How to Buy a Car at an Auction

All over the U.S., you can find car dealer auctions open to the public. That means buying cars at auction prices is an option for just about anyone, even if you don't have a dealer's license. If you're interested in buying cars at wholesale prices, take a look at our car auction guide to find out how to buy the car you want at auction, just like a dealer.

Types of Car Auctions

When buying a car from an auction, you must first understand the two major forms of auctions. Dealer-only auctions are, as the name implies, only open to dealers and require dealers to have a license to attend. 

But there are also car auctions that are open to the public, meaning anyone from the general public can attend and purchase a vehicle if they choose. Buying a car at an auction can be an easier process once you understand which type of auction you should attend.

Car Auctions for Dealers Only

Car dealer auctions are open only to those with a dealer license issued by the state. You can get your own dealer license if you wish, but the process can be long and difficult. Each state has its own set of requirements for car dealer licensing, usually with a set number of cars you must buy and sell each year to qualify.

Buying, modifying, and reselling cars bought at car dealer auctions can turn you a tidy profit. But if you only plan on buying cars for yourself, it's probably best to buy from auctions that are open to the public instead.

Car Auctions Open to the Public

There are two major categories of car auctions open to the public: government car auctions and public car auctions.

• Government or police auctions: These include county and city vehicles like buses, police cruisers, utility trucks, and more. These auctions also sell impound cars that have been confiscated because of traffic violations and crime. Be wary ahead of time that when attending this type of car auction, you'll likely face expert competition from used car dealers, taxi companies, exporters, and others who know mechanics well and understand the value of the vehicles on the block.
• Public car auctions: These may include repossessed vehicles from banks, wholesale lots of cars, flood junkers, bottom-of-the-barrel trade-ins, and sometimes, high-end sports cars and SUVs. The quality and reliability of the stock varies from auction to auction, so be prepared to do your homework. Because these auctions have become more popular since the economic downturn, competition for the best deals is fierce. In fact, you may end up paying more than the market price if you don't take care not to overbid.

How to Buy a Car at Auction

Step 1: Register for a Public Car Auction

So, how do car auctions work, exactly? First, it's typically required for all attendees to register for most auctions in advance. Usually, you can either register as a guest, a business buyer or seller, or a public buyer. 

Registration for a car auction might also come with a required fee or deposit that must be paid ahead of time, and these registration fees may have to be renewed annually. Attendees who register as public buyers must bring a photo ID with them and fill out the auction house's form. 

Business buyer attendees must provide proof of their registration with an automotive business, typically shown by offering a copy of their business license to the auction house.

Step 2: Research the Vehicles at the Car Auction

Since car auctions of all kinds move fast, knowing which cars are available at each specific auction can assist buyers with faster decision-making. Researching the vehicles that'll be shown at an auction in advance can not only help you prepare to choose which car to purchase but can also help establish the value of used vehicles. 

Since many auction listings provide the vehicle identification number, or VIN, for every vehicle, you can pull reports on each vehicle's history from various websites like Carfax. You can also use this information to compare similar models on sources like Kelley Blue Book to gauge average pricing and values. This will help you bid appropriately come auction time.

Step 3: Create a Budget

Auctions move quickly and can be highly exciting events, which can, unfortunately, lure some buyers into financially irresponsible decisions if they're not careful. Be sure to keep in mind that if you make the winning bid on a vehicle, you're typically obligated to complete the transaction and even pay at least a portion of the cost right away. Knowing this can help you stick to your budget and not get too swept up in the action by overbidding or bidding on a vehicle you don't really want.

Before you ever go to a car auction, plan ahead and set yourself up for success by setting a budget for your next vehicle. Plan to stick to this budget no matter what. Be sure to factor in the auction house's "buyer's premium" that may be charged on top of the sales price as well. 

Finally, don't be tempted to bid on a car that's outside of your budget or that isn't a model you really want. There will always be more auctions that can allow you to stick to your goals and budget, so it can be much wiser to wait.

Step 4: Understand How to Bid

Knowing how to buy a car at an auction starts with understanding how to bid properly, especially when bidding online. If you attend an auction in person, you'll be issued a numbered bidding paddle. 

