Chances are that if a vehicle has been traded in, leased, repossessed or totaled, it will find itself among the nearly 9 million vehicles that are purchased each year in an auto auction — either one that caters to dealers or one that's open to the public. Few people outside of the auto industry ever realize the size and scale of this business. It's second only to Wall Street in terms of sheer volume of items being sold at bid. Auto auctions are capitalism in its purest form, and that's what lures buyers in search of a good used car at a low price.
And while there are bargains to be had, there's plenty of potential for disaster, too. I've seen both, and often on the same day.
From a $200 Volkswagen to a $200,000 Ferrari, I have personally seen hundreds of thousands of deals come together to the future joy of one party — or the long-term sorrow of another. In my decade-long travels in this world, I have been the bid caller — also known as the auctioneer — as well as the bidder, the buyer and the seller. I even operated and managed my own auto auction in the metro Atlanta area.
This is a world that average car buyers enter at their own peril. Almost nothing is what it first appears to be. That 15-year-old cream puff may be harboring a blown head gasket and electrical issues aplenty. I have seen hundreds of cars in which the "Check Engine" lightbulb has been removed, the oil has been changed to hide a bad engine and the engine bay has been cleaned so that gasket leaks are hidden for that short ride across the auction block.
Most folks should never set foot in this arena. But if you plan on going anyhow, here are some guidelines for success, shaped by what I've learned working in this world.
1. Decide If You Can Really Handle an Auto Auction: Most car auctions are dealer auctions and are open only to professionals. Public car auctions are a rare breed in this country — for good reason. You have no guarantees and limited knowledge of the product you buy.
So ask yourself a couple of key questions first: "How much do I really know about cars?" An even better question: "How much do I know about what can be done to a car to hide an expensive repair issue?"
Public auctions are where many cars in "wholesale heaven" will wind up. These are cars that can't be sold at a dealer auction because no car dealer would ever want to invest in them for the price the seller wants.
Finally, here's the brutal reality of the car business: People buy with their eyes. If you are not a mechanically inclined person with a keen eye, buying a car at a public auction is not for you.
2. Know the Sellers: Before you even step into an auction, call its business office and find out who has consigned cars for the event you want to attend. There are three levels of sellers at most public auto auctions. The first two can be good for buyers. They should avoid the third at all costs.
- Level 1: Banks and other financial institutions: These sellers are not in the car business. They are in the lending business. Finance companies simply want to sell their vehicles at a reasonable price and be done with it.
Most public auctions will put these sellers at the beginning of the sale because, on average, they offer the best inventory and the most reasonable selling prices. A public auto auction with plenty of these sellers is well worth the visit.
- Level 2: New-car dealers: These days, new-car dealers will keep most of their trade-ins, but not all of them. Often this is because it takes time and money to diagnose and repair issues for makes with which they are unfamiliar.
A Toyota dealer can easily sell a well-kept Camry. But a Land Rover or Saab with multiple minor issues isn't worth his time. If you're someone who performs his own maintenance and can spend a healthy amount of time at enthusiast forums learning about potential issues ahead of time, new-car dealers are an excellent source of cheap vehicles.
- Level 3: Independent car dealers: These sellers are in the business of selling used cars. If they can't sell a car to a retail customer, they will bring it to one of three different places: another car dealer, a dealer auction or a public auction.
If the first two are not successful for a sale, then the dealer will try the third. This way, the dealer can sell the vehicle to someone who doesn't know what he's doing.
Public auctions serve the purpose of finding the people who fit the "clueless" mold. If you're still daring enough to shop at one, it's vital to not be among the clueless.
3. Do Your Pre-Auction Research: An AutoCheck or Carfax vehicle history report can tell you an awful lot about a car's history. Many public auto auctions will also list their inventory online along with vehicle identification numbers (VINs) so you can determine which vehicles will be worth your time.
Get a subscription to one of these vehicle-history report services and use them to vet the cars in which you're interested. Has the vehicle been sold to several parties over the past year? If it has, that may reflect serious mechanical issues for the car. Was the car maintained by a dealer? Did it come from the Rust Belt or an area affected by one of the recent hurricanes or floods? Does it have a current emissions certificate? You can learn about all of these potential stumbling blocks before you ever attend the auction.
4. Know the Auction Rules: When you arrive at the auction, register at the front counter. The auction representative will ask for your license and usually a small cash deposit — maybe $100.
This is a good time for you to ask about the buyer's fees at the auction. Auctions will charge some high fees that won't be spelled out until the end of the transaction. Make sure you're not surprised by those fees after the fact.
Drive the car around if you can. Some public auctions will let you do this if you arrive a few hours early. If the vehicle won't start, call the auction staff and ask them to bring a battery box to the vehicle. Never bid on a vehicle without driving it.
5. Assess the Car by Assessing the Previous Owner: Limit yourself to no more than five vehicles that you might be interested in buying. Go through them and look at everything: tires, fluids, interior condition. I even go so far as checking radio stations and glovebox remnants.
Your goal is not only to inspect the car, but also to understand some things about the previous owner. A car may have been built with exceptional quality, but a bad owner will turn even the nicest cars into rolling turkeys. In my experience, a radio preset to news stations and easy listening says one thing about the owner. If all the presets are for Goth metal and anarchist stations, well, that says something else.
