Written by Simone | 6th November 2019 | Updated 20 October 2022
For high-value objects, such as luxury items and classic cars, setting a reserve price can seem like the obvious course of action. At the same time, many people decide to sell without one. Why is that? What’s the thinking behind deciding to set a reserve price or? We took a look at how reserve price impacts selling prices in the classic car market and asked a few sellers as well as Expert in Automobilia and Motobilia, Jan-Bart Broertjes, about their experiences.
What is a ‘reserve price’?
A ‘reserve price’ is the hidden minimum price an object can be sold for in auction. If this amount is not met when the auction ends, the object will not be sold.The seller then has the option to revise the reserve price and resubmit the object for a new auction. To make an object more appealing to bidders, a reserve price can only be set for objects with an estimated value of €200 or more.
The reserve price serves as a safety net to help ensure that your object sells for the price you feel it deserves. While it may seem like the rational thing to do, there is a strong case for selling without one.
Reason 1: Guaranteed sale
One of the reasons people sell without a reserve price is the guarantee that the item will actually sell. But if you’re looking to make money fast, it’s better to go with no reserve price. “Of course selling with no reserve price is riskier than selling with a reserve price. But objects that do have one often don’t sell, so the turnover rate is much lower”, says Jos from Tuned Imports.
There are also some practicalities to consider when selling a car. “Cars take up a lot of space”, says Expert in Automobilia and Motobilia Jan-Bart Broertjes. “They require maintenance and you have to pay for tax and insurance. So sometimes it’s easy to put off. You want your car out of the way, and whatever it sells for is nice to have”.
Often selling without a reserve price leads to a better selling experience
“I can also imagine an item getting an extra boost when sold without a reserve price. The knowledge that the car will go, no matter what, might make the bidder want the car even more. With a reserve price, the car may not sell and still be available after the auction. So you have to get in on the action, otherwise you miss out”.
The reason so many objects with reserve prices don’t sell could be related to something called the endowment effect. This is a psychological finding that broadly means when something is in our possession, we estimate the value to be higher than if it were owned by someone else (Kahneman et al., 1991). This might be why bidders often deem reserve prices too high, while sellers feel it is simply what their items are worth.
Reason 2: More bidders, higher prices
“It’s quite surprising that so many people sell cars without a reserve price”, Jan-Bart says. “But I also know that a lot of people are looking at the average of what their items sell for, and if that’s positive, they’ll give selling without a reserve price a shot. Usually, the outcome is pretty much the same and quite often even better than comparable cars with a reserve price.”
The aim here is to increase your chances of selling your object for the best price. A welcome benefit of selling without a reserve price is that it attracts 76% more bidders on average. This opens up the possibility of a bidding war that might even end in the item selling for a higher price than estimated.
One of our sellers experienced just this: “[Selling without a reserve price] speaks to people’s imagination: people are engaged from their first bid. This isn’t the case with objects that have minimum prices, where a bidder could have the highest bid and still miss out. No reserve auctions capture people’s attention, making them more likely to take a leap of faith and place a bid.”
Artefacts are other objects often given reserve prices
Who sells without a reserve price?
For a person who sells cars, their viewpoint on selling without a reserve price will likely depend on how many cars they sell. The more cars they sell, the more likely they are to end up with a good result because they can spread their risk. A professional car dealer we’ve asked isn’t overly concerned when one car doesn’t sell for the expected price, for instance, as this can entice future buyers to bid.
“For us, it’s about the final result. A car that was sold below value is usually balanced by another that was sold for more than expected. A nice advantage is that sometimes bidders that scored a bargain will tell other people about it, which attracts new bidders to future auctions.”
Not everyone has multiple cars to make up for potential losses, as seller Wil van Buuren explains. “I’ve sold cars without a reserve price a couple of times because I found something else and needed the money quickly. Both times I sold them for less. Without a reserve price, [the car] gets more attention, but most potential buyers are just trying to get a bargain and drop out when the bidding gets more serious.”
Make an offer to the highest bidder
For those who simply prefer to sell with a reserve price, there is still a way to ensure that their object will sell. If the reserve price isn’t met in auction, sellers now have the option of making an offer to the highest bidder. This will allow you to sell your object quickly without having to resubmit it for auction.
Selling without a reserve price can be a perceived risk but the benefits often outweigh this
What’s the consensus?
There are many myths around selling with no reserve price, but data shows that there are often more benefits from selling without one.
In the end, it all depends on what your business priorities are. Selling without a reserve price helps you to sell quickly and continue to generate revenue. While there’s no way to predict how this can meet your business goals, items can often go for higher prices when bidders aren’t restricted by a reserve price.
The important thing to remember when determining your sales strategy is that you’re dealing with an auction, which has its fair share of surprises. Its full potential is only unleashed once there are no reserve prices to be seen.
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