Attending a dealer car auction is by far the best privilege of becoming a used car dealer.
Dealer auto auction prices are way lower than a public auction making them the best auto auctions to attend, and some vehicles come guaranteed. The condition, and maintenance of the vehicles are generally greater, than that of any California public auto auction I’ve attended. Most vehicles sold are off-lease returns, replaced rental fleets, company cars, repossessed vehicles, and trade-ins.
- Off-lease: vehicles returned to the financial institution at the end of a lease term. Closed auctions are usually the only venue for such financial institutions to dispose of a large volume of end-of-lease returns.
- Off-rental: rental companies normally replace their fleets once a year, releasing a flood of late-model cars to the secondary market. Rental companies rely on auto auctions to sell off their used inventory. These vehicles tend to be well maintained and driven for only one year.
- Company/fleet cars: companies of varying sizes own or lease cars, trucks or vans that they typically keep for two or more years. Like rentals, these vehicles do not have many extras and get thoroughly exploited on a daily basis. Unlike rentals, usage of company cars varies greatly from the executive luxury sedan driven slowly and carefully on occasion to the delivery truck that regularly mounts curbs and gets abused in city traffic.
- Repossessed: vehicles can be voluntarily or involuntarily repossessed by financial institutions for delinquency or another reason for recall. Auto auctions are again the bank’s only option for deliverance. Repossessed vehicles can feasibly sell for less because the financial institution disposing of them only seeks to offset its losses (also restricted by federal regulations).
Many new car dealers are selling their trade-ins, at the auctions instead of selling directly to wholesalers. Look for these “fresh trades.” A “fresh trade” is a car that was traded into a new car store. These vehicles are good because they’re not dumped there because solely because they have problems, or a retail dealer is having trouble selling it, and just wants to at least break even. You’ll know if certain vehicles are “fresh trades” because they’ll either have a sticker on them, or they’ll announce the new car store there are coming from.
One dealer car auction I go to lets you drive the vehicle down a strip of road where you can bring it up to speed. Other auctions allow you to drive vehicles around the parking lot at any time. Manheim auction, a large dealer auction chain and adesa auto auctions, don’t like dealers’ test driving the cars around the parking lot. You don’t have to worry as much about test driving a guaranteed car because you’re protected. The guarantee only protects certain things such as motor, transmission, and onboard dash lights. AC, power windows, heat, and other minor things aren’t guaranteed. Even if your bidding on a guaranteed car, inspect the car before the auction to see what works and what doesn’t so you know what your getting into. Its not such a big deal if you inspect the day before the auction. I drive the cars around the parking lot on auction day even though I’m really not supposed too. Sometimes I get away with it, and other times I don’t. I just want to protect myself if the car I’m interested in is as/is. I don’t want to buy an as/is car without driving it first. I want to make sure I have a good idea of what I’m getting into.
Be careful of overheating
I’ve purchased cars in the past that looked fine at first, but later turned out to become a major headache. A car can seem fine going through the auction block, but can overheat by the time it gets back to the parking lot. I had purchased a BMW one time at a dealer car auction that seemed fine when I bought it. When I came to pick it up, the head gasket blew. I should have checked it prior to bidding on it. That’s why now I start the cars I like, and come back later to check on them. That way I can see if the temperature gauge is starting to rise higher than normal.
Car dealer tricks to watch for
Temporarily turning off the check engine light
Many dealers will temporarily have the check engine light turned off. Anybody can temporarily turn off a check engine light with an OBD1 or OBD2 scanner. These are diagnostic tools used by mechanics. These tools are used so mechanics can find out what’s wrong with your car when the check engine light comes on. You can turn the check engine light off temporarily with these tools so you won’t be able to see it on the dash when the vehicle is going through the auction block. The light will pop back on after some driving along with any other lights temporarily turned off like the SRS or ABS light. At a dealer car auction I like to attend, I found a receipt in a car for $40 for a temporary check engine removal. You can also temporarily turn off check engine light’s buy disconnecting the battery on vehicles pre 1996 with the OBD1 system. These cars are usually sold as/is. If you buy a car with a guarantee, and the check engine light comes on that same day, You can bring the vehicle back and have it arbitrated.
Look to see if the check engine light has been tampered with. Turn the key so the battery comes on, but don’t crank the engine. Make sure all the instrument cluster lights come on (check engine, abs, airbags). If one of them doesn’t, its either been disconnected or the light bulb burnt out. I once fell victim to this scam at an auction. If you end up buying a vehicle where they removed the bulb for a check engine, airbag, or abs light you better replace it before you sell the vehicle. If your customer gets into an accident and they find out the abs or airbag light had been tampered with you can get into big trouble.
How some dealers muffle engine noise
Another car dealer scam is muffling engine noise by draining the oil, and adding 50 weight heavy motor oil with Lucas oil stabilizer. They do this before running a vehicle in a dealer car auction. The vehicle has to be driven for a little while to muffle the noise but it works. Ironically very clean oil isn’t always a good sign so watch out. Lucas oil stabilizer is also good for covering up smoke coming out of the exhaust.