George’s Corner: September 2011

I like auctions, but some companies don’t, because of all the fees involved. They want to sell equipment on their own. But selling through your business to individuals can often be fraught with pitfalls. Buying and selling used has many inherent risks. First, no matter what you say and put in writing, many buyers of used equipment come back to the sellers of used equipment and complain about the utility of the item even though it was sold “as is.” Buyers expect a retail establishment like a rental company to give a warranty regardless of the fine print that says there is none. Bad feelings can be the result. Or the seller has to rectify and spend time and money fixing a piece of used equipment because he or she feels obligated. So where is the total profit in selling used?

On the other hand, auctioned items are definitely final sales. It really is caveat emptor. You can often inspect vehicles and equipment prior to an auction. In some instances, you can start an engine or turn on an electric motor. But most of the time you just eyeball items and use your own judgment to determine their shape and worth. You often see two or three individuals from a company attending an auction because you need to take experience with you or be ready to face the consequences. Many times, bidders seek out older models of equipment for much-needed, hard-to-find parts. Even so, many bids are nothing more than a crap shoot.

When you use the services of an auction house, you are consigning your equipment to the auctioneer. No one really knows where the equipment came from in most cases. Don’t forget to remove your company labels and identification before shipping items to auction. It is acceptable and it is a must.

Auction houses can help you determine the market worth of your equipment. They can help advertise your products in local, provincial and national newspapers. In fact, auction houses can ensure maximum Internet exposure by posting auction dates, photos and details of products coming up for sale. And most auction houses have the names of thousands of potential buyers they can contact prior to the auction taking place.

The convenience of an auction service has a price. It is not uncommon for an auction house to retain a 10 per cent buyer’s premium (or even more) as part of its standard selling terms. Vehicles and trailers are subject to a PPSA (title) search prior to and after the sale to protect all parties, and this has a cost of about $60. As well, there are vehicle transfer fees. Lots of equipment selling over $1,000 is subject to additional administrative and handling fees averaging around two per cent, while lots selling under $1,000 is subject to a straight commission of 25 per cent in some cases. And don’t forget to add the dreaded HST. It is imperative you take these auction terms into consideration before consigning or buying.

Auction houses have many built-in rules to protect bidders from potentially unscrupulous consignors who may try to bid up the price of their items during an auction. I have heard of 20 per cent buy-back penalties for such consignors, and they are usually banned from making any further consignments.

Remember to bring your own stake truck or 53-foot reefer to take back all that treasure trove of items you claimed at the auction. Otherwise, you pay for shipping or even storage if you can’t take it with you immediately. And have your credit account set up in advance or bring that old shopping bag filled with cold hard cash if you are going to bid and win.

Once an auction is over, the consignee gets a rapid accounting of what was sold or not and at what price and the final cheque is usually issued in under three weeks.

At the end of the day, the auction process can provide a much-needed business channel for buying and selling. And quite frankly it can be fun and profitable at the same time. I love hearing the auctioneer bellow, “Sold to the man in the black hat!”

George A. Olah has more than 35 years of experience in the training, marketing, and renting of commercial appliances and equipment. He is presently the general manager of operations at ABCO Equipment & Supplies, a family-owned rental company located in Weston, Ont.