By Anthony Santiago - Editor-in-Chief

July 23, 2022
how car auctions work
how car auctions work

How Car Auctions Work

Car auctions are great places to find cars for cheap. But most people don't realize that they also make great places to buy cars.

While car auctions can be great places to find cheap cars, most people don't realize that there are two types of car auctions: private and public. There is a big difference. 

how car auctions work - dealership auctions

Dealer car auctions are held privately between dealers. A dealer auction is one where a dealership sells off old inventory. These auctions are usually run by the dealership itself because they don’t want to take the risk of selling off a vehicle that won’t be profitable. Dealerships will often pay less for the car than what they would in a private sale. It can sometimes be less than trade-in values. 

Public car auctions are open to anyone who wants to buy a car. I have attended public auctions and it was a madhouse.

But with a little research, you can learn how to get a great deal on a pre-owned vehicle without having to spend hours searching online. And once you've found the perfect vehicle, you can bid on it at auction and win big.

I'll teach you everything you need to know about bidding on cars at auction, including where to look for cars, how to prepare for the auction, and how to maximize your chances of winning.

Let's get started...

How to Buy Cars at an Auction

Auctions work differently depending on whether you live in California or another state. In California, you need a license plate number before you can buy a vehicle. This is because the DMV requires a buyer to prove his or her identity and residency. Once the DMV verifies the information, the buyer can purchase the vehicle.

As mentioned earlier, there are different kinds of auctions, including private sales, which are held in a dealer’s showroom. Private sellers don’t advertise publicly; buyers find them online. Public auctions are open to anyone. 

The auctioneer is the person running the sale. He or she calls out bids and keeps track of the highest bidder.

how car auctions work - auctioneer

If you want to place a bid, you call the auction house. When the auction ends, the winning bidder pays the seller’s asking price plus any fees. If you win the car you will pay the seller plus any fees. Typically, you will need to have your financing in order but we will cover that a little later. 

Car Auction Tips

Public auctions are where people can go online and purchase a car for whatever price that they want. However, be careful as you might find yourself spending a lot more than you thought. If you do decide to use public auctions, check out Carfax reports before bidding as well as the KBB.com value. Make sure you know how many miles the car has driven before you bid. And remember, no matter what type of auction you choose, make sure you know how much your car is worth before you place a bid.

Inspect the Vehicles

Auction sites like eBay Motors and CarsandBids.com offer consumers a great way to buy cars without having to go to dealerships. But there are some things buyers should consider before making a bid.

how car auctions work

The first thing to check out is the vehicle itself, if possible. You want to make sure it runs well and looks good. If there are obvious problems, such as dents or rust, take note. Also look for signs of previous damage, or damage not disclosed in the photos.

If you have some time, you might consider hiring a third party like LemonSquad.com to inspect the car. Check out our article about how to buy a car through eBay.

 Remember, auctions sell vehicles "as is," so don't expect to see a brand-new car under the hood.

Dealer-Only Auctions

Auctioneers say that there's no substitute for experience and knowledge when it comes to conducting a successful sale.  Dealerships prefer to do private sales because they know exactly how much each car sold for, and they don't have to worry about customer feedback. They can also sell the same model multiple times without having to change prices.

Repo Auctions

A repo auction is a great way to find out what cars are for sale and how much they cost. If you want to buy a car, it’s best to do some research beforehand. Auctions typically take place during off hours, such as early morning or late night. Dealerships usually hold auctions once a week, but there are exceptions.

Dealers love them because they give them a quick source of inventory, especially if they don’t have enough stock to meet demand. But buyers should beware of buying vehicles from auction without inspecting them thoroughly, since many dealerships use fake photos and videos to make their vehicles look better than they really are.

Do you have to have a dealer license for car auctions?

Car auctions are becoming increasingly popular among consumers who want to buy cars online. But while they offer a convenient alternative to traditional dealerships, there are still some rules and regulations that apply.

If you're planning to bid at a car auction, you must be licensed to sell vehicles. This means you need a dealer license. Dealerships are required to obtain licenses from the state where they operate.

Dealership licenses vary based on location. Some states require dealerships to pay annual fees, others only require periodic inspections. Check with your local DMV to find out what requirements apply to you.

To become licensed, you must complete a dealer application form and submit supporting documentation. The application includes information about your company, its employees, and any previous experience selling automobiles.

Once you've completed the application, you'll receive a dealer license number. You'll use this number when bidding at auctions.

When attending a car auction, you may not be able to drive away with the vehicle right away. Instead, you'll need to wait until after the auction closes.

After the auction ends, you'll need to contact the winning bidder to arrange payment and delivery details. Once you've made arrangements, you'll need to sign a contract stating that you'll deliver the vehicle within 30 days.

Your agreement should include a clause requiring the buyer to return the vehicle to you within 10 days of receiving it. Otherwise, you risk losing your deposit.

If you plan to purchase multiple vehicles at once, you'll need to register as a dealer. To qualify, you'll need to meet certain criteria, including having enough capital to cover the cost of buying and reselling the vehicles.

Where can I find public car auctions?

Public car auctions are a great place to buy cars at bargain prices. These types of events are held every day, and you can usually find a wide variety of vehicles available.

