Auto auctions are a lot of fun and I go a couple times weekly. It’s great to meet and talk to other dealers and get vehicles for wholesale prices for retail. My heart beat races with excitement right before the car comes through the auction block. Then, I’m overjoyed if I win it!
When I first got started, I went to police impound auctions, and copart salvage auto auction. Now, you’ll only find me at a dealer car auction. There are different types of dealer auctions. There are live ones where the car goes through and auction block, and an auctioneer takes dealers bids live. Then there are silent bid sales where a dealer walks into a lot full of vehicles and makes an offer on a particular vehicle of interest.
I look online and check out the presale list to see what’s going to be there. I get excited if I see a certain car that I know I can make some money with.
Check The Pre Sale List Before The Auction.
I get there taking a general look at all the vehicles but looking primarily for the vehicles I saw on the presale list. The presale lists have the vin numbers of the vehicles, so you can run history reports. These vehicles generally are the ones I came to buy. You can also go to kbb.com, and find out the value of the vehicle your interested in. Finding a vehicles value online is much more accurate than the kelley blue book that people carry around. If you really want an accurate assessment of a vehicles value, see what they’re selling for in classified adds, and compare.
Protect yourself from hidden problems. Check the vehicle’s history before you buy with an official vehicle history report. If you get a monthly membership you can run as many reports as you want. It doesn’t cost much and will save you a lot of headache. Your not only looking for salvage history, you want to see if the cars been in an accident, or failed smog.
- A lot of cars are dumped at auctions because they failed the smog test. Cars which have failed smog can be costly to repair.
- You can also see if the vehicle has been sold at an auction before and how many times. A car that has been passed around at different auctions multiple times should raise a red flag.
- You can see where the vehicle originally came from. Watch out for rust damage from cars from the east coast.
I get to the auction at least an hour before it starts to inspect the cars. There are so many cars there that I overlook a lot of them. The ironic thing is a lot of the time, I buy a car that I didn’t inspect or come to buy. I come across these vehicles while they are idling, and waiting to be ran through the auction block. It’s much higher risk to buy these cars because I didn’t get an opportunity to do a thorough inspection. By this time I can’t get in the car, and test it out. I have to do a quick five-minute inspection.
- I’ll ask the driver how the car runs. Sometimes they’re helpful, and sometimes they look at you like your speaking Chinese.
- I’ll have them put it in reverse to make sure that works (you’d be surprised).
- I check for warning lights like a check engine, abs, airbag, etc.
- Listen for engine noise.
- I look at the temperature gauge for signs of overheating.
- Take a good look at the exhaust checking for smoke.
- Check for leaks.
- Check out the body for dents, rust, scratches, etc.
During the presale inspection, I won’t inspect certain vehicles because I think they’re going to go to high. The auction experience is unpredictable. Even though I have a general idea of what certain cars will be sold for, you never really know. Prices are determined with whose at the auction, what time of the day, season, weather, etc. I’ll see certain vehicles go much cheaper than I anticipated. Sometimes I’ll take a chance and bid on them, other times I wont. It’s a big risk to do this without first inspecting the vehicle. It may need some major repairs, and you’ll need connections to get it fixed cheap so you can still make a profit. I wouldn’t recommend this unless you have good amount of money. You can get buried quick in this business if you buy a couple of bad cars, and can’t buy anymore cars to make back some of the lost money. The more money you have, the more risks you can take. At Dealer auctions you pay a buy fee on top of the purchase price of the vehicle. The seller is charged a sale fee. It’s usually from $100 to $180 depending on which auction you go to, on top of the selling price of the car. This is how the auctions make their money. Most auctions charge the seller a no sale fee of $30 if the car doesn’t sell.
At dealer auctions, You can purchase vehicles that are either guaranteed or as/is. Manhiem auto auction, and Adesa auto auctions offers guarantees on some vehicles. Parts of the vehicle that are guaranteed are most commonly frame, engine, and transmission. You can also arbitrate a vehicle if the SRS, ABS, or check engine light is on. Arbitration is when you bring the vehicle back to the auction for a problem that was guaranteed. The auction acts as a third-party mediator between the buyer and seller. If there was indeed a problem found that was guaranteed, you can get your money back. Most guarantees last for a single day. One of my favorite auctions writes anything majorly wrong with the car on the windshield. If I discover a major engine problem that wasn’t disclosed, I can bring it back that day, and arbitrate it. When I purchase a vehicle, I pay for it and take it for a nice test drive. If I notice something funny, or if a light pops up on the dash, I bring it back and arbitrate it. As/is vehicles are exactly that as/is. No matter what happens to the car after you buy it your stuck with it. These are vehicles you have to check thoroughly prior to bidding and be careful with.
Be careful of vehicles that are announced AS/IS in dealer consignment lanes. Most of the time there is something wrong with them. Why else would they be there? The seller could make more retailing the car rather than wholesaling it. The seller knows you can’t test drive the vehicle before you purchase it. It’s easy for them to conceal a transmission problem. If there wasn’t anything wrong with the engine, transmission, or frame the car would be guaranteed.
