Buying a Car at an Auto Auction
Some time back, I bought a car at an auto auction (link) and figured someone else could learn from my experience. Please note that the link is a Saskatchewan auction house and while most points mentioned in the post below should hold anywhere, it is better to explore your local auto auction to see if they offer the same options such as unreserved auctions.
Who Are The Sellers?
- Private owners who do not want to deal with potential buyers (showing the vehicle, letting them take it for a spin, finalizing the deal – counting dollar bills or waiting for the cheque to clear, etc.).
- People who need the quick buck while getting exposure to a wide market; of course, they could set a reserve price but if they need the money urgently, they will settle for something less than the reserve they had set.
- Government of Canada vehicles (available only on the first Saturday of the month) are placed in the unreserved section of the auction.
Who Buys At These Auctions?
- People like me who look for a cheap deal (or at least think they are getting one).
- Those who like the convenience of viewing several vehicles at the same time in one location (a dealer of different makes!) with the opportunity to bid on another vehicle if their first choice goes above their maximum bid.
- Auto mechanics, who buy vehicles at cheap prices, replace worn out parts, maybe remodel, and then sell for a profit.
As with any purchase, it is prudent to do your due diligence before submitting a bid. To facilitate this, the auction house allows the vehicles to be test-driven the day before the auction. The vehicles are parked in their lot with the price posted on them. After selecting a few cars based on the make, look and price, one can get the keys to those cars after showing their driver’s license as proof.
Auto auctions are held on Saturday mornings and one needs to get a bidding ticket after providing personal details (driver’s license is a must) to be able to place bids. I noticed that they have a live web cast for the unreserved auction (government vehicles on the first Saturday of the month) to assist in online bidding.
For those uninitiated about the auction process: the auctioneer announces a start bid and bidders raise their bright yellow bid tickets, which has a number on it, to submit their bid for that price. If the highest bid for a car meets or exceeds the reserve price set by the owner, then the deal is considered closed upon payment. However, if the final bid falls short of the reserve price, then the auction house contacts the owner immediately to check if they would be willing to settle for less. If the owner does not agree to the lower price, then the car is available for auction again the following week. It should be noted that only demand drafts are accepted and payment should be made within one week to get possession of the keys.
Some Points to Ponder
1. Inspection. Go in the day before and test-drive your vehicles of interest before going in to submit a bid. Take a friend or relative who has reasonable knowledge about cars. Looking at the exterior, interior and opening up the hood to inspect parts for obvious wear is fine and taking the car for a spin should alert you to strange noises or performance issues. But, I saw people pressing on the hood (it was closed of course) to test the suspension. Maybe, they will deduce something from it but I have no clue. If you have an acquaintance who is an auto mechanic, this is the time for him to show off his knowledge and help you.
3. Set a Price. Decide if you would be willing to go a couple of hundred dollars more if the current high bidder is fifty dollars above your maximum bid. It is as much about emotion as money and it is easy to get caught in the heat of the (bidding) moment. You could research the prices of the vehicles and then set your maximum bid at 15-20% less than the amount that you think the car is worth. This will serve as a margin of safety and help you if the bidding war gets intense.
4. No Warranty. It should be remembered that these vehicles are sold “as is” and there is no warranty whatsoever. Hence, it boils down to one’s level of comfort with such a deal. It is similar to buying privately but here, you will never see the owner to make a guess as to whether the car would have been maintained well.
5. Play it Cool. While buying at a dealer, buyers are advised to avoid showing too much enthusiasm for the car they like; same holds here. Play it cool!
So, if you are on the lookout for a used car, possess reasonable knowledge about automobiles or have a friend/relative who does, then try your local auto auction. You might find a good deal! Or, if you have a few minutes to waste on a Saturday morning (or whenever the auction takes place at your location), then stop by for a new experience. But, be warned that it might get boring after some time if you are not buying!
About the Author: Clark is a twenty-something Saskatchewan resident employed in the manufacturing sector. He repaid around $20,000 in student loans and has been working to build his investment portfolio as a DIY investor (not trader) while nurturing plans to retire early. He loves reading (and using the lessons learned) about personal finance, technology and minimalism.