Bidding Directories
If you're in the market for a new car, chances are you've seen sites like CarGurus and CarMax. But have you ever heard of bidding directories? These companies offer a way to sell your car online to multiple interested parties. How it works? Well, the seller tells their story, what they want for their car and when the listing expires. Furthermore, they can set a reserve price or an auto-accept option that allows them to automatically accept any offer that meets or exceeds the listed selling price.
When you're looking for a place to buy or sell a car, you have many options. Many people have used eBay Motors, AutoTrader.com and Craigslist. But what about bidding authorities? There are numerous companies that provide this service, including:
Reverse Auctions
The owner of a car (call it Car) puts the car on the market and sets some reserve price. If the bidding goes over that price, then the seller gets some percentage of the extra bids as profit. The company facilitating this process keeps some small percentage of those profits as their fee.
Now Car is up for sale and you've decided to take the plunge. You're worried about selling on eBay and selling to a stranger, but you're ready for the challenge. How would you do it? What about selling a car to a stranger on Craigslist? Or how about selling it to someone that doesn't live in your state? In order to find out, I looked at two bidding directories: AutoTrader.com's website (which offers services nationwide) and CarGurus (which only offers services in certain parts of the country.)
On AutoTrader.com, there are three options: sell locally , sell it now, or list it for sale nationally . You can set your own auto-accept price or you can use Car's online valuation system. If you choose the latter, then AutoTrader does the rest for you. From there, you will either have to wait for a buyer to present an offer (pro-rated) or AutoTrader will accept that buyer at the auto-accept price (no pro-rating). Once this is over with, AutoTrader will mail a form to Car stating that the transaction has been finalized and keep their fee of 4% for all transactions done on their website.
On the other hand, CarGurus has many more options such as selling locally , selling it now , list nationally (which refers to selling nationwide only), and list internationally . In the former three, you can set your own reserve price or have it calculated automatically. In the last two, there is no reserve price and the sale should go smoothly if you agree to the terms of services.
CarGurus takes a different approach to the bidding directory model. They charge a flat fee of $899 for 12 months of their service. This means that you get fee protection (meaning they will refund your money if they don't sell your car) and 60 days credit towards their service as well as an extra week on your holding period for free. Furthermore, CarGurus will make sure that there is no bidding under reserve . They guarantee that the car will sell for at least the reserve price (which is usually set as $0) so that none of your money is wasted on listing fees. After your auction ends, CarGurus will take their place in the escrow business and handle all communication with the buyer and seller.
CarGurus has many benefits over other companies in this market. They offer you a service guarantee to make sure you get your money back should they not find a buyer within 60 days. They also allow you to sign up for free, which is something that AutoTrader doesn't do until after you've sold your car. Furthermore, CarGurus has plenty of advantages over eBay Motors as well. For example, CarGurus will accept any legitimate offer so long as the offer meets or exceeds the reserve price. If you put your car on AutoTrader and set a reserve price, then you are stuck with that price unless it sells for $0.
We've looked at AutoTrader's and CarGurus's websites, but how does this translate to actual sales?
Let's go back to our car for sale: a 1998 BMW 325i with 75,000 miles. Let's also assume that the reserve is $4,000 and we decide to set our auto-accept rate as 80% of top bid. We'll call this car Car1.
The first bid is in at $4,100 and the sale is on! But what about our fees? Well, CarGurus charges a flat fee of $899 for 12 months of service so that's $80. The 80% of the top bid makes it $3,520 so we find that 20% of the initial offer is $640. This makes our total fees during this transaction $790 (since AutoTrader takes 4%).
Let's move onto Car2: a 2008 Mercedes Benz CLK550 with 25,000 miles. The reserve price is set at $12,000 and we are using the same rate as Car1 ($3,520).
So what are the fees? CarGurus charges $799 for an initial 6 months of service and $799 for another 6 months if they don't sell the car. This makes our total fee at $1,598. The 80% of top bid means that we have to pay $10,328. We find 20% of the offer ($2,624) and add it to our total. This brings us to a total fee of $3,132 for this transaction!
For both cars sold, CarGurus was more money friendly than AutoTrader because of the flat rate fee and it's guaranteed sale .
What about the other bidders? Let's say that you're not the highest bidder but you still want to buy the car. On CarGurus, they have a feature called Best Value where they find the most cost-effective buyer for the seller. You can set your bid at any price as long as it meets or exceeds the reserve price. Whoever offers to pay that price plus 20% wins the auction. For example, let's say that there is a $20,000 car with a $10,000 reserve price up for sale on AutoTrader.
Conclusion
I feel that the bidding directory model is a pretty solid way to buy or sell a car. It's reliable , secure, and convenient (no waiting on your phone for an offer). You can feel at ease knowing that you will get your money back no matter what happens.
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Bidding Directories