How Do Car Auctions Work? A Beginner's Guide

Car auctions have grown in popularity in recent years because they present a rare opportunity for buyers to acquire their desired vehicles at a fraction of their usual cost. A car auction is a method to sell vehicles to the highest bidder using an auction system.

During the auction process, each vehicle will be presented to prospective buyers by an auctioneer, alongside detailed information on the features of each car. Potential buyers will then place bids until the winning bid is determined.

Keep reading to learn about the different types of auctions and receive pro tips on purchasing a vehicle at an auction.

What Are the Types of Car Auctions?

  • Public Auctions
  • Dealer-Only auctions
  • Government Auto Auctions
  • Repo Auctions
  • Online Car Auctions
  • Salvage Auctions

Public Car Auctions

Public car auctions are open to anyone interested in purchasing a vehicle. Auction houses, private sellers, law enforcement, or car dealers may hold public auto auctions.

There are typically many vehicles sold at public car auctions; some may be new or used vehicles in excellent or poor condition. It is, therefore, a good idea to bring an expert along for the auction who has a wide range of knowledge about various vehicles and may also be able to conduct vehicle inspections.

Dealer-Only Vehicle Auctions

Private or dealer-only vehicle auctions are not open to the public and typically require auction participants to have a dealer license. Dealer auctions are an excellent opportunity for a car dealership to bid on vehicles they will add to their inventory. It is common for new or like-new cars to get auctioned at dealer-only vehicle auctions.

Sometimes, a complimentary pass from the auction house will permit private buyers to enter a dealer-only vehicle auction. It is also possible for a private dealer to enlist a broker-dealer to bid for them at a dealer auction in exchange for added auction fees.

Government Auto Auctions

Government agencies, such as the General Services Administration (GSA) and U.S. Customs and Border Protection, host auto auctions if they have a surplus or confiscate government-seized vehicles. Vehicles auctioned at government auctions may include cars, trucks, boats, motorcycles, buses, planes, or snowmobiles.

Repo Auctions

Repo or repossession auctions are an excellent option for prospective buyers looking for highly cost-effective used vehicles in various conditions. When a bank or lender retrieves cars, trucks, or other vehicles after an owner stops making car payments, these vehicles typically get auctioned off by auction houses in repo auctions. Some repo auctions may be open to the public, while others are accessible to licensed dealers and brokers only.

Online Car Auctions

With online car auctions, prospective buyers can bid in live auctions virtually from the comfort of their homes or office. Websites for auction companies post new and used cars, and buyers have the opportunity to bid on them until bidding closes and the highest bidder is determined.

To participate in an online car auction, buyers simply need to register with an auction site on Google, browse vehicles for auction, and place a bid if they are interested. Instead of traveling to attend an auction, online car auctions allow buyers to purchase vehicles in different areas or states where they are.

Salvage Auctions

If a vehicle has been damaged and can no longer drive in its current condition, it may get auctioned at a salvage auction. Insurance companies typically hold salvage auctions and provide buyers with the opportunity to purchase a car with a salvage title at a low price.

It is essential to keep in mind that most salvage vehicles will require maintenance after purchasing to ensure they are safe to operate and can legally drive. Salvage vehicles purchased from an auction must get towed from the auction lot to your location. It is also best to reference your state’s laws on salvage vehicles because each state has varying regulations on how much damage qualifies a vehicle as salvage.

Pro Tips for Buying a Car at Auction

  • Have a Budget
  • Do Your Research
  • Get to the Auction Early
  • Understand Other Costs of Buying

Have a Budget

When it comes to bidding on a vehicle at a car auction, it is vital to keep in mind that you will be responsible for paying for the cost of the winning bid if you are the highest bidder. Once the bidding starts, it is easy to get carried away and raise your offer on a vehicle — even when the highest bid rises above your price limit. Therefore, it is essential to go into an auction with a set budget in mind or a determined maximum bid.

Monitoring the current bid amount will also help you ensure you are not accidentally overbidding. Some vehicles will have a minimum bid or a reserve, which can give you a good idea of the likelihood of being outbid.

Do Your Research

When buying cars from an auction, it is essential to do your research. Searching for the car’s vehicle identification number (VIN) online is a good idea if you are interested in purchasing or bidding on a specific vehicle.

Websites such as Carfax provide a detailed vehicle history report, vehicle condition report for every VIN entered, and the estimated market value of similar vehicles. Looking up information on cars for auction will help to ensure that you are receiving the best deal possible and that you are well aware of any vital information you should know about the car.

Get to the Auction Early

Prospective buyers that arrive early to the auction can receive a preview of the vehicles going up for auction. Doing so will allow you to finetune your search, determine which cars you may be interested in bidding on, and will enable you to conduct research on the vehicles for auction before it begins. Although you may be able to sit in the cars and examine their interior features before the auction, we should note that it is unlikely that you will be able to test drive the vehicle.

Understand Other Costs of Buying

The payment process for a vehicle auction varies from a traditional car dealership trade-in route, and every auction has its own set of terms that all must follow. It is common for auction winners to be required to pay for the entirety of their purchase without a down payment.

Buyer’s Premiums

It is a good idea to determine whether or not the price of a winning bid will have an added buyer’s premium or an additional percentage charge on the winning bid that the winning bidder must pay. Factoring in a buyer’s premium will allow you to budget for both the cost of the highest bid and any added percentage fees. In addition, you may need to pay the total price of your auctioned vehicle explicitly with credit cards, checks, or cash.

Reconditioning

Reconditioning, or recon refers to the process by which used vehicles are repaired and restored. Not only will your newly-purchased vehicle need to be thoroughly cleaned and inspected, but the exterior and interior features may also need touching-up.

Repairs

It is crucial to keep in mind that auctioned vehicles do not come with classic car warranties. It is typical for vehicles purchased at an auction to require maintenance and repairs, mainly if purchased at a salvage auction. Therefore, you should factor the possible cost of repairs into your budget before buying a car at a vehicle auction.

Bottom Line

After purchasing a used vehicle from a car auction, it is time to transport it to you. If you need to ship it, enlisting the help of a vehicle transportation service such as Carvaygo will simplify the transportation process and provide you with fast, reliable, and trusted shipping services. We will get your vehicle from point A to point B with the help of a licensed car hauler within our network.

Are you interested in buying a car from a vehicle auction? Visit our website today.

Sources:
How Do Car Auctions Work? | American Auto Shipping
Understanding The Ins And Outs of Vehicle Auctions | Carvana
The Ins & Outs of Repossessed Car Auctions | Miedema’s Repocast
Buying A Salvage Titled Vehicle At An Auction | Capital Auto Auction
What Is Vehicle Reconditioning And Why Should I Care? | Autobytel

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