Did you know that car auction sales hit 9.9 million in 2018? That's a projected gross value of $107.6 billion in units sold, up 1.9 percent over the previous year. What's more, 2018 represented the third consecutive year that car auctions brought more than $100 billion.
Dealer car auctions represent one monetary stream contributing to the billions in revenue generated by vehicle auctions each year. And these dealer-only venues remain vitally important for many reasons.
When it's all said and done, there's no more affordable way to buy a car than through a dealer auction. If you know what you're doing, you stand to save thousands without compromising on the quality of the automobiles you purchase.
What do you need to know about these car selling venues to optimize your wins and avoid lemons? Watch the video below to learn more about the few reasons why. Then, keep reading for our ultimate guide to car dealer auctions.
Car Dealer Auctions 101
If you've been a car enthusiast for any length of time, you've likely heard of high-end classic car auctions such as Barrett-Jackson events. You can catch them on cable and watch the parade of one perfect Ferrari, Shelby Cobra, and Duesenberg after another.
You'll also salivate over old Mercedes roadsters and incredibly rare muscle cars. And while these beauties might make your eyes water a tad, their price tags most definitely will. Incredible events to watch, participating requires an insanely thick wallet.
For this reason, let's focus on dealer auctions where you'll find the vehicles that everyday consumers are after. They include models such as:
- Ford Crown Victorias
- Toyota Tercels
- Plain sedans
- Base model pickups
You get the picture. Dealer car auctions are specialized vehicle auctions. At these events, millions of cars get sold every year.
As the name suggests, the general public can't attend or participate. Only licensed dealers can.
Are you looking for online car auctions? Check out the five best auction websites to buy a car.
The Perks of Dealer Car Auctions
What are the perks of attending these auctions? The prices of cars sold at dealer auctions prove much lower than what you'll find on any dealer’s lot.
How do they keep prices so low? Sellers trade higher sticker prices for quick sales.
Why the need for speed? Because keeping outdated, (not classic) inventory proves a drain on car dealers' reputations and income.
As for other car owners, such as financial institutions? They often want little more than to offset losses due to auto loans that went south. With this in mind, let's take a look at the different inventory sold at an auction.
The Different Inventory Sold at Auction
What types of vehicles get sold at dealer auctions? They may include automobiles that fall into the following categories:
- Off-lease vehicles
- Company or fleet cars
- Repossessed vehicles
- Off-rental cars
- Vehicle trade-ins
- Salvage automobiles
What do you need to know about these cars before making an offer? Let's take a closer look.
Off-Lease Vehicles
What are off-lease vehicles? These refer to cars returned to a financial institution when their lease term expires. When this happens, their only venue for sale is often a closed auction.
At closed auctions, financial institutions often dispose of a large volume of end-of-lease returns. What do you need to know about these cars?
For starters, lease terms restrict mileage. Leased vehicles also require regular maintenance and penalties apply for excessive wear.
What's more, most off-lease vehicles return to the financial institution within two to three years. That means they usually return before their original factory warranty expires. As a result, these vehicles typically remain in better shape.
Company or Fleet Cars
As for fleet or company cars? Companies of varying sizes own these vehicles.
They may include vans or trucks typically kept for two or more years. That said, it's not out of the norm to see current year models sold at auctions.
In most cases, company and fleet cars enjoy adequate maintenance, and they generally come in large volumes of similar vehicles.
Company and fleet cars don't boast many extras, and they may rack up lots of mileage. But unlike rentals, you'll need to consider the car's function for a given company.
After all, there's an immense difference between a delivery truck that gets abused in city traffic and regularly mounts curbs versus an executive luxury sedan driven carefully and slowly on occasion.
Repossessed Vehicles
As for repossessed vehicles? They may refer to cars that financial institutions either voluntarily or involuntarily repossess. This action may occur for several reasons, including:
- Late payments on auto loans
- Failure to maintain full coverage insurance
- Undisclosed past credit issues
The most common way to get rid of repossessed vehicles is through auto auctions. Frequently, repossessed automobiles fetch lower prices.
Why? Because the financial institution disposing of them wants little more than to offset losses. Prices may also remain low due to federal regulations and restrictions placed on financial institutions.
What should you know before bidding on repossessed vehicles at dealer car auctions? Approach repossessed car purchases with care. After all, the condition of some automobiles may prove compromised due to lack of maintenance.
Repossession can also bring out the worst in people. There's the real potential for sabotage from past owners intent on "paying" lenders back. And believe us, we've seen it all, from destroyed interiors to keyed paint jobs, necessitating expensive touchup work.
Off-Rental Cars
Every year, rental car companies replace their entire fleet. When this happens, a deluge of late-model cars hit the secondary market. Rental companies rely on auto auctions to sell off used inventory as financial institutions do with off-lease vehicles.
Rental cars are typically well-maintained and driven for only one year. But since they're rented, they tend to have higher than usual mileage.
You'll find that optional features prove limited to air conditioning and automatic transmission. As a result, assume you're getting the base model when bidding on one of these vehicles.
It's also worth noting that rental cars receive rough treatment at times. Assume that each rental car gets driven by a normal distribution of all types of drivers in all weather conditions.
Vehicle Trade-Ins
What about trade-ins? These vehicles often make it to the auction block because they don't fit a dealer's current inventory needs. These may be outdated models or ones that don't meet a dealership's profile.
For example, an old VW Jetta might get traded in for a new Mercedes-Benz or a CLK350 Cabriolet. If the dealership is franchised, reselling the VW isn't an option.
What pros come with bidding on a trade-in? Cars may have attractive extras. Sometimes they even come with after-market modifications.
But the overall condition of such vehicles will vary significantly. Cars may also fall into the older category or be out of warranty.
Salvage automobiles
Salvage vehicles also vary when it comes to their history and condition. They may have endured floods, accidents, recovered thefts, or fires. In this case, they get purchased by insurance companies.
These insurance companies sell vehicles to body shops or dealers who fix and resell them. Or salvage vehicles may go to auto recyclers. Recyclers will part out cars and make money on what they can.
Big Savings at Dealer Car Auctions
Car auctions for dealers remain the primary source of inventory for many auto dealerships today. And with good reason. Dealer car auctions come with tremendous savings, especially compared to the stickers you normally see on used car lots.
Taking advantage of these kinds of savings matters. Especially when you factor in other costs associated with car auctions such as auto transport. Here's what you need to know about the cost of cross-country car shipping.
How can consumers get in on these savings? In general, they can't. Members of the public remain strictly prohibited from participating in these events.
Why not get a dealer license? Because obtaining one is a time-consuming process, and it also proves expensive. The licensing process ultimately doesn't prove feasible for individuals unless they plan on opening and operating a vehicle sales business.
Don't believe us? Check out the daunting car dealership licensing process for yourself.
That said, some car dealers offer a "broker" service to the public. In exchange for a small fee, they'll bid on your behalf at auctions.
Dealer-Only Car Auctions: The Takeaway
Whether you've got a car dealer license or you choose to go through a broker, many compelling reasons exist to consider participating in dealer car auctions. At the top of the list are the tremendous savings you'll enjoy.
Our tips above provide you with the knowledge you need to make sound choices at auction. After all, once you understand the various types of cars sold at car dealership auctions, you'll prove better positioned to avoid lemons while taking advantage of the best deals.
Once you've found a sizzling deal on a used car at auction, you'll need to find a way to get it home. That's where we come in.
At Nexus Auto Transport, we specialize in solutions for every vehicle shipping customer. Get a free, no-obligation quote for auto shipping instantaneously.
