- Seems like everyone in their dear old Daddy Doug
dAdDy dOuG
has an online car auction site these days.
They've got names like Bring A Trailer,
Rad For Sale, cars & bids,
and more where you can literally bid
on your car nerd, dream car from your phone.
But with it being so easy to drop your hard earned
Dogecoin on a car you haven't driven or seen in person,
are these sites the new hunting ground for scammers?
Some people seem to think so.
How safe is it to buy a car from these sites?
And why more of these auction sites popping up every day?
Today, we're going to look at the advent
of these new auction sites, how they work
and what to look out for as a buyer or seller.
- Big, thanks to Omaze for sponsoring this episode.
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- Uh, James?
- Oh I forgot about the flying ones.
- We should have had a helicopter next time.
- I have a helicopter.
- Come on Nolan, there's scientifically accurate
real looking dinosaurs out here.
- Oh, oh.
- I fell out Nolan, I fell out!
- So to understand what makes these new sites so different,
we first got to look at how buying a car
at auction used to work.
On the low end, there were estate sales,
police auctions, and public auctions.
These are auctions where the cars were
either owned by the entity holding the auction
or they were at least responsible for them.
On the day of the auction you could physically
inspect the car at the auction lot
and even start them up.
If they started, that is.
This was a place to try to get a good deal.
Maybe you could find diamond in the rough that no one
at the auction that particular day was interested in,
or at the very least you'd find something
simple and reliable that might be worth more
if you got your knucks a little greasy.
These types of auctions are relatively safe for the buyer.
Auctions sometimes even offer an auction guarantee:
a warranty on the drivetrain of the car.
And if something isn't quite what was promised
they might even have an arbitrator onsite to
reconcile any dispute between buyer and seller.
So while there are a few systems
in place that might put your mind at ease, the inventory
isn't exactly a bunch of rare sports cars
and you have to go all the way down to the actual auction
and stand all day in a building that doesn't have AC to keep
up with this many people
and you're not guaranteed to leave with anything good.
Unlike my dad who scored a Cherry 93 Dodge Spirit back
in 2000, we hit a lot of baseball practices in that bad boy.
Kinda ugly though.
On the whole other side of auctions, though,
there are the classic car auctions
and you've probably seen these
on TV before.
I'm talking Barrett-Jackson,
Mecum, Bonham's, Gooding & Company,
anything during Monterey car week.
These auctions are high end events where
every car is likely to sell for six, seven,
or even eight figure prices.
These auctions rarely have something as trivial
as a drivetrain warranty,
but you know what they do have? An appraiser.
someone whose job it is to inspect the car,
verify its authenticity, and set its valuation.
These companies put their reputation
on the line to sell a car.
So they make sure
that anything that crosses their auction block
is exactly what it says it is.
Or at least as close as they can verify.
But that's what buying a car in auction was for a long time.
Either super high-end collector cars
or bottom of the barrel.
For most people buying a car without test driving it
or being able to talk to the seller is a bit unnerving.
But if you knew how to play the game
and were smart with your money
and confident in your ability to assess a car
an auction was a good place to find a deal.
But there was a gap in the auction world.
A space somewhere between the six-figure classics
and high mileage clunkers that needed to be filled.
This is where our new auction sites come in.
And the biggest by far is Bring A Trailer.
When Bring A Trailer started in 2007,
it wasn't even an auction site.
It was just a blog that sent out a weekly email
noting interesting listings on eBay.
But as more and more people started subscribing,
sellers realize that having their car
in the Bring A Trailer email was great exposure
and wanting to start paying for placement in the blog.
Now there's over 400,000 users
and only half of them are lurkers like myself
scrolling during Zoom meetings.
- Well, if we take a look at views for last month
we can see from the trend line that it's headed
towards negative infinity.
I think it probably has something to do
with Nolan's haircut.
- Scrolling Bring A Trailer is like
scrolling through Instagram.
It's a curated assembly of cars that are interesting,
unique, and have a story.
With each listing you get a pretty detailed description
of the car along with dozens of professionally taken photos.
And it really draws you in, especially when you compare it
to scrolling used car listings
with a price listed as $1234.
And if that's not enough for you
they have a public comment section where
interested buyers ask questions about the cars and specs
and the seller will usually posts extra links
like a walk-around video or idling
and shifting all the stuff you might check
if you went to see the car in person.
But they're not the only site.
In 2020 alone, the 80's and 90's era car show
Radwood started their own auction site Rad For Sale
and YouTube legend Doug DeMuro
launched cars and bids.
Real quick, let's talk about how these sites
actually make money because they're not just websites.
They are businesses.
Auction sites generally keep the doors open one of two ways.
Charging the seller a small listing fee
a tactic even Craigslist employs.
And the more lucrative method of taking a small percent
of the final sale.
Bring A Trailer does cap this amount at $5,000.
