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All About Auto Auctions: Designed for dealers in the BHPH business Part 1

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All About Auto Auctions: Designed for dealers in the BHPH business Part 1

~Edwin Donahue, RVP-Automotive Solutions

The prices at which cars are generally sold at auctions makes everyone wonder how exactly auction houses manage to sell vehicles at such cheap prices?  Specifically for those of us in the BHPH business, we want to make sure we are getting what we are paying for. Like most industries, there are many different kinds of car auctions, ranging from government agencies to online vehicle wagers. I’ve compiled some useful information and tips for you to consider before you take to the bidding!

Keep in mind that most of the distressed auto auction inventory comes from bank repossessions, abandoned vehicles, financial institutions, charities, corporation liquidations and dealer trade-ins. Other auto auction inventory are from the U.S. Government and local police departments - from vehicles seized from drug dealers, drunk drivers, and other criminals, to government fleet vehicles that have reached their limit for public use. A number of government and law enforcement agencies at the local, state and federal level come into possession of a large amount of goods and property as a result of seizures from people and businesses that violate certain laws or rules. Add to this a large amount of unclaimed property and government surpluses and you can easily understand what constitutes auctions held by these agencies. Most of these government agencies do not have the space to store or the personnel to maintain seized goods, as a result of which these goods are auctioned off at regular intervals.

Thus Auctions were created, as a way to minimize surplus and manage large inventories…and this is a MAJOR benefit to auto dealers! An auto auction is a way to sell vehicles through an auction bidding system. However, mostly used cars are sold at auto auctions. The various vehicles sold at auto auctions include used rental cars, cars returned after the lease has expired, slow-selling cars that were traded-in at auto dealerships, as well as hot-selling cars that dealers may be capable of selling over the manufacturers suggested retail price (MSRP). At times, there are also exotic collector-style cars (new and used) that are auctioned at car auctions.

How Does a Used Car Auto Auction Work?

When auto dealers attend a used car auto auction, they carry a little book referred to as the Kelley Blue Book, or NADA, to the auction to assist them in making the proper bid. The Kelley Blue Book lists the makes of vehicles, the models and the price that they should sell for, according to the condition of the vehicle. That is, according to whether the vehicle is in fair, bad, or good working condition overall. Of course the dealers, would like to bid on the vehicle of their choice and pay a lesser amount than what the Kelley Blue Book has printed because this means that they have received a very good deal on the vehicle and especially for licensed auto dealers who desire to acquire a profit when they resell the vehicle at fair market value.

Another important thing to remember ---àVehicles are sold "as is" at used car auto auctions. Moreover, used car auto auctions can also consist of severely damaged, previously flooded and/or rebuilt cars. Therefore, it is very important to research the vehicle as much as possible before bidding on a vehicle. Some used car auto auctions permit the purchaser/bidder to pay a fee to warranty the engine, the body and the frame for at least 30 days. At some used car auction sites, the potential purchaser is allowed to drive the car before the bidding process starts. In rare but beneficial cases, some vehicles are posted on websites for the bidder to view weeks prior to the auction date. A bidder can, therefore, phone the auction site and retain information about the car so that he can do a title search and other research on the car before the bidding date occurs.

Types of Used Car Auto Auctions

Online auto auctions. Like eBay, for example, is the most common form of a used car auto auction. Online used car auto auctions require the bidder to make a bid for the vehicle over the Internet. The purchaser cannot see the vehicle beforehand to inspect it. Nevertheless, whoever wins the online bid is obligated contractually to purchase the vehicle, which he has not previously seen or even inspected. However, depending on the situation, online used car auto auctions may work well!

Wholesale auto auction. These auto auctions are, generally, only open to licensed auto dealers and directed by Manheim car auctions. The general public is not permitted to enter wholesale auto auctions.

Public, Police & Government auto auctions are open to anyone interested in bidding on a vehicle.. Police and government auctions are generally open to anyone who desires to bid on the vehicles within their inventory.

Insurance & Salvage auto auctions are additional types of used car auto auctions; however, they are typically open to only licensed auto dealers.

Regardless of which type of used car auto auction a bidder chooses to attend, it is important that dealers do their research on the type of auction they will be attending as well as well as the vehicle they wish to bid on.

Look for more tips next week as I talk about the bidding process!

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