6. Pay Attention to the Auction Lights: The auction block will usually have four lights: red, yellow, green and blue. Here's what they mean:
- Red Light: This is the "as is" light. If it's on and you are the high bidder for the vehicle, it's yours — along with anything that may have fallen off as it rolled away from the block.
Even under "as is" rules, however, you still can arbitrate and dispute the vehicle purchase on the grounds of frame damage, flood damage or title issues. Some public auctions claim that you have no recourse if the vehicle's odometer was rolled back. But you absolutely do have recourse, under the Uniform Commercial Code, which governs sales law in most states. But if the transmission or engine is bad, it's your problem.
- Yellow Light: This means the auctioneer is going to make an announcement to bidders about an issue with the car. It can be frame damage; salvage history; an odometer that has been replaced, broken or rolled back; an issue with the title or about 20 other possible problems. If a yellow light is on and you didn't hear the announcement, ask the auctioneer directly about the car's issues. Once you know what they are, then you can weigh your decision to bid.
- Green Light: This means that if you are the winning bidder, you can inspect and drive the vehicle for between one and three hours after the sale has been made, depending on the auction's rules. You do have to pay for the car before driving it off the property, however.
If it has a bad air-conditioning system, you can't undo the deal. Does it need new suspension components? Too bad. Oil and coolant leaks are also your problem, as are brake systems and other wear items. You can, however, go through an arbitration process if there are engine, transmission or major electrical issues, as well as title problems and emissions-system issues (if you live in an area that requires such certification).
In other words, if the engine is blown or the transmission shifts improperly, you might be able to walk away from the purchase if the auction can verify that there's a problem with one of the covered items. That's one of several good reasons why you should pay by check — never by cash — at an auction.
- Blue Light: This signals a situation called "title attached," which means the title has yet to arrive at the auction. The good news is that the auction won't process your check until the title arrives. The bad news is that you can't register the vehicle until the auction receives that title. If you don't get the title within 30 days of the purchase, you have the right to return the vehicle and get all of your money back. No exceptions.
7. Don't Get Drawn Into the Drama: I always tell folks to note their price limit for a vehicle on a small sheet of paper. When you do that — and look at it during bidding — it's a lot harder for the auctioneer to pry you off your financial foundations. Remember, auctioneers are there to represent the sellers and are paid to sell. They're good at building excitement.
When you get to the auction block, there will usually be a mass of people staring at the auctioneer and auction staff. Most buyers will simply park themselves among the herd and believe in the hype that's being promulgated from the auction block.
Want to know what's really going on? Change your view. Walk to the other side so that you are facing the crowd. See what the auctioneer sees. Do you see any bidding? Sometimes there will be. Other times no one is budging.
So when I extend my hand and say to you, "This car is as cheap as a worn-out mop," your job is to look down at the price-limit note and stick to your guns. If the price is too high, don't bid. It's that simple.
8. The Auto Auctioneer Is Not Your Buddy: My job as an auctioneer is to get the vehicle in a "sellable range." What's typical in this business is to start the bidding at $1,000-$2,000 over the seller's reserve price. Then the auctioneer goes down $1,000, then down $1,000 or $2,000 more. Then he'll start "bumping the bid" upward so that it gets in the range of the seller's price. A lot of what gets sold will have fewer than 10 real bids.
So when I, as an auctioneer, whip up interest in higher bids, am I trying to rip you off? No. The truth is that experienced professional buyers will conspire and sit on their hands if the auctioneer simply tries to wait for them to bid. Lawyers call it collusion. Auctioneers call these buddy-buddy bidders "cousins and brothers-in-law."
If dealers can work together to lower the purchase price of vehicles by refusing to bid up, they will. The dealers are professionals who know how to play the game to their collective benefit. My job as the auctioneer is to protect the seller from "the family" of experienced buyers and get the vehicle sold.
9. You Have a Court of Last Resort: Remember that the auctioneer is not a judge, even if he does have a gavel. The folks who pay him are in business. It's in their interest to have their auctions run smoothly and without gripes. No auto auction can force you to buy a vehicle that has been misrepresented.
More than 98 percent of the sales at public auctions go off without a hitch. But if you wind up buying a vehicle that truly has been misrepresented on the auction block, you have the right to walk away, cancel your check and fax a follow-up notice to the auction the following morning. Public auctions hate bad publicity almost as much as they hate an unfriendly judge with a real gavel.
10. Build a Relationship: While I am not on the block to be your pal, you would be surprised how far a buyer can get at a public auction by exhibiting a genuine good nature and initiating a nice conversation with the auctioneer. I deal primarily with used-car dealers — for better or worse. Some are nice. Others are scoundrels, pure and simple.
If folks pass by and say hello between vehicles, I take note. I'm not there to hold your hand. But if you become a familiar face and engage in a sincere conversation with me during the break, I'll look out for you.
I realize that the biggest fear we all face at an auction is getting screwed. Most auctioneers will slow the bidding down when they see that a member of the public is participating. I can't turn sellers into saints and inexperienced buyers into experts with X-ray eyes. But I can be a fair broker and look out for those who want to be treated well.
The rest of the auction experience will be completely up to you. Good luck!