Page Sections - At auctions, it's every man for himself | Tips For Getting The Most Out Of An Auction & Protecting Yourself | Basic Types Of Auto Auctions | Wholesale Auto Auctions & Manheim Car Auctions | Selling cars at an auto auction | Red Light, Green Light | Salvage Auctions | How much should you pay for a vehicle at a police auction? | Driving Records

Many auto auctions use a bare bones car title check, while many do no car title check at all.
 
The car auction thus provides you with nothing to guarantee you that the title is clean. Auto auctions try to cut cost and run the cheaper bare bones title checks, some of which are not very thorough at all.  In my opinion no one has a more thorough car title check than CARFAX, I don't care what any auction says.  CARFAX was doing this for 15 years before other companies and has over 1 billion records from well over 400 sources including auctions in their database.  In the game of buyer beware, the CARFAX Report is the most powerful weapon that you and I have to protect ourselves against fraud.  Remember what I said, buyer beware. Keep in mind that the auction has a vested interest in selling the car.  Don't take anyone's word for it, not even mine, always run your our own car title check.

The price you pay for the car is always higher than what you bid!

Don't forget that on top of your winning bid at the auto auction, there is usually a buyer's premium.  Sometimes the premium is only a few hundred dollars, sometimes it's 5% of the winning bid, sometimes it's 10% of the winning bid. This means if there is a 5% buyer's premium and you just won the $20,000 bidding war on a used Lexus, you now have to pay $1,000 on top of that to the auction house running this car auction.  When you're caught up in a bidding war, it's easy to forget that you have a buyers premium to pay also, and when you're done, the addition of the buyers premium takes the car over fair market value.  Oops!  The whole idea of an auto auction is to buy a used car at a significant savings below fair market value, otherwise you could just go buy that same car from a private seller, take your time, and do it right.

What About Buying Used Cars From Car Rental Agencies Instead?

 Keep in mind, a rental car is a used car, just like any other car. But we feel rental cars are probably maintained better than many privately owned cars, as they are kept in constant care and maintenance during use. When you rent a car from the top companies, they are clean, and I have never had a rental car break down. The companies tend to take them out of service by one to two years of age, so you are getting a decent car which the rental company has already absorbed the largest portion of the depreciation.. But all our rules for buying used cars still apply, because they are used cars. The used cars from car rental agencies usually still have their factory warranties in affect. Some car rental agencies may offer you a free limited warranty on used cars. If you want full coverage, read our section on Tips for Extended Car Warranties.  One last point, they may not be willing to haggle over the price, so make sure you know the value of that car before you visit them.

Auctions can be dangerous because that's where the junked, flooded, and rebuilt cars are most likely to be found.
 
 

Basic Types Of Auto Auctions

There are many different types of car auctions out there. But there are 5 main categories of auctions that we'll cover here, as these apply to the most amount of people.  These are:

• Online auto auctions like eBay Motors auto auctions and Yahoo Auctions.
• Wholesale Auto Auctions (Usually dealer to dealer type auctions)
• Public Auto Auctions (Open to any sucker.  Oops, I meant consumer).
• Police Auctions & Government Auctions (Usually open to anyone)
• Insurance Auto Auctions & Salvage Auto Auctions (Usually open to only to dealers)

Online Auto Auctions

eBay Auctions and Yahoo Auctions

All the car auction tips in this chapter apply to the eBay auto auctions as well.  The correct name for eBay car auctions is eBay Motors. Try to get the VIN of the car you are bidding on from the seller on eBay so that you can run the CARFAX Vehicle History Report before you even decide whether or not to bid on the car.  Just like e Bay Auctions, the same goes for any cars that you plan to bid on at Yahoo auctions as well.  You must keep in mind that if you are the wining bidder at eBay Motors, you are contractually obligated to buy that vehicle.  So don't bid on it unless you are 100% prepared to to buy it.  You might want to use eBay's escrow service, where a trust account is setup and the seller is not paid until you receive the car.  The buyer and seller can also agree on an inspection period so that you can have a certified mechanic inspect the car and determine if there is any unsatisfactory damages, or needed repairs that were not disclosed by the seller.  These are all the hassles you go through when you cannot see the car in person before you bid.  

Keep in mind that bidding on a car at eBay Motors is no different than buying a used car from someone through the Auto Trader.  You must still know the blue book value of that used car, and don't bid too high.  Bid with your brain, not your heart. If you see the price of the car shooting up, just walk away.  Your goal is to get that car for less than blue book fair market value, or it's not worth it.  You might as well buy a car locally out of the used car classifieds.  In order to make all the risk and effort worthwhile, the eBay Motors auction price must be less than you could get it locally from the classifieds.

