Beginner

Regarding auction formats

There are three types of auto auctions. The first is the "live auction," or “online auction” where bidders compete in real time on site as well as online in real time. The second is the "tender auction," where bidders submit their bids privately in response to a pre-set price, and the results are announced later. The third is “internet only” auctions. These are auctions that you can not visit and can only view online. While online live auctions have become the mainstream in modern times, each auction format has its advantages and disadvantages. It is important to understand these differences in order to choose the auction format that best suits your needs.

Live Auctions

Live auctions are the traditional format that comes to mind when people think of auctions. Buyers gather at the venue to bid in real time against other participants, with the vehicle going to the highest bidder. The positive input of potentially raising prices through the internet led to the online live auction. Sellers wanted the highest possible sale price.

In Japan, vehicle transactions through auctions developed alongside postwar economic recovery, beginning in the 1950s. Initially, transactions were primarily between dealers, but in the 1980s, large-scale auction houses such as USS (Universal Solution Service) emerged. This allowed buyers to bid on numerous vehicles at a single venue without needing to travel to multiple auction sites.

At large auction houses like USS, thousands of vehicles are listed in a single day, demanding an efficient bidding process. Buyers use individual terminals to place bids in real time, with instant results displayed via the "live auction system." Furthermore, with 10 to 15 lanes of auctions running simultaneously, advanced skills are required to bid on multiple vehicles at once. Each vehicle is auctioned off in roughly 30 seconds, making proficient bidding techniques a key characteristic of this format.

Advantages of Live Auctions

• Direct Vehicle Inspection

Buyers can inspect the vehicle in person at the venue, allowing them to check details like small scratches or the condition of the engine—things that are difficult to assess online.
*At Provide Cars, you can request to have Shitami service (Third party Inspection) completed, this will provide you with a non-biased review of the vehicle.

• Real-time Results

After placing a bid, the result is known immediately, allowing buyers to move on to the next step without delay.

• Excitement of Competition

Bidding directly against other buyers creates a dynamic and thrilling experience, especially when competing for rare and valuable vehicles.

• Actual Market Value

Allowing the auction to decide the final price is advantageous to both the seller and the buyer. The seller gets to see what his car is actually worth (he may want to sell similar vehicles). The buyer is allowed to go one bid higher than the competition allowing all participants to be relatively content at the outcome (content in terms of the car being too expensive for the competition rather than missing out).

Disadvantages of Live Auctions

• Time and Cost of Travel

If the buyer wants to view the vehicle: it is necessary to travel to the auction venue, which can be time-consuming and costly, especially for nationwide auctions.

• Intensified Competition

Since bidding occurs in real time against other buyers, competition can become fierce, leading to bids that exceed expectations. Bargains are hard to find.

• Reliance on the auctions inspection

As auctions spread out over the country can not be attended by many of the participants, reliance falls on the auctions inspection (auction sheet). Some auctions emerge with a better reputation than others.

Tender Auctions

A tender auction, also known as a sealed bid auction, is a type of auction where the bid amounts from other participants are not visible. It is primarily used for vehicle transactions and high-value goods, where each bidder submits an individual bid rather than participating in open bidding. This method is widely used in corporate procurement processes and large government contracts, and its history traces back to government tenders in medieval Europe. In modern times, it is utilized as a means of promoting fair competition and ensuring reasonable prices.

In a tender auction, since buyers cannot see the actions of others, they must determine their bid amount based on their intuition and market research. For example, if one buyer bids 1 million yen and the second highest bid is 600,000 yen, the buyer will pay the full 1 million yen. Thus, determining the bid amount involves a significant psychological element, and careful research and experience are required to avoid overbidding.

Examples of Tender Auctions

There have been instances in Japan where a buyer placed a high bid on a vehicle they believed to be valuable, only to find that few others participated in the auction. In this case, the buyer ended up purchasing the car at an unexpectedly high price, known as "overbidding." Conversely, there are many successful cases where buyers acquired rare vehicles at prices lower than market value. This "gamble" is part of the appeal of tender auctions.

Advantages of Tender Auctions

• Avoiding Excessive Competition

Unlike live auctions, the bid amounts of other participants are not visible, preventing excessive competition. For buyers confident in their understanding of market prices, this format can create a favorable situation.

• Remote Participation

There is no need to physically attend the auction, allowing bids to be placed from anywhere, either online or offline. This is a convenient option for buyers around the world.

• Calm Price Setting

Since there is no real-time pressure, buyers can take their time to research the vehicle’s value and market price, allowing them to place bids at an optimal price.

• Good for the bulk buyer

For someone who wants as many “cheap” vehicles as possible, the tender auctions are beneficial. They can put lower than market bids on as many vehicles as they like.

