Should I Buy At an Auction?
Bidding at an auction can be a lot of fun, especially if you win. But have you ever noticed that items at auctions often sell for prices close to their original price? I’ve heard it said that whoever wins the bid at an auction is the biggest loser. That’s because the winner in an auction is the person who’s willing to spend the most, which most people don’t call a win. In other words, no one else was willing to spend that much so the majority of the time, if you win at an auction you’re really paying too much for the item.
Now, there are some things no one wants so they may sell for a song and a dance. For example, once I went to an auction yard before the upcoming auction and I noticed a box of “sewing” stuff. In fact, the auctioneer obviously had no idea what was in the box since it had nothing to do with sewing. Instead, it was a used knitting machine with lots of expensive attachments. I was familiar with knitting machines since I had looked into them before for my wife and daughter, and I had bought a knitting machine off of Ebay. So when the auction came around, I was able to purchase the box of “sewing” stuff for around $70, which altogether could easily sell on Ebay for over $400. Sometimes you get lucky.
I’m going to give you the pros and cons that I see with buying used farm equipment at auctions as well as buying used farm equipment in general. Hopefully, this will help you be aware of what it’s like and avoid any negative experiences.
1. Auctions have good deals
Sometimes you can get a really good piece of equipment or a good deal at an auction, but you have to be a savvy buyer. Once I was looking for an old tractor, and I found one on an online auction. The tractor was located in New York, but I live in Texas so I called up the auction house and talked with them about the tractor.I asked them to send me a video of the tractor in operation, and it looked pretty good from the video. So I made the auctioneer an offer, which he accepted, and we worked out shipping and payment. It just so happened that he had a friend from Texas visiting New York for an event and he had a diesel truck and trailer with him. I wired over the money to the auction house and worked out a killer deal on shipping the tractor back to Texas with his friend.
I don’t recommend you buy used equipment from thousands of miles away, but the truth is that people do it all the time, especially if you don’t mind fixing things. In my case, I was lucky (or blessed) because I got a really good tractor, but buying used equipment doesn’t always work out that way. It’s always best to thoroughly examine what you’re buying in person, and sometimes you can find a really good deal. Not only can you find good pieces of equipment, but you can often get equipment for much less than buying it from a private sale.
2. Auctions are exciting
Let’s face it, auctions can be exciting. It’s like competing in a game or sport and experiencing the thrill of winning. For many people, auctions are a form of entertainment and I’ve meet people who go to auctions every weekend just to watch the show and maybe participate in purchasing small items. For others, they buy all kinds of useless garbage and add to their hoard at home. In fact, several American and British TV shows are centered around “pickers” who pick junk from people who have hoarded from auctions for decades. I guess everyone has to have a hobby.
3. Auctions have hard to find equipment and antiques
Auctions are one place where you will most likely find antique and hard-to-find equipment. For example, if you’re a small scale farmer (i.e., hobby farmer) and you want to bale your own hay, then you’ll need to get some equipment. But new hay equipment can easily cost more than your entire farm. You can find an old sickle or hay cutter, an old hay rake and tedder, and even an old square bailer at auction for only hundreds or a total of a few thousand dollars. If you don’t mind fixing up equipment, there’s probably not anything more affordable. Even the small scale balers easily cost over $6000, and you still need to find a way to cut the hay and rake it. So an auction can be a great place to find such equipment. Also, if you’re a collector then auctions are the place to be. While people sell tractors online and on craiglist, many of the old tractors owned by big farms or collectors go to auction. Keeping an eye on online auctions for what you’re looking for may be the best way to find it.
4. Auctions are run by a business
When buying equipment from a private sale, there are less payment options available. Personally, I don’t like carrying around thousands of dollars in my pocket. I’d prefer to write a check or use a credit card. With an auction house, you’re dealing with a legitimate business so you can send them wire transfers, use checks, PayPal, credit card, or whatever. Plus, they’ll hold sold items until you can arrange for pickup. With a private sale, you need to be ready to pick up the item now with cash in hand. An auction house lets you test out the item before you purchase it, and they act as the go-between you and seller much like a realtor does in purchasing a home when you’re dealing with larger ticket items. Sometimes dealing with a trustworthy 3rd party business to handle the purchase and transact the sale is less risky or at least more reassuring than dealing directly with individuals when large sums of money are being exchanged.
1. Auction houses bid against you
There’s an unfortunate practice that occurs at both in-person and online auctions. I’m not saying it happens at ALL auctions, but I’ve seen it happen at the auction I sometimes attend. It’s a shady practice of planting someone in the audience to run up the bidding so the auction house can sell for higher prices. It’s not right, but I know it happens. Even with online bidding, the auction house states in their terms of service that the auctioneer has visibility to all max bids and everyone agrees to those terms in order to participate. I’m not saying all auctioneers are crooks, nor am I saying that it’s somehow illegal, but it certainly doesn’t feel right. It’s just something you need to be aware of and accept if you’re going to participate in auctions.
