important issues. For example, when will payment be due if you are a successful bidder? What are the storage costs if the car is not removed within a certain time frame?
The terms and conditions are also likely to limit the liability of the auctioneer. Normally, auctioneers simply repeat the descriptions given to them by the vendor so if a description turns out to be wrong, then your claim, if any, would be against the vendor rather than the auctioneer. And, if the car breaks down on the way home it is unlikely the auction house could be held accountable, which is why thorough due diligence is essential. You will have no one to blame but yourself.
At the auction, make sure you are certain which lot you want to bid on and, importantly, what your highest bid will be taking into account the buyer’s premium. You want to avoid being caught in the excitement of the sale and buying something you did not want or cannot justify for a price you cannot afford.
A successful purchase at an auction is traditionally announced by the fall of the hammer. At this point, any risk in the car will pass to the successful bidder so make sure insurance has been prearranged.
While collector car auctions may at first seem daunting to the uninitiated, if you take the appropriate steps, they can present an excellent forum to buy a collector car.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.