Caveats to watch out for on eBay auctions and Yahoo Auctions:

• You cannot see the car in person.  You are contractually obligated to buy a car you have not seen.
• Some sellers don't list a VIN# of the car, or they list a fake VIN#.  You must run a used car title check on the VIN# to verify.
• Some sellers don't list the correct engine configuration, or even the correct model or year.  A CARFAX Vehicle History Report will straighten that out.
• Sellers can get 20 people to lie and hype up their rating, or shill bid, which means falsely bidding the price of the car up.
• You may have to go cross country to pick up the car, or pay shipping fees, which can approach $1000.

Wholesale Auto Auctions & Manheim Car Auctions

These car auctions are for car dealers only, usually run by Manheim car auctions, and the general public is not allowed to attend.  The cars at the Manheim auto auctions auctions fall into these categories:

• Cars that are returned after their lease expires. 
• Rental Cars from car rental agencies.
• Brands of used cars that a dealer received as a trade in, but does not normally sell.
• A new hot seller that a dealer may be able to sell over MSRP in the car auctions.
• Exotic cars, either new or used, that some collector dealers are trying to sell.
• Used cars over 4 years old that most major dealers don't want on their lots.

Florida Car Auctions: Can't I just get into a wholesale auto auction and buy my car there?

All these tips apply whether you're at Florida car auctions, California car auctions, New York car auctions, Ohio car auctions. No you can't waltz in there like you're going to Disney World. You have to be a licensed dealer to get into wholesale car auctions, even if you only sell a few cars a month out of your house, you still need to be licensed.  In fact, you cannot even view any information on the Manheim Auto Auctions web sites unless you are signed up with them as a registered dealer. To become a registered car dealer is pretty tough.  For example, in Florida, you must complete a 2 day school, take a car dealer test, get yourself bonded, get a Tax ID, get approved by your city, buy insurance, you must have a clean record, then you need an occupational license, costing $150. You need warehouse space, this adds hundreds to thousands of dollars per month, and all this is on the cheap side of guessing the total cost. Then there are audits from the sales tax people. Some dealers used to sneak their clients in but many auctions have already taken steps to prevent that from happening.  So the average Joe can forget about getting into this type of auction to get their car.  But if you can get in, this is the preferred type of auction to get your next car.  You'll have to be able to work out with your dealer friend how the car will be paid, since auctions usually require payment in full on the spot.  But if you can get in, the Manheim car auctions are considered top notch.  Their Highline auctions are very well regarded, but you still have to beware that rebuilt cars are still passed through these auctions, and the red light occasionally comes on at their auctions just like any other.

One way you can get a car from wholesale auto auctions

Hopefully you know a licensed private dealer who can get into these auctions, and they can get the advance list of all the cars they plan to auction off that day.  Then you can tell your dealer friend which car you want and how much to pay for it.  The dealer will most likely want something for their trouble.

How dealers know how much to bid:  The Little Black Book

Some guys use a little black book for phone numbers of their girlfriends. At the wholesale auto auctions however, this has a completely different meaning. You'll see dealers walking around with their "Black Books", which is a pocket sized, subscription based mini car pricing book updated at least monthly with regional selling prices from wholesale auto auctions.  It's like a Kelley Blue Book for auto auctions.  It lists most vehicle makes, and models, and what they should sell for if the vehicle is in bad, fair or good condition.  Ideally, the dealers would like to bid on a car and pay less than the black book price for the car, to be sure they are getting a good deal.  Many other dealers will use the NADA guide for their pricing.

You can't just walk the down the row of cars at an auction and determine what it's worth, because the car is only worth as much as the winning bid.  The buyers determine that. The pricing books might say that Mercedes is worth $50,000 and you would be foolish to bid that much if the bidding only reaches $47,000, and maybe the seller accepts.  Then you were $3,000 to high, and you would have left money on the table.  That's why bidding typically starts way less than the published value. By using the Black Book, many bidders have a goal of what price range to shoot for, and usually end up getting slightly less than the book value on a car.  Other factors affect the price too, like regional areas, that's why many used car pricing sites ask for the zip code before they.  In Florida, black cars will not bid as high as silver, because black cars get too hot.  Up north, SUVs and trucks tend to sell higher as winter approaches, and less as summer approaches.

Selling cars at an auto auction

If you're a dealer selling cars at an auto auction it's like a game of poker. The vehicles that you transport to the car auctions are your deck of cards.  Everyone is calling everyone else's bluff, and you must convince the bidders that your car is worth the minimum opening bid.  You sure don't want to have to drive a transport full of unsold cars all the way back home, it could be a long, lonely ride.  If you do sell a vehicle the auto auction house might charge you a $250 sellers fee, depending on the auction house.  Sometimes it could be a percent of the sale.  If your car does not sell, they still charge you a fee anyway, so life really sucks for a seller who transports several cars to an auction and does not sell any.