Disadvantages of Tender Auctions

• Lack of Transparency Regarding Other Bidders

Since the bid amounts of other participants are unknown, there is a risk of offering a price higher than the market value. As a result, there is a possibility of overbidding and paying an excessively high price.

• No Immediate Results

The results are not known immediately, and bidders must wait after submitting their bids. This can be a drawback for buyers who prefer to know the outcome in real time.

• Difficulty in Determining the Fair Price

Without a precise understanding of market trends and the vehicle's condition, it can be challenging to determine the appropriate bid amount, requiring careful research.

• Difficulty buying a car you “want”

If you MUST buy a certain vehicle, you have no choice but to put a tender at or slightly above the market price. This may be way over the competition but the risk of not buying the vehicle prevents you from putting a cheap price on that vehicle.

• If you only want one car.

If there are 10 Nissan Notes, that are all in a condition that you would be happy to bid on, but you only want one car, you can only bid on one of the 10. Whereas in a live auction you can bid on the remaining 9 if you are beaten on the first, and the remaining 8 if you are beaten again, this is not possible in a tender auction. You have one chance to bid on one out of the 10.

Tender auctions can be highly effective for buyers who are well-versed in market prices. Although it requires more careful research and preparation than other formats, there is a greater possibility of achieving a cost-effective purchase. By skillfully utilizing this format, there is also a good chance of discovering unexpected bargains.

Online Auctions

Online auctions rapidly developed in the 1990s with the spread of the internet. Since the establishment of eBay in 1995, the concept has expanded to general consumers and later permeated specialized fields such as vehicle transactions. In Japan, auction houses like USS and TAA began utilizing the internet in the early 2000s, establishing online platforms that allow buyers from all over the world to participate. The greatest advantage of online auctions is the ability to participate in real time and bid from anywhere, regardless of physical distance.

However, in online auctions, internet connection quality can influence the outcome. Buyers close to the auctions bidding online may have a speed advantage over those bidding from the other end of the country. This has led to interesting discussions about "lag" or time delay affecting the results. Additionally, some vehicles may become highly contested in auctions, with dozens of buyers driving up the price of a single vehicle. This fierce competition is a unique phenomenon of online auctions, offering the thrill of watching prices rise in real time.

Advantages of Online Auctions

• Accessible from Anywhere

As long as there is an internet connection, online auctions allow participation from anywhere in Japan, regardless of physical location. This expands the market, enabling not only buyers within a certain city of Japan but also from the whole country.

• Wide Selection of Vehicles

Since buyers can access multiple auction houses simultaneously, they have an extensive range of vehicles to choose from. For instance, Japan's major auction houses like USS, TAA, and CAA are all connected online, offering tens of thousands of vehicles for auction every week.

• Convenient Bidding

There is no need to physically attend the auction venue, making it easy to place bids, which is highly convenient for busy buyers. The bidding system offers an easy-to-use interface, allowing anyone to participate with minimal effort.

Disadvantages of Online Auctions

• Inability to Inspect Vehicles in Person

The biggest disadvantage is that you cannot physically inspect the vehicle. Since you have to rely on photos and auction sheet information, it may be difficult to fully grasp the vehicle's detailed condition. At times the third party inspection and extra photos become crucial for correct decisions on price and whether or not to bid.

• Dependence on Internet Connection

Online auctions rely on internet connectivity, so if your connection is slow, it could affect your bidding timing. In real-time bidding, time lags may occur, preventing you from placing bids at your desired price.

• Intensified Competition

Since buyers from all over Japan can participate, competition for certain vehicles can become more intense. As a result, prices may rise higher than expected, and there is a risk that inexperienced buyers may win bids at unexpectedly high prices. Mistakes also occur, expensively!

Online auctions have had a significant impact on Japan's used car market due to their convenience and ease of global access. They are particularly attractive to overseas buyers, but strategy is essential when bidding. Additionally, paying attention to technical aspects such as reading auction sheets and ensuring a stable internet connection is key to success.

Points to Consider When Participating in Online Auctions

When participating in an online auction, it is crucial to understand how to read auction sheets. Since the vehicle cannot be inspected in person, it is essential to accurately interpret the information on the auction sheet, carefully checking details such as the vehicle’s evaluation, accident history, and repaired areas. In particular, Japanese used car auctions provide highly detailed evaluation sheets, and the ability to read these properly can determine whether or not you get a good vehicle. Added to this is the reputation of the auction. Some auction houses do a better job of evaluation than others. At Provide Cars we regularly use a third party to give us extra photos as well as an honest appraisal of a vehicle. This is one of our services.

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