Car auctions offer some amazing prices and some serious risks. Many of the cars for sale at auctions are there because they couldn’t be sold any other way. There may be some good apples in that barrel but there are also going to be lemons.
If you don’t know much about cars, a car auction is probably not a place you want to be. If you have a solid base of automotive knowledge and you’re willing to negotiate a complicated process at high speed, you might be able to come away with an exceptional deal.
Choose Your Auction
There are two types of vehicle auctions, and you should know which type you’re attending:
- Government auctions. Agencies of the federal, state and local governments use lots of vehicles, and they often dispose of them at auction. The vehicles at these auctions have been heavily used, but they have accurate service records and they have not been worked on to conceal potential flaws.
The biggest problem you’ll face at a government vehicle auction is competition. These auctions are heavily attended and many of the buyers are vehicle brokers, buyers for cab companies, and other professional bidders.
- Public auctions. Public auctions handle large numbers of vehicles. They may be trade-in vehicles or cars that dealers couldn’t sell. They may also be repossessed, damaged in floods or accidents or lease or rental cars that are no longer profitable to maintain.
Cars at public auctions are often buffed to a perfect shine and may look great on the outside. That doesn’t mean they are in good condition. Cars sold at auctions may have serious problems and some sellers will try very hard to conceal those problems.
Not all vehicle auctions are open to the public. Some may be restricted to licensed car dealers. Some cars that couldn’t be sold at dealer auctions may be passed on to public auctions.
How Do Vehicle Auctions Work?
Many auctions publish a catalog in advance. This may be available on paper or online. You can review the catalog and identify the vehicles that interest you. Most auctions provide a catalog when you arrive at the site. Most auctions allow inspection of the vehicles before the auction begins.
Auctions may be reserved, meaning each lot has a “reserve price” or minimum price where bidding starts. Unreserved or no-reserve auctions have no minimum price. Most auctions prohibit owner bids designed to push the price up, but they still happen. It’s very hard for the auction house to know whether a registered bidder is working on behalf of a seller.
Many auctions use a “stoplight system” for describing vehicles. There may be a light above the auctioneer describing the status of the car on the block:
- A green light means the vehicle is free of known problems. Arbitration in the event of mechanical issues may be available. These vehicles usually command higher bids and higher reserve prices.
- A yellow light means the vehicle has known problems and no arbitration is possible.
- Red light means the vehicle is sold as-is. All the risk is on you.
- Blue light indicates title issues.
Some auctions may use a number scale of one to five, where one is new and three is “normal wear and tear”. Vehicle inspection reports may be available at some auctions. Always check the auction policies to confirm the rating system.
You can usually attend an auction for free, but if you want to bid you will have to register and pay a fee. You may also need to pay a deposit. If you place a winning bid you will have to be ready to pay, so be sure you have cash or an approved loan.
When you register you will be given a bidder number, often printed on a card or paddle. If you want to bid you will hold this up for the auctioneer to see, and your bid will be registered. Auctions can be chaotic, and you’ll have to be sure your bid is seen.
You may be required to pay more than what you bid. Many auctioneers charge a “hammer fee” above the bid price. This may be 8-10% of the vehicle’s price. The fee will be a larger percentage for a low-priced vehicle and a smaller percentage if the vehicle is more expensive.
Follow these steps for the best chance of getting a good deal:
- Watch first. Attend several auctions as an observer before you consider buying. Auctions move fast. Watch the bidding process and the speed at which the vehicles move across the auction block. Get used to the rapid-fire delivery of auctioneers. Think about whether this is the right place to make a major purchase. Some people thrive in auctions, others don’t.
- Check the auction catalog. Do some research on the vehicles for sale. Check the book values with Edmunds or Kelly Blue Book. Services like CARFAX or AutoCheck can give you a vehicle’s history and tell you whether it’s been stolen or involved in an accident. Local listings on Craigslist can give you an idea of local prices. Note any condition rating provided by the auctioneer.
- Know the sellers. If owners aren’t listed in the catalog, call the auction office and see who the consignors are. Cars consigned by banks and other financial institutions are often good buys. Cars consigned by new car dealers are often trade-ins and may be in good shape. Cars consigned by independent dealers are risky.
- Go early and inspect. Check everything the auctioneer allows you to check. Start the engine and listen. If you can’t drive the car, at least make sure the gears engage. Pull the dipsticks and check the fluids but remember that they may have been replaced a few hours ago. If you don’t have a very clear idea of how to evaluate a used car, you may be in the wrong place!
- Set a maximum bid for each car and don’t exceed it. Decide what you’re willing to pay on each car that interests you and don’t go over that amount. It’s easy to get carried away in the bidding process but you may regret it later.
- Look at several cars. Don’t get emotionally attached to one vehicle and decide that you want it. If you have several options, you’re less likely to get pulled into overbidding.
- Bring a friend. Try to bring someone who knows cars to help out. A second set of eyes and opinions can give your perspective, and a friend who isn’t bidding can help you avoid getting too fired up and making mistakes.
- Know when the cars you want will be shown. Auctions move fast and there’s a lot going on at the same time. Stay calm and focus on the lots that interest you. Many auctions will provide a showing list.
- Watch for shills. Some bidders may not be there to buy. They can be working for sellers, placing fake bids to drive the price up. If you see suspicious bidding action, back off.
- Don’t place the first bid. The first bidder is often the one who wants the car most and the one who’s most excited about bidding. That’s a good way to get marked by the auctioneer or any illegitimate bidders as someone who can be maneuvered into overbidding.
- Don’t drink. Many auctions provide free drinks, commonly known as “auction juice”. That’s not charity: impaired judgment is the house’s best friend. Stay sober.
Auctions are exciting, even exhilarating. They are designed to be that way. You have to know exactly what you want and exactly what you’re willing to pay for it, or that exhilaration is likely to lead you to a place you may not want to go. If you’re excitable by nature, be very careful.
The auction process sounds challenging, and it can be even more challenging than it sounds. Vehicle auctions are dominated by professional buyers and sellers. The pace is fast, decisions are made quickly, and the system is set up to encourage impulse buys. If you aren’t very sure of what you want and how to get it, you may miss out on the deal you want or go home with a vehicle you don’t want. It’s a place for sharks, not minnows. If you know cars inside out, you have a cool head on your shoulders, and you’re willing to learn the system and study the vehicles on offer you could come away with a great deal. If you don’t know what you’re doing, an auction may not be the best place for you to buy a car.