There are two main types of public car auctions: private sales and open houses like Manheim. Private sales are typically held in person, while open houses are online auctions. Both types of auctions allow buyers to browse hundreds of vehicles at once.

To find a public auction near you, you can also look into local newspapers or Craigslist.org for listings. 

Can you get good deals at car auctions?

Car auctions are a great place to buy used cars at rock bottom prices. However, places like CoPart have gotten bad news recently due to the high prices and poor condition of cars.

But just because they're cheap doesn't mean you shouldn't pay attention to how much money you could save. There are several factors involved in determining whether or not a car auction is worth attending.

Here are three tips to consider when bidding on a car at an online auction.

  • Have your documents ready - Before bidding on a car, make sure that you have all necessary documents. You have your payments available, vehicle history report and insurance available.
  • Don't Bid Too High. But Bid Early - When bidding on a car, don't bid too high. Remember that the seller wants to sell the car but don't get caught up emotionally in order to avoid overpaying just to win the deal.
  • Be Flexible With Your Bidding Amounts - Finally, be flexible with your bids. If you end up winning the bid, be sure to stay within budget. Remember, if you lose the bid, you still might be able to negotiate a lower price if the top bid falls through.

Are car auctions a good idea?

Yes, you can find good deals at car auctions but I suggest this is only good for car guys and gals. If you do not wrench or have repaired cars before, then I suggest learning first. Auction cars are a gamble and most of the time there are things that need to be addressed. 

Sites like IAAI and CoPart sell salvaged titled cars that would make for good projects. But I would not recommend it for the average buyer. 

As mentioned previously, buying from the private seller is typically the best way to find a steal or a deal. Most sellers are happy to discount the price just to get rid of their car. 

Tips for First Time Car Buyers at Car Auctions: 

Get the Vehicle History Report

If you are planning to buy a used car at auction, you might want to consider getting a vehicle history report. You can purchase them online and get more details on the car you are looking at.

carfax-sample

What Are Vehicle History Reports?

A vehicle history report (VHR) is a document that lists every single thing that happened to a specific vehicle over the course of its life. This includes things like maintenance records, repairs, insurance claims, accidents, and more. While many people think of a VHR or Carfax  as just a list of problems and repairs, it actually contains information about the vehicle's performance, safety, and reliability.

You can access a vehicle history report online or through dealerships. Some dealerships offer CarFax reports with their listings but most auctions do not offer this. 

Set a limit for your budget

If you’re looking to buy a car at auction, don’t let emotion cloud your judgment about whether it’s worth spending money on. You need to have the retail price in mind as you place your bid.

Factoring potential repair costs and the cost of the vehicle can quickly exceed the retail price if you are not careful. 

The best way to do this is to use a spreadsheet. Set up columns for each type of vehicle you’d like to purchase, and enter the price of each one, Manheim Market Report (MMR) and the market retail price

Once you’ve got everything entered into your spreadsheet, you can see how much you have to play with to bring the car up to the retail market. Sometimes you might be better off buying directly from a private seller. This will give you a better idea of whether you’re getting a good deal or paying too much for something.

Set Aside Money for Repairs

Auctions are great places to find used cars. But there’s one thing you shouldn’t do—set aside too little money for repairs. In the previous section, you will have a column where you can see how much you have to spend on repairs.

You might think it makes sense to buy a cheap vehicle because you won’t spend much money fixing it up. After all, you don’t want to sink thousands into a car that breaks down every week. This is also important to research potential problems with the cars so you can anticipate repair costs. 

If you don’t, you could wind up paying tens of thousands of dollars to replace parts that break off during routine maintenance.

how car auctions work

Factor the fees into your budget

  • Purchase Price
  • Shipping Costs
  • Taxes
  • Other Fees

It's common that car auctions include fees that don't always list clearly. And even if the auction doesn't mention anything, you still need to factor in the fees that apply to your purchase.

In Conclusion

Yes, car auctions offer a unique opportunity for buyers who want to save money on their next vehicle purchase. 

Remember the following ground rules and you should be ok.  

1) Make sure you know what you're buying. Don't bid on something unless you know what it costs and what condition it's in. Also compare the retail price if you found this for sale with a private seller. 

2) Be prepared to pay top dollar. Auctions often attract buyers from around the country who are eager to snap up the best deals possible.

3) Keep your expectations low. Even though you may be able to score some amazing bargains, you shouldn't expect to walk away with a brand new car or steal.

Good luck with your next car search!

More Articles Worth Checking Out:

If you are approaching your lease's end, you might ask yourself, "Should you buy a car after lease?"You know the buyout price

Read More

I know from first-hand experience how NOT to buy a car, despite the seller being a family friend. I will cover exactly

Read More

Is it worth buying a 10 year old car today? Short answer: YES!I have personally owned new, old, and really old cars. In

Read More

How To Buy Manual Car Without Knowing How to Drive OneIf you're like many people, you've been dreaming of the independence and

Read More

Anthony Santiago - Editor-in-Chief

About the author

I am a passionate car enthusiast who likes to help people save money and avoid headaches when it comes to cars. I believe that everyone can find the right car at the right price. I share my tips and experience so you can learn quickly and maximize your next SUV, truck or car purchase.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}

Get Your Free Guide:
Top 3 Rules to Buying a Car