Motor Vehicle Auctions

Car Dealership pricing – market forces

Demand Curve

There is typically only a small price margin that can be negotiated at a dealership

Supply Curve

Shortage - under supply

Surplus – over supply

Profit for Car Dealers

• Sale price – Costs = Profit• What type of costs would car dealers have?– Wages– Site rental– Lighting– Security– Repairs– Detailing

• The cost of a car just sitting in a dealership is about $100 a day

VendorPrivate Buyers

and

DealersAucti

onee

r

Insurance

Finance

Car Auction Process

Auction Markets are Fluid

• The auctioneer will start at a certain price• Bids commence • There is interaction between the vendor and

potential buyers• If the reserve is reached the car is available for sale• The highest bidder buys the car, pays for the car

and takes it home that day• Why would the price for identical cars be different

on the same day?

How auctions work ...

X

If there are a number of similar cars to be auctioned, the first car auctioned in a specific category is usually the best vehicle with the most features and attracts the highest price

XX

X

Subsequent cars .. Generally have less features and attract lower bids

If bidders do not reach the reserve price set by the vendor, the car is “passed in” and they have an opportunity to negotiate to reach the reserve price

Auctions generally have finite supply that is all available for sale at a reserve price

Demand Curve

Shortage - under supply

Surplus – over supply

Due to restricted supply, a number of buyers may have negotiate through bidding

Reserve Price

What are some key differences between car dealers and auctions

Car Dealer Auctions

Vehicles stocked

Colour Range

Ability to test drive and inspect

Warranty

Access to buyer after transaction

Car dealers will stock a range of vehicles

Only stock a limited range and finite supply

Generally all colours are stocked

Colours are generally limited to saleable colours eg white and silver

Yes

Guaranteed

Available

No – can visually inspect and start engine at auction

Will honour balance of factory warranty otherwise no buyer protection

Need to find independent servicing and repair company

What does this mean?

Let the buyer beware ....

Your investigation

1. You need to complete all the details in table 2 from the auction

2. Find similar cars (in terms of make and kms) and using internet research find prices in the dealers market

3. Compare and identify similarities and differences

Your Press Release Focus (refer to task sheet)

What determines the prices of second hand motor vehicles?

The sub questions you need to answer are1. What is the average price of the car types you saw at action?2. What is the average price of the same car types in the dealers

market?3. How do the prices between the two markets compare?4. What factors determine prices (you need 5)? Why is there a

difference?

Refer to your handout page 3 for some internet sites that might help you out

Example of a Press Release

Toyota• http://www.pressroom.com.au/press_release

_detail.asp?clientID=2&prID=4091&navSectionID=2

Cadbury• http://www.cadburyinvestors.com/cadbury_ir

/press_releases/2010press/2010-02-03/

Press Release Format• FOR IMMEDIATE RELEASE ON [DATE]

• Headline: The headline is the most important part of a press release and you should give it careful consideration. Try to grab attention. Go for clarity. Be direct.

• Introduction: State the reason(s) why the press release is newsworthy. Reinforce the headline.

• Your body text: should include information about your inquiry. Ensure you answer the focus question and sub questions. Use short, succinct paragraphs

• Credibility: Include reputable quotes, in-text referencing and supporting graphs

• Your Contact Details: Include Name, Email, Phone etc

• - ENDS-

What to hand in

• Title Page• Press Release• APA Reference list• Your Review – See back of task sheet• Criteria Sheet