Silver lining of economic downturn
The uncertain financial
upside to the
gloomy economic
One
conditions prevail-
ing is that it is a
buyer's market for
motorists looking
to buy a new car at auction. Top-
end models have become a regular
feature at auctions as repossessions
soar.
Merlin Car Auctions, part of the
Merlin Motor Group, has built an
auction facility on a 15-acre site off
the Mmotorway in response to
7
market demand. It is ploughing €20
million into the project, which will
be completed by the end of the year.
According to David Byrne,
managing director of Merlin Car
Auctions, car repossessions have in-
creased by between 45 per cent to 50
per cent since the start of the year.
Byrne said Merlin jvas the only
car auction house in the country
that was actively disposing of assets
on behalf of finance institutions.
The company's clients include
Bank of Scotland Ireland, GE
Money, Permanent TSB, Bank of
Ireland Finance, AIB Finance, An
Garda Siochana, the Criminal As-
sets Bureau and AXA Insurance.
Merlin holds weekly auctions on
Wednesday evenings and Saturday
mornings. "We act as agents on be-
half of the banks to assign third-
party collection agents to repossess
and collect vehicles around Ire-
land," said Byrne.
"These collection agents are
carefully screened and adhere to a
strict set of guidelines from our-
selves and the finance houses. Re-
possession and collection is 70 per
cent pre-arranged. We don't deal di-
rectly with people or businesses
whose cars are being repossessed."
Merlin Car Auctions completes
an engineer's report on each vehicle
and then prepares and presents the
vehicles for public auction with the
aim of obtaining the best possible
open market price on the day.
"Our primary concern is to ob-
tain the maximum we can for the
banks," said Byrne. "In some cases,
the shortfall -
the difference be-
tween the sale price and loan settle-
ment - is requested from the
customer."
Byrne said that there had been a
considerable increase in business so
far this year, as job losses in the con-
struction industry continue to rise.
"Some subcontractors and con-
climate means there are bargains
tractors have declared bankruptcy
or have gone into liquidation. The
banks would then either repossess
the company's assets or the com-
pany directors would voluntarily
surrender the vehicles," he said.
The rising cost of living in Ire-
land has added to the problems
faced by many households as the
downturn takes hold. "Usually, the
first thing a customer will do is to
try to liquidate some assets. Their
car is usually the first [asset to go],"
said Byrne
"Under the Consumer Credit
Act, the customer, if in financial dif-
ficulty, has the legal right to surren-
der the vehicle. People who have lost
their jobs, yet continue to hold their
car even when they fail to make re-
payments, will have a repossession
order placed on their vehicle and,
in turn, the agent will look for the
car."
According to Byrne, there has
been a 145 per cent increase in the
number of commercial vehicles re-
possessed or surrendered volunta-
rily since the start of the year,
leading to an influx of fleet vehicles
to the market.
"Companies like Fiat Ireland
might put 500 cars out on hire with
a rental company or a sister com-
pany like Merlin Car Rental," he
said.
"During peak times, such as Sep-
tember, when the holiday season is
over, those cars need to be disposed
of. Because the second-hand used
car market has changed so much
over the last six months, some of
the fleet companies have placed a
higher dependency on auctions to
sell their cars.
"Because we sell the assets at
trade price, the value of used cars
continues to decrease. Therefore,
now more than ever before, it is the
best time to buy at auction.
The number of motorists opting
to buy at auction has increased sub-
stantially since the start of the year,
in response to changing market dy-
namics, Byrne said.
"In June 2006, seven per cent of
our sales were accounted for by pri-
vate individuals. Today, more than
40 per cent of all our buyers are pri-
vate," he said.
"The benefit of buying at auction
for a trader is the huge amount of
06, 07 and 08 vehicles coming back,
which have to be sold. People are
to be had, writes Colette Sheridan
paying trade price for the same ve-
hicle, with the same manufacturer's
warranty, as they would get in a re-
tail garage."
While the high cost of finance ac-
counts for some changes in the car
market, Byrne said the perceived
impact of the new CO2-based VRT
system, introduced from July 1, also
had a part to play.
"Sales in April, May and June
were slower than in previous years
in anticipation of July 1, but the im-
pact of that wasn't as severe as peo-
ple thought it would be," he said.
"People thought there would be a
huge increase in VRTand a surge in
both the used car market and the
new car market. What actually hap-
pened was that there was a slow
growth in July.
"With the exception of ourselves,
and another couple of garages in the
retail sector, a lot of garages aren't
selling many cars at all. A lot of gar-
ages have, in a way, written off the
year. But, from the buyers' perspec-
tive, garages have hugely decreased
their prices to remain competitive."
Merlin Car Auctions recently
launched Merlin Car Swap, an in-
itiative which allows customers to
set the value of their existing car
against the price of the model they
which to purchase at auction, using
a voucher system.
"This applies both ways. If a cus-
tomer is having difficulty with a
newer model and its repayments,
we will downgrade cars," said By-
rne.
"For example, if they are swap-
ping an 07 Opel Vectra, and wish to
buy an 01 Ford Focus, we will issue
them the new car and the difference
in cash back. We introduced this in-
itiative after identifying a gap in the
market whereby in a slowing econo-
my, consumers wish to swap down-
wards."
The team at Merlin Car Auctions

Merlin Car Auctions: the recession means that top-end models are becoming a regular feature at auctions as repossessions soar