In these harsh economic times, it is in everyone's best interest to try to save as much money as possible. One of the places you may try to cut back is when buying nonessential items. One increasingly popular way to save funds is buying on the auction market. The auction market is a very good way to save money on the items you want, if you know the tricks. This article will briefly explain how auction market works and how to get the most bang for your bid. Ebay and Quibids are some of the largest retail and penny auction sites, respectively.

How the Auction Market Works
Retail Auction
The online auction market works very similar to the live auction market. You view an item you want and place a bid on it. If your bid wins, then you win the item. Just like the live auction market, a bid is a promise to buy the item; if your bid wins, then you have to buy the item. Only in certain cases will you be able to retract a bid. In certain cases, there will be an option to "Buy It Now" as well. What this means is that you can opt to avoid the bidding process entirely and buy the item outright for a predetermined price. Once an item has been won, you go through the steps to pay and have your item shipped.

Penny Auction
A new trend in the auction market is the Penny Auction. Gaining steam in 2011 with the premise of saving the buyer the most money possible when buying typically high-priced items, several penny auction sites have popped up and have been peoples' go-to place for getting typically high-priced items for cheap. How the penny auction works is you buy a certain amount of bids for a flat rate (the bids are worth around 60 cents), which are used to try to buy items. Every time you bid on an item, a bid is removed from your account and a timer pops up. If the timer reaches zero, then you have won the item. There have been cases of bidders winning items for up to 97% off the retail price. The danger is that there are others bidding on the items as well.

How to Beat the Auction Market
Wait Until the Last Second
When it comes to online bidding, your best bet is waiting until the last second. Waiting until the last second of a bid will save you both time and money. When you wait until the last moment to make a bid, you avoid driving the price up by making early bids, which will cause the other potential buyers to make higher bids. By keeping the bid amount low, you will end up paying a higher price, and it will also save you the stress of having to constantly watch the item to see if you've been outbid.

When it comes to penny auction sites, the same rule applies, but you should be more careful when you choose a bid. Remember that your bids on penny auction sites cost money, around 60 cents each. Now one bid may not seem like much, but you could very easily get into a bidding war, spend a significant amount of money on bids and still have to pay for the item.

What this means is that if you see an item such as an iPad, and the current price is $2, you should probably hold off on bidding. Reason being is that more than likely someone else is going to bid on that, because the price is that attractive. This trend will continue until you get into a price range where the savings are no longer astronomical and people will drop out, this is when you should bid.

Set Price Limits for Yourself
While the aim is to try and get the item for less than the retail price, there comes a certain time where the amount that you would have saved will not be worth it. If you get to the point where you would only save $30 on a $600 item, then it's probably not worth bidding on. If you've reached that point in the bidding process, then you would be better off buying the item for the retail price, because when you factor in things such as taxes and shipping costs, you might end up paying the same price and having to wait, as opposed to getting your item instantly. You should always be in the mindset that another deal will come along eventually, and rushing into a buy is always the wrong thing to do.

The Bottom Line
The online auction market is a great place for you to grab items for prices that would be considered steals. However, this is only possible if you make careful decisions in regards to bidding. Approach it like you would any situation where you are typically frugal, weigh your options and think about the pros and cons before you hit that bid button. Remember, a bid is essentially a promise to buy.

Related Articles
  1. Savings

    Passing Down Values and Money to the Next Generation

    Amassing wealth to pass down to your kids is great unless your values don't come with it. A priceless gift is teaching them to be financially responsible.
  2. Budgeting

    How to Save Money on Your Disney Vacation

    Understand why Disney Parks are attractive vacation destinations and why they are expensive. Learn five money-saving tips for Disney vacations.
  3. Budgeting

    Top 7 Money Saving Tips for Eating Out

    Discover seven money-saving options available to consumers who are looking to partake in the luxury of dining out while cutting down on cost.
  4. Insurance

    4 Ways to Find Good Health Insurance

    Follow these 4 steps to get the best coverage at the most affordable price.
  5. Savings

    Top 7 Money Saving Tips For Buying Groceries

    Understand why it benefits grocery shoppers to shop intelligently with money-saving tips, such as staying away from prepared foods and looking for coupons.
  6. Professionals

    How to Separate Emotions from Investing Decisions

    With stock market volatility, financial advisors are finding they're doing more hand-holding to help clients navigate turmoil.
  7. Home & Auto

    Hiring a Contractor vs. DIY: Cost – Benefits

    When you want to change something about your home, the first question to ask yourself is whether it’s more cost-effective to DIY or hire a professional.
  8. Insurance

    The Smart Way to Shop for Travel Insurance

    Trip-related coverage can afford peace of mind, but be wary of buying more than you need.
  9. Home & Auto

    The Best (and Worst) Times to Buy a Car

    Timing your purchase – along with some attention to the features you need – can save you thousands on your new wheels.
  10. Savings

    The Best Time to Book a Hotel for Vacations

    Knowing when to book your hotel room can help your vacation budget. Since there are lots of variables, it pays to do your homework to get the best deal.
  1. How does the trust maker transfer funds into a revocable trust?

    Once a revocable trust is created, a trust maker transfers funds or property into the trust by including them in a list with ... Read Full Answer >>
  2. How is marginal propensity to save calculated?

    Marginal propensity to save is used in Keynesian macroeconomics to quantify the relationship between changes in income and ... Read Full Answer >>
  3. How do companies use price discrimination?

    Price discrimination is a strategy that companies use to charge different prices for the same goods or services to different ... Read Full Answer >>
  4. What is the importance of residual value in an automobile lease?

    The residual value of a car is often used by banks and auto dealerships to determine how much to charge per month for a lease. ... Read Full Answer >>
  5. What are the different types of price discrimination and how are they used?

    Price discrimination is one of the competitive practices used by larger, established businesses in an attempt to profit from ... Read Full Answer >>
  6. When is an expense ratio considered high and when is it considered low?

    A number of factors determine when an expense ratio is relatively high or low, but a good, low expense ratio is generally ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!