2. Auction items are sold “as-is”
With auctions, there are typically no returns. I once bid on two items because there was a glitch in the system that said I had lost the first bid, but then I was awarded the winning bid on both. I talked with the auction house, and they accepted back the second item due to the glitch in the software. But don’t expect that to be the case. If you forfeit in paying, I doubt they will take you to court, but you will never be allowed to bid in that auction again. So make sure you really want the item before placing your bid.
3. Most auction items are worn and need repair
Don’t be fooled by paint. I’ve seen local guys buy and sell tractor equipment, and they will apply a new coat of paint to the equipment. You look at it and it looks pretty good for a used tractor. The problem is, paint doesn’t fix anything mechanical. I’ve bought a tractor before with a blown head gasket and another tractor was given to me that had a blown head gasket. Unless you want to fix the mechanical issues, you need to look deeper than the paint. It’s a good idea to take someone with you who has more knowledge about the equipment you’re buying so you can decide if it’s a good deal. You might find an old John Deere tractor or implement at an auction, but finding the parts for it may be hard to do. Also, rust ruins equipment. At some point, you’ll want to paint whatever you get and that can be time consuming and expensive.
In my experience, unless you’re handy, enjoy fixing up equipment, or the equipment isn’t too beat up and rusty, I would recommend saving yourself the headache and buy the equipment new. There’s a reason why the equipment went to auction, and sometimes it goes because it’s just not worth taking care of anymore. Don’t be pulled in by getting a low price and a great deal. When it comes to farm equipment, spend the extra money on a new or really well cared for piece of equipment and it’ll last you a lifetime.
4. Many auction items have reserves
Be aware that most equipment auctions have reserves. Reserves mean that you can’t purchase the item until the reserve price is met. So it may look like the item is going to sell for a few hundred dollars and you may think you have the winning bid, but it may be trumped by a reserve once the auction is completed.
5. Auctions have buyer premiums (and seller premiums)
Auctioneers make money from buyer (and seller) premiums. The premium may only be a few percent to 10-20%. The size the object also matters. Larger items tend to have smaller premiums. And if you buy through an online auction, then you will most likely be charged an “internet” premium of several percent. Make sure to read all the Terms and Conditions before placing a bid at an auction.
6. Auctions pass on credit card transactions fees to you
Since auctioneers are only go-betweens for buyers and sellers, they have no interest or intentions of paying the 2-3% credit card transaction fees. All those fees will come back on you in addition to any buyer’s premium and internet premiums.
7. Auctioneers talk fast
In person auctions can often be hard to understand. That’s just part of the way that auctioneers speak. Obviously, you get use to it, but I’ve been to auctions where I could not for the life in me understand what the auctioneer was saying. In fact, lots of bidding was going on by the old-time farmers, but I couldn’t even see the bids being made. Old timers will nod their heads or lift a finger and it can be a little intimidating jumping into the fray. My preference is to pay the internet premium and place my max bids online and then the bidding platform handles everything else. This also removes the emotions from the process so you don’t get carried away. Know what you want to spend and stick to it. Of course, when you place a max bid online, then an auctioneer will try to raise the price to hit your max bid so that’s always the danger of revealing your hand.
8. Auctions often run all day
When an auction has a lot of items to sell, it’s not uncommon for the bidding to start at 9am in the morning and go to late in the evening. You can literally lose your entire day waiting around for the item you want to buy to sell. This is particularly uncomfortable in Texas in the middle of the summer where most days are over 100 degrees (F). The alternative is to bid online (and pay the extra premium) so you can either watch it all day, receive notifications when your item is on the auction block, or place your max bid so you can walk away and see what happened the following day.
9. Auctions require pick-up and transport
Don’t forget that when you buy large equipment, you need to pick it up. Auction houses will often give you time to pick up an item, but you need to arrange for transport. There are always plenty of people around an auction house that will transport your equipment for $100-150 if it’s local. Just remember to factor that into the cost of the item when you decide to buy something if you don’t have a truck and trailer to get the equipment home.
10. Auctions sell junk
The last drawback to buying at an auction is that we may impulse buy something that we think we’re getting a good deal on, but then we discover it’s just a piece of junk and you’ve wasted your money. You may also purchase something that looks interesting but then realize that you can’t do anything with it so now you have junk laying around. My rule of thumb is this—if you don’t need anything, then don’t go. Then you won’t be tempted and you won’t waste any money.
- Machinery Pete’s 5 Tips for Buying Used Equipment
- TIPS AND ADVICE FOR BUYING A USED TRACTOR
- TIPS FOR BUYING A USED TRACTOR
- 9 tips for buying used
- [Video] How to buy a good used farm tractor. Great Information, tips and money saving advice! Buyer Beware!
- [Video] How to Find a Good Used Tractor (12 things to look for to help avoid getting hosed)
- Inspection tips: what to inspect before buying a used farm tractor
- 5 Simple Steps for Buying Used Farm Equipment
- BUYING AND SELLING USED FARM EQUIPMENT
- Tips For Buying Used Farm Equipment