Some RV dealers in Florida and the Midwest have lost tens and sometimes hundreds of thousands of dollars over the past two years by using auction companies that appeared to promise them a guaranteed price for their units.
According to an article in RV Executive Today Online, dealers have filed complaints with the Better Business Bureau and state attorneys general about small pop-up auction houses that offered “invoice protection plans” that supposedly guaranteed how much the dealers would receive for their units, regardless of how much the units actually sold for at auction.
The dealers say they were told the auctioneers would put reserves on their units and that they wouldn’t be sold unless the reserves were met. Instead, the units were sold in “absolute” auctions in which they simply went to the highest bidder, frequently at prices far below their agreed-upon value. And, under the formulas used in the “invoice protection plan,” the so-called cash protection was less than the amount the dealers lost.
One dealer recently stood to lose almost $100,000. The dealer had supplied the auction with four units whose combined invoices were given a value of $200,000. The contract stated that “If the seller’s NET check fails to meet or exceed 100% of the TOTAL VALUE of $200,000 … the auction agrees to provide an incentive of up to $60,000 for protection per its Asset Assurance Plan’s terms of service.”
The units failed to reach their total value at auction, selling for only 45% of their value, or $90,000. And under the asset assurance plan’s formula, the dealer was entitled to only $5,000, not the expected $60,000. With an attorney’s help, the dealer was able to unwind the transaction, but it cost $25,000 in legal fees and shipping to get the units back.
The dealer, an RVDA member who asked not to be named, says the company never explained what it meant by “absolute” selling terms, or that the asset protection money was based on selling price, not value. “They’re very good at persuading you,” he says. “They talk in dealer lingo. They sound like dealers. Part of the temptation is that they approve units you didn’t expect them to approve. The icing on the cake is the asset assurance.”
He’s spoken with two other dealers who had similar experiences; one of them had lost close to $100,000 “and it turned out to be the same people operating under a different name.”
In fact, several small popup auction companies offering similar “asset security plans” have been taken to court during the past two years in Tennessee, Missouri, Georgia, and Kentucky. It appears that some of the owners may be involved in more than one operation. When their business goes bankrupt or is taken to court, they pull up stakes and move to another location.
Dealers should be wary of any auction house that offers a guaranteed payment and should read the contract closely before signing.
“It’s embarrassing,” says the dealer. “We just totally got hosed. Every single dealer I talked with cannot believe they allowed this to happen, because they’re smart enough to know better. I really wouldn’t want to see any other dealer go through this.”