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How Do Car Auctions Work?

aerial view of car auction lot

Searching for good deals on used cars can be taxing. Between the haggling and the risk of bait-and-switch, most consumers quickly grow frustrated with the dealership experience.

You may have heard of the low vehicle prices at auctions. In essence, car auctions provide a wide selection of used cars for sale in one place. Most of these vehicles are in reasonably good condition at affordable price points.

But any seasoned car auctions veteran will tell you, actually securing one of these cars is no easy feat. Hundreds—if not, thousands—of other bidders show up to these events, mostly with some level of auction experience.

Especially for casual buyers or those unfamiliar with the used car market, the overall process can be quite intimidating.

There is a lot of time, energy, and effort that goes on behind the scenes to secure such low prices on vehicles. But if you’re willing to put in the work, you can save a lot of money on a nice car.

Keep reading for everything you need to know about what really goes into car auctions.

Do You Need a License to Attend Car Auctions?

It’s important to go into auctions well-prepared. Without knowing what you are walking into, the entire experience will likely be completely foreign.

License requirements depend on the type of auction.

At a dealer’s auction, you will usually need a car dealer’s license to participate. Although, there are some websites that allow public participation in specific dealer auctions, license-free. These sites sometimes charge a fee or deposit.

As for public auctions, they are open to anyone and hold no license requirement.

They may be online or in person. But considering the COVID-19 pandemic, many car auctions have gone digital over the past year.

What Happens at Auto Auctions?

In theory, car auctions work much the same as any other auction. Contenders bid on an item, continuing to increase the value of their bid until only one bidder remains. At that point, this remaining participant wins the vehicle.

But in practice, the process is much more complicated.

It’s important to review the rules prior to participating in car auctions. Each individual auction may have its own set of rules—so it’s a good idea to check these out in advance.

Contrary to popular belief, many car auctions are public events. They are posted ahead of time—including the vehicles up for grabs. Any average person can attend the event or place a bet online.

When it comes to the auction day, things move quickly. Dress comfortably, as it’s likely you will be outside and on your feet for much of the day.

Most of the attendees are well-versed in these processes, so it’s easy to become overwhelmed. But with proper preparation, this can be avoided.

Vehicle Viewing

As the auctions are posted in advance, potential participants can get a sneak preview of available vehicles. This way, you can narrow down your search ahead of time.

At the same time, you do not want to limit yourself to one single listing. This can set you up for disappointment if outbid early on.

The entire experience is very fast-paced, so there is usually not enough time for the type of browsing you may typically be accustomed to at a car dealership.

Gather a list of various cars you are interested in, and be sure to check for their vehicle identification number (VIN).

If this is available, run a quick online search on the number. This will produce a vehicle history report, complete with important details that might influence your decision to bid.

Factors could include previous owners, major accidents or other damage, maintenance history, and odometer readings. Manufacturer recalls are also usually listed.

There is usually a wide variety of vehicles up for auction, there for various reasons. Examples include:

  • Repossessions
  • Cars seized by police or the government
  • Salvage title cars declared a “total loss” by a car insurance company
  • Surplus vehicles
  • Title pawns
  • Cars that failed to sell at dealerships

One of the most important ways to get ahead of the game is to arrive early. This way, you can locate the vehicles you identified in advance. From there, you have more time to examine the vehicle.

This is where you should take a good look—under the hood, inside the cabin. In some cases, you might be able to start the car or even test drive the vehicle.

What to Look for

When you see the car on the floor, it will usually have a colored light above it. This signifies the condition of either the vehicle or its documentation. Any one of the following lights may be displayed:

  • Green light — good condition
  • Red light — vehicle is being sold as-is (usually less-than-desirable condition)
  • Yellow light — may be subject to arbitration/further announcements concerning the vehicle
  • Blue light — currently no title for the car, but the seller must provide it within 30 days of sale

Most cars will be in decent condition. However, they may have underlying issues that could resurface down the line.

With this in mind, it’s critical to do your own inspection of the car before bidding. If you don’t know what to look for on your own, it may be worthwhile to enlist the services of a mechanic.

It’s best not to focus all of your attention on one vehicle. Instead, try to make a list of the important aspects of a car that matter to you.

Taking this approach will allow you to find multiple cars that fit the bill. As such, you have a few back-up plans if you are unsuccessful with your primary vehicle.

Car Auction Bidding

As you prepare to head into the bidding process, it’s a good idea to set price limits for yourself.

This is especially important for first-time bidders. It’s easy to get caught up in the excitement and bid more than you should, so setting a realistic limit ahead of time can help prevent getting in over your head.

This might also include doing some research on your target vehicle to get a good idea of the market value. With the VIN of your desired car, you can usually get a good amount of information with a quick online search.

This will help you understand the individual vehicle’s history, as well as the market value for similar vehicles.

Plus, be sure to factor in additional auction and shipping fees that may be part of the deal. These are not included in any of your bids, or the final winning price of the car.

Additionally, some vehicles require a “reserve.” This is the minimum acceptable bid and can be a good sign of how likely you are to win out this particular vehicle. If you can barely meet the reserve, it’s fairly likely you will be outbid.

Once the bidding actually starts, it moves quickly. With this in mind, be sure you know the location of the “ringman” in your lane. This individual is responsible for spotting bids as they are called, and signaling this to the auctioneer.

Make sure you keep track of the current bid amount, as well. This way, you don’t overbid by mistake.

If you’re lucky enough to win a car, there are additional steps required before you can take your new vehicle home.

Car Auction Payment

For successful bidders, the process of payment and vehicle shipping is different than a traditional car dealership-type of experience.

Be sure to carefully monitor your bets. You are obligated to follow through with transactions more often than not upon winning a car. You may need to pay some (or all) of this cost upfront.

It’s important to note that there may be auction fees in addition to the winning bid price of the car. Shipping fees are not included, either.

Each auction is likely to have its own set of payment terms. Some may be cash-only, while others accept credit cards or checks. It’s best to determine this in advance, so you can be prepared to follow their rules upon a successful bid.

Other Legalities

In order to complete the sale, there are a few legal obligations that must be taken care of.

The previous owner of the car must provide you with the title. This demonstrates your ownership of the vehicle. From there, this gets assigned to you by your state’s DMV.

Plus, you will need car insurance in compliance with your state’s regulations.

Auto Auction Shipping

After the auction, you will have to transport the new vehicle home.

The easiest way to accomplish this is with an experienced vehicle shipping company. Like the auction houses, these auto auction transport companies will come with their own payment terms to familiarize yourself with in advance.

This way, you do not have to worry about any problems arising throughout the ride back home.

Securing shipping after car auctions is simple with American Auto Shipping.

They provide low-cost, flexible shipping services to transport your vehicle from the auction to your home securely. This way, you can simply leave the auction house and meet your prize right in the driveway. It can’t get much easier than that!

Trust the Vehicle Shipping Experts

While car auctions may be overwhelming, shipping your new vehicle does not have to be.

Consider American Auto Shipping for all of your vehicle shipping needs. With fast, secure, and low-cost shipping, they are your simple solution.

Contact us today for more information or for a quote on transporting your new car!

Dave Armstrong
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