If you’re planning on attending a dealer auction, it’s always safe to do some research, as you can learn what kind of cars are up for sale and decide in advance what you want to bid on. It’s also good to do some comparison browsing;
How do I get in if I’m not a dealer?
You have to have a friend whose a dealer to get in. They’ll let you in at some auctions if the dealer vouches for you as their driver. Dealer’s can get the presale list online, and let you know whats going to be there. You can also approach a dealer in front of an auction and ask. Some people pay dealers for this service. It’s not worth it for me. I would only do it for a friend or relative. Dealers will take a deposit from the buyer before they bid on the car. That way if the seller backs out of the deal they can try retailing it or running it back through the auction. With the deposit in their hands they protect themselves from losing money.
The best thing to do if you have a friend whose a dealer, is get a salesman license under their dealership so you can go whenever you want without them. If you have a salesman’s license you get all the same privileges as a dealer such as using dealer plates, going to dealer auto auctions, etc. Most dealers won’t give you this privilege unless they get a piece of your profit, and trust you. You can find out what it takes to get your used car dealer license, or salesman license at your local DMV.
Auto Auction Tips
If your just starting out, attend some public auto auctions. There’s nationwide auto auction, and gsa auto auction. Good buy auto auction which also does online bidding. Kruse auto auctions specializes in antique, and classic cars.
Attend some police impound auctions. There’s government seized auto auctions, and try checking out a charity auto auction.
Police Impound Auctions
Everything is as/is at police impound auctions. Police auctions are a great place to get your feet wet, and get used to the auction experience. Police impound auctions are a free public auto auction. Anybody can attend them. Call the police station in your area, and ask where they’re held. Even if you don’t end up buying anything, they’re fun to attend because you end up meeting interesting characters there. Have your money ready, and bring cash. After you win the bid you’ll either have to pay for the car in full, or leave a non-refundable deposit. There is also likely to be a city fee on top of the purchase price which is usually 10%. Make sure you have your i.d. with you so you can register when you get there, and get a bidder number. I haven’t been to a police impound in a long time because I have access to dealer auctions. People get their vehicles impounded for a number of reasons such as
- No California driver’s license
- Being parked in the same space for more than 72 hours
- Expired tags
- Illegally parked.
The towing, and storage fees can be excessive, and the vehicle’s owner can’t afford to get their car out of impounding, or don’t feel its worth it. The city police garages conduct weekly auto auctions / lien sales for vehicles not redeemed. This gives the city the opportunity to enable the city to recoup fees owed to them. Remember that a lot of these cars have been abandoned there by their owners which should bring up an immediate red flag. Most of these police impound auctions will announce why the vehicle was impounded. It’s less likely for a car to have major problems if it was impounded because the owner didn’t have a drivers license. Pay attention when the lot men are starting up the cars. Making smart decisions will save you a lot of headaches in the long run.
Advantages to purchasing police impound/lien sale vehicles
Everybody has a niche, and certain people do better at selling certain vehicles, in certain areas. If you go to an auction far from where you sell your cars, you’ll be able to get your niche cars dirt cheap because they’re not as popular in the area that your buying them.
Disadvantages to purchasing police impound/lien sale vehicles
When you buy these cars you don’t get the title. Instead you get a bill of sale from the tow yard, and lien sale papers. They work like a title, but its hard to sell these cars with this type of paperwork. Rarely do you ever get the title with the vehicle.
These cars have had the license plates stripped off. In order to get the plates you have to register the vehicle. You can pay the registration, and get a temporary registration sticker which is good for a month. Once you get the car smogged, you can go back to the DMV , and get your plates. It’s better to get the plates because the vehicle looks more presentable. It’s hard to sell a car with no license plates on it. A lot of dealers will make up stories on why there are no plates on the vehicle. They won’t tell the buyer the truth that they bought the vehicle just to flip it.
Most unlicensed dealers selling these cars don’t want to register them in their name. If they park them on a public street, they’ll make fake temporary registration stickers, or fake report of sales, and tape them to the back window. They won’t just leave the cars on the street with no plates. They’ll put the plates on that you see on the cars at new car dealerships.
In my opinion you’ll never make big profits with these vehicles because they’re not very clean. You can make $250 to $400 off of most of them easy because your buying the cars for around $500. If your selling $800 to $1000 cars, you get a lot of dealers calling to try to low ball you, or people with very little money. I wouldn’t feel comfortable selling these cars to the public. Its not worth the headache if they call back and complain which happens often when selling impound cars because most of them have a lot of mechanical problems.
Regardless of the problems associated with these cars, lots of people make a living selling them. If you’re serious about growing in this business you’ll have to eventually take it to the next level, and get your dealer’s license. Some people have asked about police online auctions. You can bid online at copart, and manheim auctions. I’ve never heard of online bidding at a police impound.