But as a rule, the more car sells for all the better
for the site, which has some worrying implications
I'll talk about later.
Now you might think that a website full of desirable cars
that are being honestly represented is too good to be true.
And you wouldn't be alone.
Plenty of people can see the potential
for buyers to get scammed
when you look at how these websites work.
As I mentioned, Bring A Trailer didn't start out
as an auction site.
It was just a curated list
of cool things you can buy on eBay.
Kind of like thisiswhyimbroke.com.
It was in no way affiliated with the seller
and couldn't vouch for the legitimacy of the car.
Today, the site works in a kind of similar way.
Yes, they vet the car a bit and provide
as much info as possible, but there's no auction guarantee.
All sales are as is.
There's no official arbitrator
or appraiser to talk to you just see other users.
And as far as the actual transaction is concerned,
you're on your own.
Sites like Bring A Trailer, Rad For Sale, and cars and bids
are in no way responsible for the security
of the actual transaction
or its legitimacy.
So you'd go from scrolling a Pinterest board
of nice cars to all of a sudden having to wire money
to a dude in Michigan, just like you would
if you had bought the car in Craigslist.
Now I want to be clear here.
I don't think these sites have responsibility to do any more
than they're currently doing.
I do think it's a buyer's responsibility to
treat a purchase seriously and not assume
that things will be taken care of for you, just
because the site has a better UI than Facebook Marketplace.
But I get that people start to feel uneasy when
the pretty, well presented site turns
out to be very similar to the normal buying process
once you've actually won an auction.
It feels a bit like a bait and switch, I guess.
So much so that they think there's
some kind of scam going on.
Like the '55 Desoto they just paid for is
actually going to be a Geo Metro.
But to that I say, it's time for a reality check.
Thing about reality, it always gets checked.
Life's not fair!
(futuristic music playing)
Look, to get a car listed on any of these sites,
the seller has to go through the listing process.
Extensive photos are required,
as well as the records of the car.
And it's not just a checkbox list of questions.
These sites are run by enthusiasts like you and me
and a scam happening on their site would be as big
of an issue for them as it would be for the buyer.
So if a seller is uncommunicative or just a little shady
they're not likely to get their listing approved.
You've just been checked!
The truth is that these auction sites benefit
from the engagement of bidders.
Because people ask questions about the listed cars publicly.
If a user asks something, not disclosed, let's say a recall
the seller's answer is then visible to anyone else bidding.
It may not have been a question you thought to ask.
And now you know the answer.
And at the end of the day the winning bid is
just a promise to buy the car.
If you show up, and the car isn't what was advertised.
You're not legally obligated to buy it.
There is no bank lien on your house
if you backed out.
Sure, the seller might be mad.
And if you backed out without good reason
you would probably get banned from the site
but it's not like the feds are coming to your door.
So don't worry, there's no scam.
At least not the kind you're thinking of.
In July of 2020 an E30 M3 sold on Bring A Trailer
for a quarter of a million dollars.
Even though this particular one only had 8,000 miles on it,
many people agreed that that was an
insane price for this car.
After the auction had closed a few users wanted to
know more about this Richie Rich buyer.
And decided to run the VIN of the car
through services like Carfax
until they saw it change hands.
Six months later, the car still showed
the same number of owners.
Why would someone buy a car
for 250k and then never take ownership of it?
Well to answer that, we need to make a journey
to the speculation zone.
That's right, two bits this episode.
(mysterious music playing)
What if our BMW seller never intended to
sell their ultra low mileage M3?
But they had a second M3
he wanted to get rid of.
They listed the 8,000 mile one
and either created a second account or
had a friend bid to make sure they won it
at a stupidly high price.
Then riding the artificial hype created
by this high priced auction, sold their other M3
for 20 to 40k more than what they would have gotten before.
Before the 250k M3 sold, only one E30 M3 had ever sold
for over a hundred thousand dollars
in the history of Bring A Trailer in the nine months
since that sale, four more have sold for over a 100k.
Sounds a little like someone's gaming the system.
Now, admittedly, this sounds less like the speculation zone
and more like the conspiracy corner on my part.
And what's more likely is that the registration got delayed
because of COVID or the site wasn't up to date.
But it does illustrate a phenomenon
that many buyers are frustrated with.
In the normal world, this is known as the rising tide effect
but in the car world, it's now known
as the Bring A Trailer effect.
In ultra rare supercars,
the rising tide effect was easy to see.
One selling an auction changed
the valuation of all the others.
If a Ferrari 250 GTO sells an auction for 8.6 million
and you've got one of the other 36 in the world
you now know yours is worth about 8.6 million.
As they sell for more and more,
the others increase in value as well.
And today that same 250 GTO is expected to fetch
over $50 million in auction.
But now because the popularity of these auction sites
people are seeing more entry-level collector cars sell
for $10,000 and $20,000.
The same cars that were listed on Craigslist
for 4k, four years ago.
