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How to Buy a Car at Auction

Buying a car at auction, wholesale, could mean a huge savings, but it’s not without its pitfalls. Over nine million cars are sold at auction each year. Not all of them are good. Depending on the type of car auction, the vehicles for sale could be anything from expensive, private collector editions to cheap salvage title cars that insurance companies or city police departments need to unload. If you’re ready to take on the challenge and the risk, here’s how to buy a car at auction.

How to find a car auction

Not all auto auctions are open to the public. Some only allow businesses and car industry representatives to attend. Of course, if you’re buying for a business, you’re good to go. If you aren’t buying for a business, you’re considered a “public buyer” and need to find a public auction.

Some public auctions are online (eBay for example), some are in person and some in-person auctions also allow real-time online bidding.

Register for the auction

You may need to register in advance in order to bid at an auction. Some may require  a registration fee or deposit. You or your guests may be able to register as a guest, a public buyer, a business buyer or seller. If you register as a public buyer, you will need to fill out a form for that auction house and provide a government-issued photo ID. If you register as a business buyer, you will need to additionally provide business license information proving you are registered with an appropriate auto business.

  • How much is registration? This depends on the auction house and what type of buyer you are. A public buyer may not have to pay but a business may have to pay for each buyer it registers with the auction house. For example it could pay an annual fee of $200 for the first buyer and $100 for each additional one.
  • How long does a registration last? Usually registration memberships last a year, during which you could attend any and as many public or business car auction as appropriate, depending on what type of buyer you are.

Do your research before you go

Car auctions go fast. Bidding on each vehicle typically lasts less than a minute. If you make the winning bid, you either won’t be able to back out at all or will have to pay heavy penalties, depending on the law in your state. The seller also isn’t able to sell the car to anyone else even if someone else offers a higher price after the auction. If yours isn’t the winning bid, you won’t get a second chance to buy the vehicle.

If at all possible, look at what cars will be at the auction before you go. Pick out some that you would like and research that specific vehicle model and even that specific vehicle if you can. For more on vehicle research, you could read about VIN checks.

Know your walk-away price

With all the excitement and competition of bidding, it can be easy to get carried away. Have a firm maximum price you are willing to pay for each vehicle. In order to set this price, look at how much the vehicle is worth using industry guides such as Kelley Blue Book or NADAguides and how much you have to spend.

Know how you will transport your auction vehicle

Whatever you buy at auction, you’ll need to transport it back with you. You could bring a friend or you could bring a trailer, but consider the following.

  • The number of cars. Do you plan to buy one car or five? Are you able to take a trailer to the auction that’s big enough to tow your potential car(s)?
  • The type of car. If you plan to buy a classic car, you might not want to put any miles on it. If you buy a salvage car, it might not start or you may not be able to legally drive it until the title has been updated.
  • The distance. If you’re buying at an online auction, you may not want to drive the distance of half the country and back to get it. A professional car transport company may be the best option, but be sure to include the cost in your walk-away price — a cross-country trip may top $1,000.

How to bid at car auctions

When you get to the auction, you’ll have to prove you’re you. For online auctions, this can be as simple as signing in with a username and password. For in-person auctions, you’ll need to sign in, show ID and get a paddle with a number.

  • What’s a paddle? An auction paddle can look like a ping-pong paddle made out of paper, wood or plastic with an ID number on it. By raising it up at an auction, you place a bid on whatever is currently being sold. Remember that placing a bid is a legally-binding promise to buy the car at that price if you have the winning bid.

Know when your potential cars will go under the gavel  

This may not be possible at all auctions, but at large ones, especially specialty collector car auctions, you might not want to sit in a hard chair, bored, waiting for all 500 cars to pass by, just to see the three you want. To find out when cars you are interested in will go under the gavel, check the auction website or with an auction organizer when you register in person.

  • What’s “under the gavel?” If a car goes under the gavel, or under the hammer, it means that the car will be auctioned off. This could refer to the fact the car will be auctioned off in general or it could refer to the specific time period in which people will bid on the car.

Arrive early

Again, car auctions go fast. The “cool kids” might show up late, sit in the back and place a bid at the 11th hour, but doing so yourself could mean you miss your chance on the car you want. Even though it might be possible to get an estimate of when certain cars will go under the gavel as we mentioned earlier, there’s typically not an exact time. Other cars in front of yours may sell more quickly (or slowly) than expected. Show up earlier than you would expect the car to be available for bidding.

Stick to your walk-away price

While there are many strategies you could use about when and how to bid on what you want at an auction, don’t get carried away in the excitement and pressure of bidding. Don’t go above your maximum price that you set when you had a cool head.

Pay attention to the lights

Some auction houses use a lights system to communicate a vehicle’s condition. Green can mean that the car is free of any known major issue. Red can mean the car is sold “as-is.” Other colors may indicate different problems, such as minor mechanical issues or a missing title.

How to wrap up buying a car at auction

If you didn’t authorize the auctioneer to take payment out of your account when you registered, you’ll need to go pay for the car(s) you bought. When you do this, you’ll also need to pay the auctioneer fee, also known as buyer fees or the buyer’s premium.

  • How can you pay?  In most cases, you’ll need to pay in cash. Many auction houses don’t provide financing and financing for salvage title cars can be difficult to find. There are some lenders willing to finance classic cars bought at auction.
  • How much are buyer fees? They are usually in the hundreds, depending on the sales price(s) you pay and how much you spend overall. Depending on the auction house, there may be a tiered fee system or a percentage system. Buyer’s fees are typically not included in the registration fee you may have already paid or in the price you pay for the car.
  • How much are taxes? As with any car you purchase, this depends on your location. Some states have no car sales taxes, such as New Hampshire, Alaska and Oregon. Other places have high car sales taxes, such as Washington D.C., Tennessee, Rhode Island and Indiana. You may also have to pay sales tax to your city or county in addition to title and registration fees.

Follow any closing processes

You may have to fill out some paperwork for the car(s) you bought. The main enemies here may be tax and registration paperwork, plus any forms required by the auction house.

Arrange transportation for your car(s)

If you didn’t arrange transportation earlier because you weren’t sure what if any car(s) you would buy or how many, you’ll have to set up transportation now. Some car auction houses partner with car transport companies and may be able to help you arrange it. Otherwise you could research transport companies in the area and strike a deal.

Drive safely

Whatever car(s) you get, make sure it’s safe to drive before you do so. It might be smart — or even required by your state — to get a mechanic to check it out, especially if it is a salvage car. Some auction houses offer inspection services, airbag diagnostics and mechanical repairs.

  • What if you got a lemon car? Unlike lemon cars bought at traditional dealerships or even from private sellers, there aren’t many protections for cars bought at auction, especially if the car was sold “as-is.” You may have no recourse but to write off your auction car as a loss. Yet if the car was not sold as-is or you think you have a case, contact the auction house. Some offer arbitration services between buyers and sellers.

The bottom line

Do your research beforehand, go early, keep a relatively cool head and have fun when shopping for a car at auction. Remember, there are thousands of vehicles sold at auctions every month. If you don’t get the car you want at the first one you go to, you’ll probably have another chance at an auction in the future.

 

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