Buying a car at an auction — whether local or online — can save you some cash. But it can be risky and there's usually a tradeoff. Cars bought at auction don't come with the same guarantees as those bought through dealerships. So while you may save money in the purchase phase, you could end up spending more on repairs and maintenance if you don't do your research — and a thorough inspection — before bidding. If you're going the live auction route, make sure the auction you plan to attend allows inspections, is reputable and will give you the proper documentation needed to register your new vehicle. If you plan to bid in an online auction, the same holds true. Make sure it's a reputable site from which you can get all the proper documentation needed. Local auctions are plentiful, and their rules and procedures may vary by location. Online auctions are becoming more popular and are offered through auction houses as well as more mainstream sites such as eBay. Regardless of which type of auction you choose to attend, make sure you educate yourself beforehand on what to expect and you'll be far less likely to walk away with a lemon.
The rules are simple: bid, pay (if you win, of course) and take your new car home. But the steps you take in between each of those rules can make all the difference in the world.
Auction Types
There are three main categories of auctions: local auctions, dealer/wholesale auctions and collector car auctions. Some are public and some are closed, some require pre-registration while others don't, and each has its own type of rules and regulations. Before heading to any type of auction, find out what types of cars are sold, whether the auction is closed to the public and whether you need to register beforehand. Here's a quick rundown on each ...
Local Auctions: Most towns across the country have general auctions at which a wide variety of items are sold — including cars. These auctions are always open to the public and may offer a selection of cars. Before bidding on a car at a local auction, be sure to inspect it thoroughly (taking a mechanic with you is ideal). Once you win the bid, the car is yours — no matter the condition.
Dealer/Wholesale auctions: Dealers tend to go to auction for three reasons: their lot is too full of inventory, their inventory is aged or they have trade-in stock that doesn't match their inventory. Going to auction helps them make a quick profit on these cars and helps make room on their lot for other autos that have a quick turnover or a higher profit margin. These auctions are mainly open only to dealers and also include previously leased vehicles.
Collector Car Auctions: Always open to the public, collector car auctions are where you go to get your hands on unique cars from decades past, or from recent years, that are in collecting condition. Certain collector auctions are specialized in one type of vehicle — be it prewar, postwar or muscle cars. Choose the auction that suits your style and prepare yourself for an experience — collector auctions are high energy and very exciting.
Basic Steps of Buying a Car at a Local Auction
Step 1: Regardless of the type of auction you plan to attend, find a reputable auction house that allows potential buyers to inspect cars before the bidding begins. You don't want to attend an auction that does not allow inspections, or you run the risk of buying a vehicle that looks good on the outside but is a mess on the inside.
Step 2: Set limits on what you plan to spend. Often car auctions are high energy, making it easy to get caught up in the experience. Setting price limits will help minimize your chances of bidding higher than you can afford.
Step 3: Pre-register with auction house. At this time, the auction staff should explain all rules, procedures and instructions.
Step 4: If registering a car, be honest. Give the auction house all the basic details about your vehicle: mileage, condition, title status. Once registered, you will be given a unique number and designated a lot space in the auction yard.
Step 5: Inspect! As mentioned in Step 1, the most important step of any car auction is to inspect the vehicle you plan to bid on. What many amateur auction-goers don't realize is that the second the gavel strikes, ownership changes hands. There's no chance to back out of the deal after you win a bid. So, take a close look before the auction begins and inspect every aspect of the car you plan to bid on. If possible, bring a mechanic along who can give the car a thorough inspection to ensure you won't be surprised afterward by something you didn't see.
Step 6: When bidding, signal clearly to the auctioneer, and if you win a bid, settle up quickly with the block clerk. The sooner you settle, the sooner you can drive away in your new car.
Online Auctions
Online auctions are all the rage at the moment, and often these auctions include autos. While independent auto auction sites do exist, larger-scale — and more well-known — auction sites like eBay are offering cars up for bid. Thanks to the name recognition, a lot of auction traffic is going to eBay, which allows users to search by make, model and even color.
While super-convenient, online auctions still draw a fair number of complaints — the biggest of which is that they aren't local — and come with risks. Many sites, however, are now allowing users to restrict their car search to a specific area, which limits the number of complaints, but the risks are still very much alive and well. Sometimes what you see online isn't exactly what you get. Check out the seller to make sure he or she is reputable and has a positive selling history. You don't want to be surprised when your "mint condition '67 Chevy" arrives looking not-so-mint. To be absolutely sure about what you're bidding on, consider traveling to see the car in person if it's not local. While the cost of a flight or road trip may be a lot to absorb, it may save you thousands of dollars — and quite a few headaches — later. Also, be aware of scams — which are plentiful in the online world. Doing your research and being aware of the consequences of buying online will do you a world of good in the long run.
Bidding is simple and users can follow the auctions with email alerts or simply by checking the site. If you win the bid, there are quite a few ways to pay and to arrange delivery of your new purchase. It really doesn't get much easier than that.
But if the thought of making a large purchase — like that of a car — on eBay leaves you uneasy, there are other online avenues to pursue. Professional auto auction Web sites do exist, but things work a bit differently than they do on more mainstream auction sites. The biggest difference is that you may have to pay a buyer's premium on top of the bid price in the event that you win the auction. While buyer's premiums are more common at live auctions, they can be charged during online auto auctions, too. Just do your research when signing up for an auction, and be sure you're not taken by surprise should you win the car you bid on.
Online auto auctions work a lot like on-site auctions, except there isn't usually a preview period and you can't inspect the car for damages. Reputable online car auctions should list all the information you need to make your decision, and they'll send the car to you for a nominal fee.
Payment process
Most auctions — local and online — accept cash, checks and credit cards. If you don't have the finances to buy the car outright, consider a financing plan. Most auction houses can set you up with a third-party financing offer, but often it's cheaper to go with an outside loan company. If you plan to finance your purchase, be sure to get approval before you go. Most mainstream online auctions do not offer financing plans, but sites catering to car auctions may.
Car Auction Tips
* Check the rules and regulations for the auction you're interested in before going. Some allow you to inspect the cars before bidding, while others don't. And it's pretty safe to say that if an auction house doesn't allow inspection, be leery. It's probably because they don't want you to know what's really going on under the hood.
* Before going to an auction, formulate a plan outlining what types of vehicles you're looking for, their estimated value and how much you're willing to spend. You don't want to be caught in the heat of the moment bidding higher than you can afford.
* If you're attending an auction that welcomes potential buyers for a preview period before the auction begins, consider bringing a mechanic along with you to inspect the car. Remember, there's usually no warranty, guarantee or return policy with car auctions, so you want to be absolutely sure the car you're bidding on is worth the money.
* If you are lucky enough to attend a preview period prior to auction, jot down the VIN number of the vehicle you're interested in. This will allow you to perform a car history search, which can reveal if the car has been in any accidents. Unfortunately, though, most classic cars won't be found on VIN searches because of their age. Also, you should inspect the car for any telltale odors such as mildew.