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How to Buy a Car at Auction
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Buying a car at auction can be a quick way to get a low-cost vehicle. Bidding happens fast, and rates are generally cheaper than on the open market.
But going this route can require some preparation and loads of unforeseen costs. For example, you may have to pay an outstanding lien against the car you buy, or you could end up getting stuck with a lemon. Here’s what you need to know.
Do I need a car auction license?
In some cases, you may be required to have a car auction license in order to participate in an auction. Whether or not you need one will depend on a few details, including your reason for buying and the type of auction you plan to attend.
Licenses won’t typically be required for private buyers who want to attend public auctions. However, these events aren’t very common, and cars sold at public auction are generally in bad shape.
Licenses are more commonly required for dealers, any buyer who wants to attend a wholesale auction or anyone who plans to sell a vehicle they buy at dealer auction. Each state may be different: In California, for example, you’ll need to complete a DMV course, take a test and submit an application in order to get a Wholesale or Dealer License and attend dealer auctions.
3 steps to buying a car at auction
If you plan to buy a car at auction, you’ll have to do some work before you show up. Here are the steps you’ll need to take before you arrive:
1. Register for the auction.
You may need to register in advance of attending an auction. Generally, you’ll have the option to register as a guest, public buyer or business buyer or seller. You may also have to pay a registration fee or deposit.
If you register as a public buyer, you’ll need to fill out a form for the auction house and provide a government-issued photo ID. If you register as a business buyer, you’ll also need to prove that you’re registered with an appropriate auto business by providing information from your business license.
- How much is registration? This will depend on the auction house and what type of buyer you are. A public buyer may not have to pay, but a business may be charged an annual fee for each buyer it registers. For example, your business could be charged an annual registration fee of $200.
- How long does a registration last? Usually registration memberships last a year, during which time you can generally attend an unlimited number of public or business car auctions.
2. Research ahead of time.
Car auctions go fast, and bidding on most vehicles can last less than a minute. With all the excitement and competition of bidding, it can be easy to get carried away — so before you bid, know your maximum price for each vehicle.
Do some research to find out what each car is worth. You can do this by finding which cars will be at the auction before you go, then researching specific models (or even the specific vehicle) by using industry guides like Kelley Blue Book or NADAguides and getting a VIN check. You may also be able to inspect the vehicle online or in person before the auction.
When it’s time to bid, keep your research in mind. If yours isn’t the winning bid, you won’t get a second chance to buy the vehicle — but if you make a winning bid, you’re locked in! You may not be able to back out without paying hefty penalties, and the seller won’t be able to sell the car to anyone else, even if they get a better offer after the auction.
3. Know how you will transport your auction vehicle.
Whatever you buy at auction, you’ll need to transport back with you. You may want to bring a friend or a trailer, but consider the following first.
- The number of cars. Do you plan to buy one car or five? Are you able to take a trailer that’s big enough to tow your potential car(s)?
- The type of car. If you plan to buy a classic car, you might not want to put any miles on it. And if you buy a salvage car, it might not start or you may not be able to legally drive it until the title is updated.
- The distance. If you buy at an online auction, you may not want to drive a long distance to retrieve the car. A professional car transport company may be the best option, but be sure to include the cost in your walk-away price — a cross-country trip could top $1,200, and enclosed carriers cost extra.
Is buying a car from auction a good idea?
You may be able to get a car for a low price at auction, but the savings come with a lot of risk. Cars sold at public options are vehicles that wholesalers didn’t want, and that’s probably because they’re in bad shape. Buying at an auction also means you won’t have a chance to test-drive the vehicle, and you’ll have to accept it as-is.
Unlike buying from a dealer or manufacturer, you may have to pay for outstanding liens, tickets or smog checks. You may also have to pay various substantial expenses after the sale, including an auction fee, service fee, sales tax and transportation costs. Plus, you can’t return the vehicle or get it repaired if it turns out to be a lemon.
If you’re looking for a better deal on your next vehicle, with less risk, consider these alternatives:
- Buy a used car. Even if used car prices are inflated, they’re less likely to have the troubled history of a car sold at public auction. To get the best deal, search multiple dealerships and sales platforms online, negotiate on your price and/or trade-in your current vehicle.
- Get classic car financing. Financing a classic car can be less expensive than buying an old fixer-upper or a lemon at auction. Not all lenders offer classic car financing, since it can be hard to determine a specialty car’s value — however, some major lenders and credit unions offer financing specifically for classic cars.
- Give it time. Inflation can drive car prices up significantly, even prices on used cars and cars sold at auction. If you’re looking to beat market rates, your best bet is to wait until prices drop and you can afford a less risky purchase.