Why Do Dealers Buy Cars At Auction?

If you’re wondering where used car dealerships get their cars, car auctions are one of their sources. So, why do dealers buy cars at auction?

Car auctions are available across the US, wherein both car dealers and private individuals can join. Although auctioneers enjoy great deals, car auctions have their own pros and cons that everyone should consider carefully.

Read this post further if you want to learn more about why dealers buy cars at auctions, what are the advantages and disadvantages. 

Car Dealers And Auctions – What’s The Deal?

Car dealerships buying cars from auctions is not a trade secret – almost every other dealership you know does this. But what can car dealers get from getting auctioned cars? Why do they keep buying cars at auction?

It’s not that hard to see the reasons why. Car auctions offer a lot of advantages for dealers, regardless if they’re a franchise or not. Car auctions are a good event wherein dealers can check out different cars in one sitting. Dealers can buy several vehicles in just one sitting.

In addition, car auctions provide essential information right away; information that dealers should know right on the spot. Every car presented in the auction comes with details such as mileage, odometer, and condition reports. Cars being auctioned are guaranteed with a good title. Best of all, most car auctions provide pick up and delivery services for larger dealerships. If your car dealership doesn’t have auto reconditioning services, car auction houses can do the recon for you.

One more thing that car auctions can provide to car dealers is financing. Many finance companies out there are willing to offer auction-only loans to dealers who are keen to get more cars but short in cash. Usually, these finance companies can also give protection and guarantees to each transaction. 

All in all, car auctions provide convenience, protection, and efficiency to car dealerships who partake. Car dealers can save time looking for cars to sell and transact with one company instead of negotiating with multiple car dealerships.

Car Auctions – How Do They Work?

Although this is not new to most car dealerships, car auction’s popularity is becoming more popular with private buyers. Even though it’s becoming a hot commodity to all types of car buyers, not many folks know how car auctions work. For them, just hearing the word auction can get so intimidating, like it’s a thing that only happens for artwork and similar stuff. But, once you get to know the process, you’d be able to use car auctions to your advantage.

Car auction process is simple. Used cars are listed and come with a starting price and other important information. Before presenting the vehicle to the floor, you can inspect it to thoroughly check the car. After examining the car closely, you can start setting your maximum bid. Once the vehicle is on the presentation floor, everyone can start their bidding.

Take note that you are competing with other bidders who are outbidding each other, and the number of bidders varies. But just remember you’re not there to outbid everyone, so stick to your maximum bid to prevent overspending. If someone outbids your highest rate, you can always wait for the next one. Also, remember that there are times you won’t go home with a used car on your paper.

Where Auctioned Cars Come From?

Now that you know the process, you should also know why cars are auctioned and where they come from. Below are just some of the reasons.

  • Some car dealerships want to get rid of their cars taking up lot space for some time. Dealerships sell these cars to auctions to make room for newer cars and have a bit of a return to their investment.
  • Repossessed cars due to the owner not able to continue paying their loan.
  • Some owners trade their Cars to banks and insurance so that they can get a newer one.
  • Damaged cars from accidents and natural calamities. Insurance companies pay car owners when accidents and disasters damage their vehicles. For them to recover from their expense of paying out, they are selling out the cars. But this only happens rarely and only during specialized auctions.

What Are The Different Types Of Car Auction

It used to be two, but now there are four different types of car auctions that car dealerships can check and buy cars. Below are the following four types.

Public Auctions

If you’re just an individual who doesn’t own a dealership, this is the right type of car auction for you. Several public auctions are open to individual buyers, although car dealerships are welcome as well. Insurance companies and car auction houses usually organize public auctions when they have enough repossessed cars with no issues in their inventory.

Private Auctions

There’s not much difference between public and private car auctions, except only car dealerships can join; private individuals are no entry. And it’s not just for any car dealers as one must possess a dealer’s license to get invited to a private event. This is because the used cars presented for bidding are a much better condition than those in public auctions, making these cars better for selling. 

Online Auctions

Taking the auctions online makes it easier for car buyers to join the bidding. As a result, online auctions become more popular by the day. No need to dress up and travel; just view the vehicles online bid from the comfort of your home or office. The only caveat here is that you really have to pay attention to the details. Since you won’t be able to check and feel the car yourself, the information and reports provided are your only friend.

Government Auctions

It’s not only insurance companies and auction houses that hold car auctions. Government bodies such as the US Customs Service hold car auctions from time to time to get rid of surplus vehicles that have been seized or impounded. They also sell off government vehicles such as police cars when they want to renew their fleet.

Dealers Buying Cars At Auction: What Are The Pros and Cons

Advantages

Faster Time To Complete Process

When you buy cars at car dealerships, it can get a bit complicated, and you have a lot of processes to go through. This is something that you won’t experience when buying cars at auctions. Auction sellers aim to dispose of as many used vehicles as they can in just a short period, so you would be able to get the cars fast. Plus, it saves you hours of checking the vehicles. All you need is the condition report, and you’d be able to determine the car’s value fast.

Extensive Selection Of Cars To Choose From

Auctions don’t hold just one type of car, make, and model – you can have it all if you will. Most auctions feature a wide choice of cars, trucks, SUVs, and even commercial vehicles. The only problem is that you can’t get to choose when it comes to color, mileage, and year. If this doesn’t bother you, you will have a great time deciding which cars you should sell at your dealership. However, if you’re looking for a particular vehicle, you will need more than one auction event.

You’ll Get Your Money’s Worth – And Probably More

Reports say car dealerships have saved as much as 30% from joining auctions. There’s no wonder why car auctions are becoming popular these days, to both individuals and car dealerships alike. However, the best deals are usually coming from the fleet and government-owned vehicles since these cars are well-maintained.

Disadvantages

Warranty Not Included

Unless you’re going to bid for a fleet or government vehicles, most auctioned cars don’t come with a warranty, as they are considered “as is”. However, some sellers can provide three months’ worth of grace period from the date of purchase if there are any problems you want to report. Take note that not all sellers give such an offer. So if you’re looking for a car that comes with a guaranteed warranty, your best is to look at used car dealerships.

No Test Drive

You will only be able to drive the car around once you purchase it. Vehicle condition reports can help a lot as well as personal inspection, but trying it for yourself is the best gauge of whether the used car is worth the buying or not.

You’ll Never Know What You Get

Car auctions are like a box of chocolate. Usually, some cars that are up for bidding have less desirable backgrounds that auction houses may overlook from time to time. A vehicle can be there because the owners have financial problems, while some stolen cars can end up in auctions. It’s good that car auction centers validate and check each vehicle’s background first before presenting it to the bidders.

Dealer Recon Expert Tool For Car Auctions?

Now that you know why car dealers buy at auction, it’s time to know what tool you can use to do car auctions at home.

Online auctions are on the rise. In order to win the best car during bidding, you need a valuation tool and a condition report to avoid getting lemons. The vehicle condition report provides you information of the vehicle you’re viewing by just typing or scanning the VIN. The valuation tool, on the other hand, allows you to determin your maximum bid by letting you know the vehicle’s price in the used car market.

Thankfully, you don’t have to get two tools as both condition report and valuation tool can be found in one. Check it out right here.

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