Thursday, October 19th, 2017

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Car Auctions 101

So you want to try your luck at a car auction? There are two basic types of auctions: Those open only to licensed car dealers, and those that are open to the public – including dealers.

Auctions open to the public are often best suited, in our opinion, for people who truly know cars and who know how to fix them or have access to a low-cost maintenance facility. At most public auctions you can walk around the car, open the doors, look inside, and open the hood to examine the engine; but you will not be allowed to drive the vehicle.

Full payment is required at the time of purchase, all sales are final, and the autos come “as is,” which means there is no guarantee or warranty. While there are some good deals to be had, keep in mind that this is a high-risk proposition.

Who Holds Public Auctions?

  1. The General Services Administration
  2. The U.S. Customs Service
  3. The IRS
  4. The U.S. Postal Service<
  5. Your local police department (state, county and city)

To find out what auctions are being held in your area, check your local newspaper and television ads.

What You Need to Know

1. Find out when they are holding the pre-sale inspection period and take advantage of it.

2. Inquire about the terms of the sale.

  • Do they require a deposit before permitting you to bid?
  • How will they accept payment? Cashier checks? Credit card? Cash?

3. Determine how you will get the car home. Be wary of people selling temporary registrations at auctions. In most cases, you’re going to have to tow or flat-bed the car off the auction lot. Generally, you’ll find various tow services offered at the lot.

Determining How Much to Bid

1. During the inspection period perform, to the extent permitted, the inspection checks outlined in “What Car Dealers Won’t Tell You.” (Available in bookstores and on Amazon.com)

2. Write down the: Vehicle Identification Number (VIN), make, model, number of cylinders, mileage optional equipment and note the condition of both the exterior and interior.

3. Call three used car dealers or wholesalers and “pretend” that you have a used car to sell. Describe the car you’ve inspected giving them all the details. Ask the dealer to give you a “ballpark” price over the phone. Usually, his number will be 10-20% below its wholesale value. Add 15% and you’ll probably be pretty close to its true wholesale value. You might also want to compare their quotes to the NADA website (www.nada.com ).

4. Once you know the approximate wholesale market value, adjust your bidding accordingly knowing that, in a worst case scenario, you can probably sell the car back to a wholesaler.

5. Use the VIN Number to run a CarFax report prior to the auction. CarFax reports include any history of accident damage, odometer fraud, multiple owners, title problems and much more. To see a complete list of their reports, log on to CarFax.com .

Tips on Bidding

1. Always go to the auction with a not-to-exceed bid amount in mind. And stick to it. Don’t let yourself get caught up in the frenzy of bids. Your top bid number should never be higher than the wholesale value of the car.

2. Often an auctioneer will start the bidding at a high number and then drop it if, as is usually the case, no one responds to the opening asking price. It’s usually best not to be the first one to bid. Get a sense of the audience’s interest in the car before you jump in.

3. It would be a good idea to attend an auction or two before you start seriously bidding. The more you can learn, the better your chances of reducing your risks.

Inspection Tips

Check the Car with CarFax.com. This website will provide a history of the car including odometer readings, the amount of warranty, if any, left on car, and whether the car has been in a major accident.

Professional Mechanic Inspection. It will cost you a few bucks, but it may well be worth your while to have the car checked by a professional mechanic.

Good luck!

Bob Ford is the author of “What Car Dealers Won’t Tell You.”

© 2008, Young Money Media, LLC. All rights reserved.

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