10 Things You Didn't Know About Buying Cars at Auction

Excited people bidding at an auction.

All over the U.S., you can find car dealer auctions open to the public. That means buying cars at auction prices is an option for just about anyone, even if you don't have a dealer's license. If you're interested in buying cars at wholesale prices, take a look at our car auction guide to find out how to buy the car you want at auction, just like a dealer.

Car Auctions for Dealers Only
Car dealer auctions are open only to those with a dealer license issued by the state. You can get your own dealer license if you wish, but the process can be long and difficult. Each state has its own set of requirements for car dealer licensing, usually with a set number of cars you must buy and sell each year to qualify.
Buying, modifying and reselling cars bought at car dealer auctions can turn you a tidy profit. But if you only plan on buying cars for yourself, it's probably best to buy from auctions that are open to the public instead.
Car Auctions Open to the Public
Popular Mechanics reports there are two major categories of car auctions open to the public, government car auctions and public car auctions:
  • Government or police auctions: These include county and city vehicles like buses, police cruisers, utility trucks and more. These auctions also sell impound cars that have been confiscated because of traffic violations and crime. Popular Mechanics warns that you will face expert competition from used car dealers, taxi companies, exporters and others who know mechanics well and understand the value of the vehicles on the block.
  • Public car auctions: These may include repossessed vehicles from banks, wholesale lots of cars, flood junkers, bottom-of-the-barrel trade-ins and sometimes high-end sports cars and SUVs. The quality and reliability of the stock varies from auction to auction, so be prepared to do your homework. Because these auctions have become more popular since the economic downturn, competition for the best deals is fierce. In fact, you may end up paying more than market price if you don't take care not to overbid.
Ten Things You Should Know When Buying Cars at Auction
  1. Be careful. This is where unsalable cars go to die. As Edmunds.com puts it, "If a vehicle has been traded in, leased, repossessed or totaled, it will find itself among the nearly 9 million vehicles that are purchased each year in an auto auction." That doesn't mean every car on the auction lot is junk. It just means lemons are out there, so be suitably suspicious and thorough in your inspection.
  2. You will need cash or an approved loan, if your bid wins. If you plan to pay with a loan you have already secured from your bank, be prepared to cover a deposit once your bid wins. Find out in advance which credit cards are acceptable for this purpose. There will also be taxes, title and registration fees. If you're financing the purchase of your car, you'll likely be required to carry collision and/or comprehensive insurance by the lending agency. So, it's probably also a good idea to talk to an independent Trusted Choice® agent to help you find car insurance quotes before you buy. Independent agents work with several insurers, and can comparison shop for you, for free.
  3. Everything shines. Cars are often touched up, buffed and polished to a sheen for auction. This does not guarantee a solid car. Always check the car history, and see if VINs match between the dash, door and other points of identification.
  4. Sellers may hide problems. There are all kinds of masks and foils that can make a faulty engine seem clean and sound. If you don't know the tricks that sellers may use to hide trouble, bring a friend who does or stick to used car dealerships. There are no guarantees or warranties at public auctions.
  5. Banks own the best inventory at the best prices, in general. Edmunds.com advises that these are the vehicles to look for at public auction. They are usually repossessed cars and trucks that the lender just wants to sell at a decent price to recoup losses. Make sure it is a reasonably well maintained car and that the interior is in good order, as these are often problem areas for repo cars.
  6. Beware the used car dealers selling at auction. Most used car dealers prefer to sell to customers, other dealers and dealer auctions. If a car is too far gone to sell in any of those ways, they resort to the public auction. Take a second, third and fourth look at used car dealer offerings at public auction. Things may not be what they seem.
  7. This will get kind of crazy. Former auctioneer Steve Lang calls it "capitalism in its purest form." Car auctions move fast and carry a lot of intensity. It can be easy to feel rushed and pressured to make a decision, so be prepared to tell yourself to slow down if you feel unsure about a vehicle. It's better to walk away and buy another day than to get a clunker you can't sell.
  8. Limit yourself before the bidding starts and stick to it. Paul Duchene writes for Car and Driver, "Set your top price and don’t go above it. Do not visit the bar; do not go with a new girlfriend or a college buddy." You need all your wits about you and not an ounce of pride to cloud your judgment.
  9. Cars will be shown in a set order, so arrive early and figure out when your favorite will be on the block. You can usually get a copy of the showing list when you check in. If you arrive late, you may not have a chance to inspect the car you're interested in buying at the auction.
  10. Leave room in your budget for shipping if you are buying out of state or far from home. The last thing you need is a cross-country trip in an unproven vehicle and a breakdown somewhere remote and expensive.
Are Car Auctions a Good Place To Buy?
That depends entirely on your mechanical knowledge, your willingness to do research and your luck. Auctioneer Steve Lang observes, "From a $200 Volkswagen to a $200,000 Ferrari, I have personally seen hundreds of thousands of deals come together to the future joy of one party – or the long-term sorrow of another."
 
With the right preparation and a discerning eye, you could drive home in the best steal of your life. Just be aware that for all the deals available at car auctions open to the public, many lemons could be lurking as well.