How to Buy Cars at Auction
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How to Buy Cars at Auction

By Autolist Staff | September 20, 2019

Buying a used car is generally a very involved process. First, you have to decide what kind of car you want, then how much you can afford to pay and then where to buy it. Usually, when you buy a used car, the main options are buying through a private party or at a car dealer. However, there's a third option that not all car shoppers consider or even know. That option is buying a vehicle through an auto auction. Many people think that buying cars at car auctions is a risky proposition and it definitely can be. It takes more research and caution than buying any other way. But the payoff is that you may be able to snag a dependable car for an inexpensive price compared to buying at a dealership or even privately.

What Are Dealer Auto Auctions?

Dealer auto auctions for used cars take place regularly, but the average person usually won't know about them because they require a dealer's license to participate. That leaves you with two main choices. You can get a dealer license in your state, or you can work with a dealer to get the car you want. Getting a dealer license can be somewhat complicated, depending on the state. For example, in Washington state, you need to be located on commercial property and have an enclosed building to get a dealer license. That's not something everyone can do. If you work with a licensed dealer, then you could have them bid on the car you want. In this case, it's essential to put down firm rules on how they can act on your behalf.

Public Car Auctions and Closed Auctions

Most dealer auto auctions are closed to the public, and you won't be able to join unless you take one of the steps as mentioned above. However, there are also various types of public auctions that you can get into. These auctions include law enforcement and government auctions. Whichever kind of auction you choose, it's essential to read about bidding on cars and run a VIN report on any vehicle that you're interested in purchasing.

What About Online Auctions?

Another type of auction you can get into is an online auction. These don't require a dealer license and are not put on by the government.

Some online auction websites include:

  • eBay Motors

  • Salvage Bid

  • Auto Auction Mall

  • Copart

  • IAAI

The two top dealer auctions that require licenses are ADESA and Manheim. If you can find a dealer to work with, then you can gain access to these sites. If not, then you can start with the other five.

Why Do Online Auctions Allow Public Access?

Online auto auctions list used cars for the public to bid on from the main dealer auction sites already mentioned. The sites also have access to various auction specialists in the United States and other countries. To get involved in these online auctions and make bids, you'll have to create an account on the site and add a deposit to your account.

What Are Some Benefits to Buying a Used Car at an Auction?

The main benefit of buying a used car at an auction house is that you'll have the opportunity to get a good vehicle for much less than a dealership or private party would sell it. Some options at these auctions included loaners or demonstrators, used cars and salvage title vehicles. The latter type has a dubious reputation, but some salvage titles can be diamonds in the rough, depending on why they were considered totaled. For example, a stolen vehicle that isn't recovered right away will often be totaled by an insurance company. If it's found later with no damage, it will usually be auctioned off but will have a salvage title.

Once you buy a vehicle like this, you can get it inspected, and a rebuilt title will be issued. The main downside is that it may hard to sell in the future. But another benefit to buying via an online auction is pure convenience. You can shop for cars in your living room. The third benefit is that you will have an extensive range of vehicles to choose from and not just cars in your area either. All three of these benefits allow you to get an outstanding deal. The average person might not realize that car dealerships use auctions all the time to stock their lot with used cars.

Signing Up for an Auction Account

For some sites, you might be able to check out a partial inventory sample before signing up. But to see everything they have you'll need to make an account. The easiest way to do this is to enter your information and make a username and password. That will at least gain you the ability to see the full inventory. However, if you want to make a bid, you will generally have to make a deposit into your account. In terms of the amount, you won't have to put the entire amount you want to spend. Most sites ask for around 10 percent as a deposit. For example, if you're going to spend $3,000 on a car, then you would make a deposit of $300.

Browsing the Auction Site

After setting up an account, you can then browse the full inventory of your online auction site. You might find that some cars will be in continuous auction status, while others might become available in live auctions where you have to be online while they're taking place. You can usually browse the inventory by selecting filters like the model year, make, model and other criteria.

What Kind of Vehicles Are Available On Auction Sites?

