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. Budgeting

    10 Ways to Save Money at the Farmers' Market

    Strategic shopping can help your budget as well as your health.
  2. Savings

    6 Ways to Save Money on Back-to-School Stuff

    Those school-supply lists just keep getting longer each year. Here's how to shop smart.
  3. Insurance

    How to Shop for Home Insurance

    Tips for getting the best protection for your place and possessions.
  4. Personal Finance

    Sending Money: MoneyGram vs. Western Union

    Comparing the differences between the services – and the fees.
  5. Economics

    OPEC vs the U.S.: Who Controls Oil Prices?

    In the last 100 years, pricing power for oil has swung between the United States and OPEC. What does the future hold?
  6. Active Trading

    The Right Way To Set Up Your Trading Screens

    Well-organized trading screens sum up intraday market action, breaking it into digestible bites that can speed up complex decision making.
  7. Economics

    OPEC and Its Limited Control Over Oil Prices

    Popular perception is that OPEC controls oil prices. But input from the futures markets and world events limit its pricing influence.
  8. Retirement

    Why Millennials Should Invest in a Roth IRA

    Saving for retirement is important, and it's important to start early. A Roth IRA is a great option for low-earners just entering the workforce.
  9. Home & Auto

    Are Home Inspections Worth It? - Price vs. Value

    If you’re wondering whether home inspection is worth the investment, the following information will help you decide.
  10. Budgeting

    The True Cost of Home Caregiving

    Caring for eldery family in-home might be unavoidable, but most caregivers don't realize the true cost of doing so.
RELATED TERMS
  1. Bidding Ring

    A group of individuals or businesses that conspire to affect ...
  2. Linked Transfer Account

    Accounts held by an individual at a financial institution that ...
  3. Negative Option Deals

    A dubious business practice that involves supplying a typically ...
  4. Drip Pricing

    A pricing technique in which only part of a product or service’s ...
  5. Opaque Pricing

    Opaque pricing is a way that companies can sell their merchandise ...
  6. Historic Pricing

    A method for calculating the value of an asset using the last ...
RELATED FAQS
  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

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!