Does the car similar to yours
selling an auction for a high price affect your car's value?
Some people think it does.
In fact, some people are using auction results to
show their insurance companies that their car is worth more
and should therefore payout more if it got totaled.
But I don't think that collector's auctions
and used car sales are really in the same market.
Many people will try
and compare some used listing to an auction
they saw completely ignore spec, condition,
or maintenance records.
All things that would be checked
in the approval process by those sites.
Now you might not care about those things.
Things like mileage or maintenance records and that's fair
but there's a difference between it mattering to you,
the individual buyer, and it affecting the value of the car.
Like I said, these auction sites are run by enthusiasts
and it's a place for unique cars to be appreciated.
So naturally, that means people are more invested
in investing.
But I will admit that high prices on auction sites have led
to a few optimistic used car posts on social media.
No
low ballers,
I know
what I got.
Ha!
(fart sound effect)
I think the fear of the rising tide effect is legitimate.
But it can't be blamed
on auction sites because it's happened
with every generation of car that has come before.
As someone who is super into muscle cars,
it was heartbreaking as a teenager to see the rising prices
of Kudos and GTOs and Chevelles, because it felt like even
if I one day made more money by then
they would have gotten even more expensive
and I could never catch up.
And that's still true,
it's still true to this day.
Why does a rusty charger have to be 30 grand?
You're out of your mind
they drive like boats.
I want to drive the rusty boat, okay?
All cars appreciate and depreciate
at a different rate and scale.
But for the most part, they follow a similar parabola.
From the day they leave the lot
and go from new card used car.
They go down in value, the miles and years stack
on until eventually they begin to plateau out.
But then as there are less and less of them on the road,
the value begins to go up.
Sometimes it's because of nostalgia,
sometimes it's because the car becomes ironically cool.
And sometimes it's because the things that made the car good
in the first place are now desirable again.
But whatever it is, the car is only going to get rarer
because it's not going to get made again.
We saw this with the 60's muscle cars,
we saw it again with the 70's Porsches.
And now we're seeing it with 80's and 90's cars.
We just happened to be seeing it
through the sites like these.
What I really wanted to see was one
of these sites from the seller's point of view.
So I called up my friends at Rad For Sale to see
if they'd run us through the auction approval process.
Now, since none of my cars are
from the Rad era, we used Max's BMW.
We had Max give us all the info he would
as if he was actually selling the car.
He submitted over 40 Max quality photos,
a lot of sites like Rad For Sale,
actually have a list of angles
they want you to get.
So, you know, the postings gonna be uniform
and the customer gets a complete view of the car.
After submitting our listing,
a rep from Rad For Sale responded
in just a few hours saying that the listing was really good
but they actually wanted some pictures of the undercarriage
of the car, just so they can make sure it
wasn't rusting away from beneath the driver's seat.
That's kind of important.
They also came back with some recommendations
on what the reserve price should be, info on what parts
of the car were going to be the most desired,
and how to best market the car overall.
You know, these are real people looking
at these listings and making both sellers
and buyers have a positive experience.
And that goes across the board
with all these sites that we've talked about today
So I think I figured out why there are so many
of these auction sites popping up now.
People wanted a better private seller-buyer experience
than Craigslist or Facebook.
A place where people who are actually
into cars could sell cars.
And a place where people respected the fact
that we like to ask questions, know our specs
kick tires, and know a lot about what we're getting
before we get it.
While Bring A Trailer might be the big dog.
I like that we have smaller and more niche sites
like Rad For Sale and cars and bids and Hemmings auctions.
Because as a buyer
that means there's less people watching a single auction
and more chance you might get a good deal.
Seriously, check out those smaller ones.
Don't sleep on them.
That actually brings me back to the point I made earlier.
Remember that conspiracy theory I had
about the M3 prices rising?
Well, what also makes those prices rise is the user base.
Regardless of how a car appreciates or depreciates,
the more people you have bidding on an auction
the more likely it is
that someone will be willing to spend a lot more money.
But an auction only sells for slightly higher
than the second highest bidder is willing to pay.
So even with one high roller in the auction,
the price might not actually get that high.
With an even larger user base, though,
it's more likely that two or more people
with money to burn will get into a bidding war.
When those four E30 M3 sold, the user count
on Bring A Trailer was about half a million.
When that first one sold in early 2018,
the user count was way, way lower.
So is that an elaborate conspiracy
or just the growth of an audience?
If you've ever bought or sold a car at an auction,
let me know in the comments, was it a good experience?
Would you do it again?
If you liked this video, hit that like button
and it actually really does help us out.
You know, you know how the algorithm is.
Just it's magic.
If you want to see more of Max's car, check him out
on Instagram at @35mm_cars
Also follow Donut on Instagram and all social media
@donutmedia
Follow me @nolanjsykes
I'm posting a lot more of my photography lately.
Be kind and take care of each other,
I'll see you next time.
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