Buying Cars at Auction - Part 2
Auto Auctions Part 2:
- Basic Types of Auto Auctions
- The Auction Process
1. 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:
a. Online Auto Auctions
eBay and Yahoo Auctions
All the car auction tips in this chapter apply to the eBay auto auctions as well. Try to get the VIN of the car you want to bid on from the eBay seller so that you can look into the car's complete history before you decide to bid on it. If you already have a VIN that you want to verify, click here to visit AutoCheck.
Just like eBay 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 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.
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. An AutoCheck 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 $1,000.
b. Wholesale Auto Auctions and Manheim Car Auctions
These car auctions are for car dealers only, usually run by Manheim and the general public is not allowed to attend. The cars at the Manheim auto 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.
Can't I Just Go to a Wholesale Auction and Buy My Car There?
No you can't waltz in there like you're going shopping. 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.
One Way You Can Get a Car From Wholesale Auctions.
Hopefully you know a licensed dealer who can get into these auctions and they can get the advance list of all the cars they plan to auction. 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. At one wholesale auction I attended, I noted many dealers getting cars for $500 - $1,500 below Black Book value, which is really good for them. When they resell the car for fair market value, they will maximize their investment.
c. Salvage Auctions (also known as insurance auctions)
Salvage auctions are a whole different ball game. In fact they are not open to the public. This is because of the serious nature of the damage to these cars. Stay away!
d. Seized Cars, Police and Government Auctions
In police and government auctions, they are usually auctioning off government seized vehicles or decommissioned vehicles that the agency no longer uses. The one thing to keep in mind is the impounded vehicles could have been sitting for a year or longer with no maintenance. The other issue is that there could be severe title problems with confiscated cars. You should run a vehicle history report on them to make sure that you'll be able to take title. Remember that these vehicles are sold "As Is" with no warranty.
2. The 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, Yellow 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.
- Red Light - Usually means there are issues with the title, rebuilt, not actual mileage or some other problem. The price ends up dropping usually 30%. A rebuilt car is just bad news.
- Yellow Light - Usually means the title is in transit or some frame damage but not enough to brand the title.
- Green Light - means everything is OK with the title.
Issues to Watch Out For at the Car Auction
Common items that can affect the car value, some more than others.
- Bald or uneven tire wear on all the tires or (indicates bad alignment, possibly from a wreck)
- Damaged wheel rims on one side of the car only, usually the side not facing the bidders.
- Problem title cars (junked, salvaged, flooded, fire, etc.). Rebuilt title usually drops the value of the by 30%
- All VIN#'s stickers from the doors, hood, trunk, dashboard do not match. Could be wrecked or stolen
- No title present for you to take today. Avoid "title in transit" cars
- Excessive dimples, scratches, dings, dents, paint chips, especially on bumpers
- Airbag fraud, fake airbag covers
- Variations in thickness of the paint. (Requires a digital coating thickness gauge)
- Traces of paint over spray along windshield, engine compartment, inside door edges, along door seams
- Evidence of leaks or hand applied seal material to plug up window leaks
- New carpeting for no apparent reason. Could have been flooded
- Feel around door edges for leftover evidence of masking tape from body work, and doors that don't line up
- Loose or crooked windows, or power windows that don't work. Motors are over $500
- Malfunctioning convertible top
- Excessive exhaust coming out of the muffler
- Malfunctioning A/C
- Evidence of odometer tampering
- Excessive mileage for the car's age. This gets overlooked by lots of people. I deduct $0.15 per mile extra
- Follow your gut instincts. If something does not seem right, do not buy that vehicle!