How to Buy a Car at Auction: 5 Tips That Help Dealers Win

April 20, 2022

ACV Team

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How to Buy a Car at Auction: 5 Tips That Help Dealers Win

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Traditional live Car auctions can be a great option for savvy dealers looking for quality used cars. You can save a lot buying a vehicle at an auto auction, but you will have less information to make good decisions. 

Buying a car from an auction adds risk since you can’t take the car for a test drive or put it on a lift. Dealers have a chance to find great inventory, but can also discover hidden problems later that could shrink profits. If you have a dealer’s license, dealer-only online auctions maximize chances for big rewards. High-tech tools give you the information you need to make decisions with more trust and transparency than traditional live auctions.   

The process of buying a car from an auction differs at each auction house, so understanding the auction process is essential. Research before you go and make sure to follow these general tips for success.

1. Evaluate Your Vehicle Inventory Before Buying

Before signing in online or stepping foot in a live auction house, it’s important to evaluate your inventory. Part of learning how to become a successful car dealer is knowing your market. What types of vehicles do you have? What are you looking to buy? Auctions are exciting and fun, so it’s easy to get swept away and forget your end goal of making money on your inventory and moving vehicles through your dealership quickly.  

It’s essential to know what kind of cars your customers want. Taking a look at your quarterly or yearly sales reports will help. You’ll learn what brand, car class, mileage, and price range your customers are searching for. Are they buying new cars or used cars? Are specific models or years popular? What kinds of cars do you sell, when do they sell, and why? Are your customers open to buying a repo or as-is cars? Understanding your customer will tell you what to look for when buying a car from an auction. 

Consider the overall profit you make on the types of cars you sell compared to your overall costs. Maybe you got a great deal on a compact, but if customers are buying SUVs and trucks, it won’t matter. If the car sits on your lot, it ends up losing value and becomes a sunk cost. You may decide to wholesale it at a slight loss and buy cars you know you can move.

Evaluating your inventory also guides what cars you want to sell at auction. If you’re a retail dealer, you probably accept a range of cars as trade-ins. Maybe you even take the types of vehicles you won’t sell at your dealership. Cars that sit on your lot cost you space and money as fees add up or the vehicle ages. You could have types of vehicles that had great trade-in value, but you can’t sell to your market. This can include motorcycles, RVs, or even classic cars. These types of vehicles are all great options for the auction block. 

Setting priorities ahead of buying a car from an auction will help you stay focused.  Bidding on flashy cars or cars in near perfect condition is exciting, but you need to be able to sell them for a profit.

2. Research the Run List 

If you are newer to auctions, you might be wondering what a run-list is. 

A run-list is your preview of all auction vehicles. It can include information such as: 

  • VIN
  • Vehicle history reports 
  • Damage reports 
  • Title information 
  • Known issues (mechanical or other damage), and even what extras are included like keys or the original manufacturer manual 

For a live auction, you can usually access this information via the company’s website before the day of the auction.  

An online auction will have a similar run list where you can see the cars up for auction. Since online auctions run twenty-four-seven, you can usually view the run list one to two days before the auction. Easy-to-use tools and filters are one of the biggest advantages of online auctions. You can sort and prioritize run list cars before, during, and even after the auction. 

Most auctions will use a light system, so you know information like if the title is in hand or if the car is being sold as-is is. Every online auction has a different flavor, so read up before you start bidding.  

3. Set a Price Ceiling 

To maximize profits, you’ll want to set a price ceiling before bidding to stay on budget. When you are buying a car at auction, it’s easy to get carried away or caught in a bidding war. Whether it’s a public auction or a private one, knowing all the fees will help you leave a margin for profit and score amazing auction wins.

You probably already know what a car’s market value is based on your industry  knowledge, auctions tools, and estimates from guides like Kelly Blue Book. Hopefully, you also have a great idea of resale value. If you aren’t sure, you can always have a friend or business partner advise you. A second set of eyes can help with estimates for new and used models or outside repairs. 

To figure out your bid limit, you’ll need to subtract any auction (or other) fees. These can change at different auction houses, so be careful to check each auction’s policies. Most of the types of fees will be similar across auctions and will include: 

  • Registration fees
  • Buyer’s premiums
  • Sales tax 
  • Transportation fees (more on this below) 
  • Repair costs 
  • Financing fees 

You’ll also want to think about add-ons like extended arbitration periods and storage costs so you can get the best deal when buying a car at auction. 

Another place you could incur fees is your payment method. Most auctions have a pre-screening process to check that you can pay for your purchase. They may want to review bank statements, your credit score, and your dealer’s license information. You may also need to sign a contract or agree to terms and conditions. Make sure you know how you’ll be paying if you need financing and what types of payments the auction accepts.  

Having a price ceiling will help you know exactly what to spend and when to stop. Then, you can relax knowing you won’t accidentally pay too much.

4. Consider Transportation Methods and Costs

Transportation costs can run the gamut depending on your new car’s location. Before you bid, decide if you are arranging transport yourself or using the auction’s transportation services. If the car is nearby, or you have a reliable service, you may know what to expect. If not, you can usually view online auction transportation estimates before you bid. With ACV Auctions, you can even see cost estimates before bidding and easily add shipping at checkout.  

Today’s online auctions are amazing at providing a variety of cars all across the country. Sometimes your perfect car is local, but what if it’s hundreds or even thousands of miles away? That’s why transport is a big part of setting your price ceiling. The distance you need to move a car, and even the types of vehicles you are moving, can change your transportation cost. If you're buying locally, it is safe to assume transportation costs will be low, but the further you get from home base, the more it can cut into your margins.  

Once you’ve considered all your needs and you have your magic number, you are ready to go to auction and place your winning bid! 

5. Source Smart with Online Auctions

As a busy dealer, why go to a live car auction when you can get the same quality inventory on your phone? As technology advances, people want one-click answers and easy access. It’s no wonder online auctions are here to stay. 

There are some advantages to buying a car from live or public auto auctions, but with an online auction, everything is at your fingertips…from the comfort of your desk or dealership. Some auctions even have exclusive online tools to help you evaluate their online offerings. 

For example, ACV Auctions uses Virtual Lift™, a tool where you see detailed pictures of the car’s undercarriage. You can even listen to high-definition engine sound with AMP™, ACV Auction’s audio motor profile. On top of that, ACV offers easy access to CARFAX reports so you can quickly learn everything about the car’s history. Users also get access to ACV Market Reports which leverages data from millions of previously inspected vehicles. This shows how much other buyers paid for similar cars that you are actively bidding on.

Online auctions let dealers stock what they need and liquidate inventory easily through features like ACV’s 20-minute auctions. Without the need for a set time and place, online auctions also drive sales so you can buy within a limited time frame.

After you’ve considered all the tips above and are ready to place your winning bid, you can buy confidently…even place a proxy bid. Once the auctions are over, the highest bid wins. If the reserve price isn’t met, the process for after-auction negotiation is streamlined. Buying a car from an auction has never been easier. 

Start Winning at Auctions Today

Now that you know more about the strategies that help dealers win at auctions, it’s time to get bidding! ACV’s online auctions are perfect for busy dealers who value transparent details and want to buy confidently – access is just a few clicks away.    

If you’re looking for more expert advice on how to become a dealer or even how car auctions work, make sure to keep up with our blog for more tips.