Used Car Auctions
Learn about buying at used car auctions to minimize your risk of ending up in a regretful situation.
What You'll Find Here
- Types of Auctions
- Who Holds Public Auctions
- Determining How Much to Bid
- Tips on Bidding
Types of Used Car Auctions
There are two basic types of auctions: Those open only to licensed car dealers, and those that are open to the public - including dealers.
Used car auctions open to the public are often best suited, in our opinion, for people who "know" cars and/or who know how to fix them and/or who have access to a mechanic or a shop that offer reasonably priced maintenance. The point here is that the more expertise you can bring to an auction - yours or someone you know - the better the odds of buying a good, mechanically sound used car. At most public auctions you can walk around the car, open the doors, look inside, and open the hood to examine the engine, but in the majority of auction - possibly all - you will not be allowed to drive it.
Full payment is required at the time of purchase, all sales are final and they come "as is," which means there is no guarantee or warranty. While there are some good deals to be had, keep in mind that this is a high risk proposition.
Who Holds Public Used Car Auctions?
- The General Services Administration
- The U.S. Customs Service
- The IRS
- The U.S. Postal Service
- Your local police department (State, County and City)
- State Auctions
To find out what used car auctions are being held in your area, check your newspapers and television. It would be a good idea to attend an auction or two before you start seriously bidding. The more you can learn, the better your chances of reducing your risks.
What You Need to Know
- Find out when the auction house is holding the pre-sale inspection period and take advantage of it. We don't recommend that you buy a car at auction without first having inspected it and run a CarFax report on the VIN#.
- Inquire about the terms of the sale.
- Do they require a deposit before permitting you to bid?
- How will they accept payment? Cashier checks? Credit Card? Cash?
- Determine how you will get the car home. Be wary of people selling temporary registrations at auctions. In most cases, you're going to have to tow or flat bed the car off the auction lot. Generally, you'll find various tow services offered at the lot.
- Note that in some cases, the auction house will charge you a service fee on top of the amount of your winning bid. (They also charge the seller a fee as well.) You should find out what this fee is - usually a percent of the sale - before you begin bidding.
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Most important: During your pre-auction visit, ask the used car auction house how they identify cars with clear titles. What kind of check do they run and how do they alter the bidders to the status of the car?
To be on the safe side, after you've selected a car or cars that you'd like to bid on, go to CarFax and buy their Vehicle History Report. They also have a 30 Day Unlimited CARFAX Vehicle History Report which gives you the opportunity to run any number of checks. - Before you write the check for the car you've won in the bidding, be sure that you have the title in hand and that the VIN# on the title matches the one on the car. Our suggestion is that you never sign a check for a car bought at auction unless they can produce the title. Remember, you can register it unless you have a title.
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Finally, before you bid, check out the companies that offer Extended Warranties. (See the section on Used Car Warranties for more information on Extended Warranties. Call one or more warranty companies, tell them what you're doing, tell them about the car you intend to bid on and find out what it's going to cost to get your car covered. The same goes for getting car insurance. Remember, the "bid" is just the first of a series of costs that you're going to incur.)
Determining How Much to Bid
During the used car auction's inspection period perform, to the extent permitted, the inspection checks outlined in the section on this website titled Used Car Evaluation.
Write down the: Vehicle Identification Number (VIN), make, model, number of cylinders, mileage optional equipment and note the condition of both the exterior and interior.
At this point you can utilize The Car Smart Shopper to learn what the same car is bringing at the dealer auctions.
Or...
Assuming you've gone to the pre-auction preview and selected a car to bid on, you can call three used car dealers or wholesalers and "pretend" that you have a used car to sell. Describe the car you've inspected giving them all the details. Ask the dealer to give you a "ballpark" price over the phone. Usually, his number will be ten to twenty percent below its wholesale value. Add 15% and you'll probably be pretty close to its true wholesale value.
Once you know the approximate wholesale market value, adjust your bidding accordingly knowing that, in a worst case scenario, you can probably sell the car back to a wholesaler.
As noted above, we urge you to use the VIN Number to run a CarFax report prior to the auction. CarFax reports include any history of accident damage, odometer fraud, multiple owners, title problems and much more. To see a complete list of their reports, log on to www.CarFax.com
Tips on Bidding
Always go to used car auctions with a not-to-exceed bid amount in mind. And stick to it. Don't let yourself get caught up in the frenzy of bids. Your top bid number should never be higher than the wholesale value of the car.
Often an auctioneer will start the bidding at a high number and then drop it if, as is usually the case, no one responds to the opening asking price. It's usually best not to be the first one to bid.
Get a sense of the interest in the car before you jump in.
