When buying and/or selling a car at an auction, it is important to know what you want and go in prepared. Shayne Sherman, the Chief Executive Officer of Car Passionate shares the sentiment that auctions can be very hectic, and a lot of professionals will be there, so you need to be quick and know exactly what you are after.
Sherman adds that beforehand, you should think about the make and model you are after, the characteristics, and your budget. Research if the auction has any available information on what would be presented.
Now that you have an idea of what your mindset should be before going to a car auction, let us delve deep into the actual process of it. For that, we talked to Richard Reina, the Product Training Director of CARiD and a lifelong classic car aficionado.
Closed Auction and Open Auction
First off, Reina points out the two basic types of auctions: “closed” auctions and “open” auctions. To explain things simply, the former is only available to licensed dealers, while the latter—from the name itself—can be attended by anyone and feature mostly late-model vehicles.
Advantages of Buying a Car at an Auction
• You might get a favorable price, but that depends on who else is there bidding against you.
• Multiple vehicles available in one location—basically, if you are open to different years, make and model vehicles, you have a choice.
• Low- or no-reserve sales means that the car will sell to the highest bidder.
• You generally are allowed to pop the hood and open the doors, sit in the car, and do complete visual inspection on site.
Disadvantages of Buying Car at an Auction
• No test drives—at best, you will see the car start and run as it is driven across the block.
• Usually, you cannot speak to the owner, so there is no chance to learn its history (in some rare cases, the owner is there with the car).
• No warranties or guarantees, unless specifically stated (this is true when buying off Craigslist and other online private sellers, too).
Auction Fees You Need to be Aware of
• There is always a “buyer’s premium,” typically a percentage (5-10 percent) of the purchase price.
• You also need to figure out how to get the car home (registration, tags, insurance, etc.).
Expert Advice on the Best Practices
• Get the list of vehicles ahead of time, get there early, find the cars you are interested in, and do a thorough inspection. Imani Frances of Auto Insurance Quote claims that auctioneers’ main goal is to sell whatever they are auctioning, and they are not going to say anything to convince you that you should not purchase that item. This is why you have to do your research on the auctioneer and the venue before attending the event, and you should research the vehicle that is being sold.
• Bring a notebook, a small blanket or pad to lie on, a flashlight, and a small screwdriver (for poking at rust holes).
• Once you narrow down your choices, set a price limit in your head and stick with it. As the car crosses the block, it is very easy to get caught up in “auction fever” and say to yourself “I will go just $100 over my limit”. That $100 then becomes $500 plus the buyer’s premium. Westland Auto Sales co-owner, Mark Beneke, doubles down on this idea, advising would-be buyers to run the book on a vehicle and determine its max value. From there, set a cap for what you are willing to spend and make sure to stick to it. It is easy to get emotional and caught up in trying to outbid others but reminding yourself that the value will only go down the more you pay will help keep you grounded.
An Overview of the Auction Process
You cannot simply show up and start bidding. You must register. Depending on the auction, you may need to show a driver’s license, a credit card, and some proof that you have the funds to bid up to a certain amount.
Serious bidders get the auctioneer’s (or bidder’s assistant) attention. Do not feel obligated when the requested opening bid starts high. Some people like to wait for someone to place the first bid. The action can move quickly; the auctioneer determines the price intervals (is the price moving in $100, $500, or $1,000 increments?). If the bid is at $17,000 and the auctioneer wants $18,000, you are within your rights to offer $17,500.
Keeping to your limit
Do not let the auctioneer or his assistant talk you into a higher bid. The best way to avoid exceeding your limit is to walk away from the auction block.
Knowing no-reserve versus reserve
At most auctions, cars sold as “no reserve”, meaning high bidder gets the car, are usually announced. If there is a reserve (a minimum price the car needs to reach to be sold), that amount is never announced. However, at the auctioneer’s discretion, he or she may say “reserve has been met, and the vehicle will sell.”
Payment depends on the auction. At some high volume, low priced sales, it is strictly cash only. Some places will take a credit card or even a personal check. Some require a “bank letter of credit” to verify available funds.
Going to a car auction can be really stressful to the point that you might get overwhelmed by everything that is going on. Hopefully, this article provides you some semblance of clarity throughout the whole process and makes your next trip as smooth as possible.