Part I: The Price of Risk
By Dane Hulse | Auto Auction Review
Two words every wholesale dealer knows: AS-IS.
I’ve spent most of my career buying and selling wholesale vehicles. I’ve made money, lost money, and occasionally wondered what possessed me to buy a particular vehicle in the first place.
That’s wholesale.
But when does accepting the risk of a vehicle become accepting responsibility for a problem somebody else already knew existed?
BUYERS AREN’T INNOCENT BYSTANDERS
A Ford Edge with a transmission shudder? Imagine that.
A Ram 1500 with a Hemi tick? Start pricing lifters.
A Kia with a misfire? Needs a motor. Trust me.
Experienced buyers know certain vehicles have weaknesses. We factor those risks into our bids.
There’s a price in my head where I’ve already allowed for significant repairs. Buy a $20,000 MMR vehicle for $15,000, and I’m approaching it differently than if I paid $19,500.
At the right price, I may not particularly care what’s wrong with it. And if I guessed wrong? Nobody made me buy it.
NOW, ABOUT THE SELLER
Let’s not kid ourselves. Sellers aren’t going to volunteer every mechanical problem they know about. What they’re required to disclose depends on the applicable rules and circumstances.
But silence and misrepresentation aren’t the same thing.
Not volunteering that a transmission slips is one thing. Telling a buyer it’s fine when you know otherwise is another. Deliberately misleading a buyer crosses a line, AS-IS or not.
Pro tip: If you’ve got questions about a vehicle, ask before it runs. Catch me beforehand, and I’ll tell you what I know.
But don’t wait until I’m repping the car on the auction stand to start asking about the transmission. I assume you’ve either inspected the vehicle or you’re comfortable taking it AS-IS. I’m not conducting a mechanical Q&A while the bidding is underway.
DOES PRICE MATTER?
I think so.
Consider two sellers with identical vehicles needing transmissions.
One hopes to get full market money without anyone discovering the problem. The other is willing to sell $5,000 behind MMR because he knows the vehicle needs work.
I see a difference in good faith.
A discount doesn’t excuse a required disclosure, and the buyer may not know why the vehicle is cheap. But price matters when evaluating risk.
If I’ve bought a vehicle cheaply enough to absorb a major repair, I can live with it. Pay nearly full market money for the same problem? Different story.
AS-IS means I’m accepting the risk of buying a used vehicle. It doesn’t mean a seller gets a free pass to misrepresent what he’s selling.
But it also doesn’t mean I get to complain every time a cheap car needs an expensive repair.
The price I pay determines how much risk I’m willing to accept. What the seller knows and represents determines whether we’re dealing in good faith.
Next week, Part II: Online auction platforms inspect vehicles, publish condition reports, and collect fees from buyers and sellers. What responsibility comes with that service when an inspection misses a serious defect?