The three main categories you'll find are used cars, salvage cars and nearly new cars. What does this mean in auction terms? Let's start with the most accessible and most prevalent vehicles. Used vehicles are primarily what you'll find on auction sites. These vehicles found at auctions may have a variety of histories, including dealer overstock, trade-ins and repossessed cars. These cars are usually your best option for getting a good deal and a decent car. The second category is salvage cars. These cars represent some of the best possible bargains, but you'll need to do a lot more homework to make sure that you don't end up with a lemon. Like-new cars are vehicles with very low mileage, which makes them almost a new vehicle. These vehicles might have been rentals or repossessions. This section is the most restricted in terms of choice on auction sites.

What Does Bill of Sale Mean on an Auction Site?

When you look through the auction inventory, you'll likely come across vehicles that have a bill of sale label on them. The reason you need to watch for this is that it means the vehicle does not have a title. Only the bill of sale establishes ownership. It's a good idea to avoid these vehicles as you won't be able to take possession without a title. Getting a proper title for a vehicle that doesn't have one can be expensive and time-consuming. Even if the vehicle price is really low, it's not likely to be worth it in the end.

How To Set a Budget

As with any car shopping, it's essential to set a budget. If $3,000 is comfortably affordable for you, then you should stick to that. There's no reason to go too high when you can get a decent car for even less than that price. Once you've decided on a budget, you can add it to your account and set a maximum and minimum range. The other important thing to remember about your budget is that your max buy price on the auction won't be the final price. Various additional fees will come into play, including transportation, sales tax, registration, and possibly repairs.

Be an Informed Bidder

One reason it's crucial to have a set budget is that it's easy to get carried away during the bidding process if it's a car you want. If you find a vehicle at an auction that's just out of your range, you can usually find something similar that is more affordable. As most vehicles aren't part of a live auction, you have time to look at history reports by getting the VIN. Most vehicles will have VINs displayed. Check the VIN through a site like Carfax, which is one of the most complete vehicle checkers available. With these reports, you can find out about recalls, title status, the number of owners, any accidents, and sometimes service records. One thing to remember is that these reports can only list items that are reported. If someone gets into an accident and it's never reported and then fixes the vehicle themselves, you won't see it on a CarFax. In other words, they're not 100 percent foolproof.

Paying for Your Auction Car

After you bid on a car, you will either lose or win the bid. If you win, you'll be notified and allowed to move to payment. The deposit you initially made will be applied to the price of the car, and then you simply need to make up the difference by the time stated on the auction site. Before you get to this point, it's a good idea to check what forms of payment the auction accepts. Many times, an auction requires certified payment like a wire transfer or bank check. It's important to know this information in advance as you may only have three days or so to complete payment on your new vehicle. If you don't make prompt payment, then you'll usually be charged a late fee. If you continue not to make the payment, then you will lose your deposit and the car.

Delivery of Your Auction Car

After you complete payment, then you'll need to make arrangements for delivery. It's usually a simple process as the auction specialists work with buyers to set it up. They will show you all the options and let you know which ones fit your budget. You can also arrange for delivery yourself, but remember that you won't be able to go physically pick the vehicle up yourself. The best practice is to work with the auction specialists as they know all the options and can get you the best deal.

More Information on Buying Salvage

As previously mentioned, salvage vehicles are relatively standard on auto auction sites, and they aren't all necessarily vehicles to avoid. Not only that, but they give you the best chance to get a fantastic deal on a car. The reason for the low price is that they are considered totaled. Even if the cause is benign, they will still be sold for far less than any other vehicle category. In a salvage situation, the insurance company paid 75 percent or more of the car's value and declared it totaled. Some of the more severe reasons for this include traffic accidents, flood, fire or hail. As mentioned earlier, stolen vehicles are often written off, and then when they're recovered, they have salvage titles even if nothing has been damaged. Again, look into the vehicle's history and try to find out why it was declared salvage.

Getting a Rebuilt Title

If you do decide to buy a salvage vehicle, one of the first things you need to do is get a rebuilt title to drive it legally. To do that, you have to go through an inspection with the vehicle. If it passes, then you can apply for a rebuilt title with the DMV. If the vehicle needs repairs, you will have to do those first before going through the inspection. Every state has different laws regarding salvage vehicles, so make sure to check with yours before proceeding. The other thing to understand is, even if you get a clean bill of health on the vehicle, it will never have a clean title. Unfortunately, that means selling it again can be rather tricky, and you will likely have to ask for less than it's worth.