Never try to auction your car at a wholesale auto auction

Unless you have a rare car that is worth something, always retail it on the open market, because auction prices are wholesale, near trade in value, and much less than fair market value.  Only auction your car if you need to dump it fast.  Don't let your finances get you into the position where you need to unload your car fast, you'll lose the maximum amount of money that way.

Beauty is only skin deep!

Some bidders at car auctions are smart and don't take any chances.  They use a clever $549 device called the Elcometer digital coating thickness gauge to measure the thickness of the paint.  This tool is simple, you just touch it to the car's painted surfaces, and the LCD readout tells you how thick the paint is.  This is useful in flagging cars that have had body work done.  You see, the factory paint jobs are usually 4.5 mils thick.  When a body shop paints a panel, their process is not refined like the factory, and they often paint over existing paint, doubling the thickness.  Once your LCD readout hits the 8-12 mil range, you know that body work was done on this car.  As each car in the auction drives up the auction lane to be bid on, you'll see a group of dealers rush up to it and start placing their Elcometer on all the major panels, doors, hood, and trunk, looking for "evidence" of body work. 

Some of the better auctions have the mileage written on the windshields so you can rapidly walk up a row of cars in the lot and determine if it meets your mileage requirements without having to open each car up and check the odometer.  If the car had previously been in a wreck, sometimes the windshield will have the word "Unibody" written on it, indicating prior accident damage that had been repaired.  Mercedes and BMW leasing companies usually do this, GM usually does not.  Beware of cars with more than 12,000 miles per year on the odometer.  They should bid for much less than similar models with lower mileage.

The auto auction process

Usually at the bidding area there are several lanes going at once, each with its own auction running.  Typical of auctions, the auctioneer is talking very fast, in fact, too fast for most people to understand what they are saying.  It takes you about 20 minutes to get used to it.  They sometimes have helpers in the lanes watching for your bid.  As the car drives up the lane to be bid on, flocks of potential buyers will come up to it, you'll see several buyers rub their Elcometers on the paint to determine thickness, and they'll sometimes open the hood and trunk to check for signs of body damage.  This is not the time to evaluate the car you are about to buy.  That is why you should arrive early before the auction starts to view the car. 

Red Light, Green Light

Behind the auctioneer is usually a traffic light with Red, Yellow, and Green lights.  These lights are used to indicate the status of the car's title.  Make sure when they write up your purchase that they indicate the color of the light on your contract.  If they say it's green, that title better not have any issues.  The classier Highline auctions would probably take back the car if something went wrong there, but for other auctions, who knows.
 

• Red Light -  Usually means there are issues with the title, rebuilt, not actual mileage, or some other problem.  This is important, because you would not expect to pay as much for that car as one which had not been in a wreck. At wholesale auctions as the cars come up to the block, the ones with bad titles trigger the red title warning light to come on over the auction box.  At this point, usually 50% of the bidders take off.  The remaining 50% don't know what the heck to do, and the price ends up dropping usually 30%.  The reason is a rebuilt car is just bad news.  It's one thing to have a quarter panel replaced or door dent removed, but a rebuilt title means something very bad happened to this car.  It means the car was totaled in an accident, then rebuilt, and the title was "branded" back to used car status again.

• Yellow Light -  Usually means the title is in transit, or there is some frame damage, but not enough to brand the title, and Usually the seller is right there next to the podium and they have the owners manual and title ready to hand over to you, and you settle in the closing room. Ideally, when you buy at a car auction, you'd like to have the title right there, since you are required to pay in full on the spot.  Unfortunately, many titles at auctions are "in transit".  That stinks because you would like to have the title there on the spot so you can drive home in your new purchase.  They expect you to pay in full for that car now, yet they won't give you the title now.  Sounds very lopsided. Each car is usually on the auction block for about a minute or 2, and the bidding moves fast.  There's a couple of hundred cars there, and they have to get them all through.  If the car does not sell, they just roll it right on out the door and the next one comes in.  Sometimes they will pass cars through the auction lines a few times hoping they will sell.

• Green Light - means everything is OK with the title. 

Flood Warning

If the car had been flooded after a hurricane and there was salt water, everything is corroding right now, and electrical components that work now, will soon fail. Repaired struts could break on you after they were fixed.  If the roof was welded back on after a rollover, and the car flips, you may not have the roof strength you once had.

Everybody Lies

You need to remember this at auctions, everybody lies. They lie about how much money they have invested in the car, they lie about prior accidents, claiming "not to my knowledge", or "the previous owner assured me the damage from the wreck was minor".  They all skirt the law by hiding behind open ended statements like that, and "AS IS" documents that they make you sign, so remember, everybody lies, trust no one, the only person looking out for you is you.

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