As the auctioneers introduce each vehicle, they'll describe a bit about the car and then announce its starting price. That's the cue for any interested bidders to raise their paddles at every interval they'd be willing to pay for the vehicle. The auctioneer will keep increasing the price until no more paddles are raised.

Buying cars from auctions can also be done online, but you might have to pay additional fees. If you're bidding online, take some time beforehand to understand how the bidding process works for that specific auction. 

No matter which type of auction you attend, try to set a low bid early on. When you're already prepared and know how to buy a car at auction, you can focus your attention more easily on getting the vehicle you want when you're at the event.

Step 5: Know How to Pay

Most auctions require communication between the buyer and seller to work out payment and shipping of the vehicle after you make a winning bid. Keep in mind that with online car auctions, there may be additional online transaction fees tacked on to the overall winning price. 

Winners also need to pay a buyer's premium in addition to their registration fee and the vehicle's final sale price. The buyer's premium is often about 10% of the final bid on a vehicle. Sales tax will also be added to the final purchase price.

Winning buyers must pay the vehicle's sale price and all fees at the end of the auction. Certified checks and wire transfers are often the only accepted forms of payment. If a winning bidder fails to produce a payment, they'll often be banned from participating in any future car auctions.

Step 6: Make Sure You Can Transport a Purchase

Before you attend a car auction, if you plan to buy a vehicle, be prepared to transport it home. Be sure to either bring a trailer or an extra person with you to help you transport your new car after you win. 

You can also look into ways to ship your vehicle ahead of time. If you buy a vehicle from an online auction, several transportation services can deliver your new vehicle to you. Take some time to research these before attending an online car auction.

Save on Car Insurance

Our independent agents shop around to find you the best coverage.

Request a Quote

Six Things You Should Know When Buying Cars at Auction

1. These cars are sold as is. Keep in mind that if a car's been leased, repossessed, totaled, or traded in, it'll be among almost nine million other vehicles in the same categories that get bought at auto auctions annually. That doesn't mean every car on the auction lot is junk. It just means lemons are out there, so be suitably suspicious and thorough in your inspection.
2. You will need cash or an approved loan if your bid wins. If you plan to pay with a loan you have already secured from your bank, be prepared to cover a deposit once your bid wins. Find out in advance which credit cards are acceptable for this purpose. There will also be taxes, title, and registration fees. If you're financing the purchase of your car, you'll likely be required to carry collision and/or comprehensive insurance by the lending agency. So, it's probably also a good idea to talk to an independent Trusted Choice insurance agent to help you find car insurance quotes before you buy. Independent insurance agents work with several insurers and can comparison shop for you for free.
3. Sellers may hide problems. There are all kinds of masks and foils that can make a faulty engine seem clean and sound. If you don't know the tricks that sellers may use to hide trouble, bring a friend who does, or stick to used car dealerships. There are no guarantees or warranties at public auctions.
4. Banks own the best inventory at the best prices, in general. It's strongly recommended to look out for these vehicles at public auctions. They are usually repossessed cars and trucks that the lender just wants to sell at a decent price to recoup losses. Make sure it is a reasonably well-maintained car and that the interior is in good order, as these are often problem areas for repo cars.
5. Beware of used car dealers selling at auction. Most used car dealers prefer to sell to customers, other dealers, and dealer auctions. If a car is too far gone to sell in any of those ways, they resort to the public auction. Take a second, third, and fourth look at used car dealer offerings at public auction. Things may not be what they seem.
6. Leave room in your budget for shipping if you are buying out of state or far from home. The last thing you need is a cross-country trip in an unproven vehicle and a breakdown somewhere remote and expensive.

Are Car Auctions a Good Place to Buy?

That depends entirely on your mechanical knowledge, your willingness to do research, and your luck. While car auctions produce hundreds of thousands of happy buyers annually, there are also quite a few customers who don't end up so fortunate.

But with the right preparation and a discerning eye, you could drive home in the best steal of your life. Just be aware that for all the deals available at car auctions open to the public, many lemons could be lurking as well. So, make sure you're covered with an affordable car insurance policy.