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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.

The Deal

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.

2. Research. Research prices for those cars you are interested in beforehand at VMR Canada and MSN Canada to arrive at your maximum bid.

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.







20 Comments, Comment or Ping

  1. 1. willfly

    Great tips. I will try a few of those in Toronto

  2. 2. Bryan Sr

    Car auctions can be a very nice way to get a car or cars. You do need to know what you are looking for and it is vital that you take the time to visit the auction location the day before to test drive any cars you are interested in. If you can, bring a mechanic friend with you to look over the car if you are not a good mechanic. You can save a lot of money, but also buy a money put if you are not careful.
    Good post and thanks for sharing the information.

  3. For those of you who have had experience with car auctions, how close to market value do these cars usually go for? I guess it depends on the popularity of the vehicle?

  4. 4. tiggerzzz

    Beware! This is not for everyone.

    Great deals can be found but so can time consuming money pits.

    I have personally had mostly good luck buying auction vehicles and have saved thousands of dollars. This is not always the case though.

    The post should also mention that many of the vehicles at auction are placed at auction because they have serious mechanical issues that are hard to diagnose and may not show up during a short test drive etc. The owners of these vehicles dump them at auctions so they are somebody else’s problem without any repercussions on themselves.

    Here is a list of auction nightmares from people I know personally.

    VW jetta with undiagnosable electrical issues causing the car to die without warning… owner gave up and put back at auction after dumping in over $1000

    mercury villager with a slipping tranny (only slipped every 100km at the most inopportune / dangerous times. needed a new tranny $3000

    5 yr old Chev 4×4 truck needed a new transfer case plus more… $3000 in repairs

    Buick car in mint shape but needed a motor within a month $3000 in repairs

    2 year old Hyundai Tiberon bought from Vancouver online auction needed over $2000 of repairs to be certified This owner would have paid less at a dealer and still had full warranty.

    2001 chev venture needed intake gasket , rear brakes plus much more over $2000 in repairs

    chev cavalier , 2.4 l needed a tranny and head gasket … over $3000 in repairs.

    I have also know car dealers who have been burned as well with vehicles that looked fine but had issues…

    newer Saab – flood damage / electrical issues
    2003 pontiac montana with low km for the yr needed a new motor
    Cars that look fine but have bent frames that cannot be fixed to actually pass an inspection

    I used to suggest to friends and family to buy at an auction but I don’t anymore.

    It is the equivalent to setting your sister up on a blind date with some guy that looked and sounded nice on facebook but might turn out to be a crazy stalker nutjob.

    I l will still buy future vehicles at auction but I know the potential downside and at some point I will likely hit a lemon as well.

  5. 5. Sarlock

    We’ve had mixed results buying our company vehicles at auction.
    One truck we bought at the auction turned out to have major engine troubles that you could not notice during a test drive. We ended up pulling the head off and determined that the engine must’ve been run with no oil at some point in its life due to the damage inside the cylinders and elsewhere (the steel was bluish from overheating).
    So what did we do? About $1,000 later, we slapped a few parts together, re-assembled the engine and put it back in to the auction a week later. Got 90% of what we bid on the truck. Now it’s someone else’s problem (it needed a totally new engine, to the tune of at least $6,000). Good riddance.
    On the flip side, two other trucks we purchased there are running fine 2/3 years later with only minor mechanical issues in that time.

  6. Cool! I would consider buying from an auction. I’ve never done this before but I would definitely like to check one out when the opportunity arises.

  7. 7. tiggerzzz

    How much to bid…

    If you still think an auction vehicle is for you here is my approach.

    Most auction sites have list of previous sales with what sold and the price it went for… this will give you an idea of prices.

    My rule of thumb when buying auction vehicles is not to pay more than the lowest trade in value for the vehicle. Never pay anything close to the retail value of an auction vehicle. If possible I try to get deals 10% to 30% below the trade in value. By following this rule I can usually drive a vehicle for 1-3 yrs and still sell it (privately) for about what I paid. I usually end keeping them longer if they are reliable and not needing immediate repairs.

    I also run a carfax report on the vin before bidding… This is only a small snapshot of what the vehicle is actually like but can help you see how many owners it has had and where it came from.

    You will be shocked at how many cars have seen several owners and passed through auctions in multiple states/provinces even if the vehicle is only 3-5 yrs old.

    I usually go to http://www.car-parts.com and run a few searches for major items like motors and transmissions to see what I may have to pay to fix the vehicle if it does have issues. If my proposed bid value + used motor or tranny +shipping + Install is anywhere near the retail price I stay way from that vehicle.

    Good luck but beware.

    Thx

  8. 8. J

    My wife and I bought at fully loaded 2007 accord EXL V6 last year via auction in theToronto area for $23,500 inclusive of taxes (60,000 km). I’d say it saved us at least 10 to 15%.

    I should note that we went through a dealer auction, not a public auction. Dealer auctions sell return lease vehicles, rental vehicles and corporate fleet vehicles. Essentially if the parent dealer does not want the car or is over stocked on a certain make / model, they go to auction to a broad group of licensed car dealers.

    We paid a flat rate fee for the services of the dealer to attend the auction and by the car. His fee was $500.00 which included a car proof report and a 48 hour no questions asked return policy.

    If you want a popular car you could save up to 50% (i.e. standard model Corollas, Civics, Mazada Threes, minivans etc). Where it gets tricky and typically results in less savings is when you want a particular model and options (i.e. leather, moonroof, highest trim package, paint colour, seat furnishings) etc. You can wait awhile to get the car you want in this case. My wife wanted the fully load edition of hte accord, so we had to wait 2 – 3 months for the right car to go to auction so that we could purchase it.

    It was worth it. We love our Accord.

    Cheers,

    J.

  9. 9. Elbyron

    I don’t think I would be comfortable with the risk of getting a lemon when so many thousands are on the line. But I have gone to a few bicycle auctions put on by the local police. They have a lot of bikes that were stolen or abandoned and the owners couldn’t be determined. They don’t let you test-ride them, but you can turn the pedals and test the brakes. As with the car auctions, there will be mechanics and dealers there who will bid each other fairly high on any bike that appears to be of decent quality, so they can touch up the paint and re-sell it for a profit. So you can get a mountain bike for $5, but it won’t be anywhere near as good as the bikes you see in stores. Or you could outbid the dealers and still save some money off the store prices.

    As an interesting story: I was riding my $5 auction bike to work one day and was struck by a car making a left turn. The wheels and frame were pretty banged up (as was my body). The guy’s insurance company offered to replace my bike, so I went out and bought a new one (of similar style and features) for $150!

  10. 10. Clark (The Guest Blogger)

    Thanks for the comments.

    I forgot to include an important point in the post (thanks to “tiggerzzz” for the reminder). In Saskatchewan, one can do a free VIN search online on vehicles registered in the province to get their damage claims history since Nov. 2002. For a fee of $10, one can do a Cross-Canada Search (only mail, fax or in person) but they will still only give a Saskatchewan Damage Claims history along with other information as given in the link below.

    http://www.sgi.sk.ca/vin/index.html

  11. 11. Wpglooker

    Buying a vehicle at a “car auction” is no doubt a risky venture.

    I only buy “bank repossessed” or “estate” vehicles from auctions. Then, of course I know that the vehicle was either seized from the owner by the bank for not paying his loan or the vehicle was property of someone who died intestate.

    In both cases, they are usually good deals because I know for a fact that the owner is not intentionally trying to get rid of a lemon!!

  12. 12. Future Money-Bags

    I have always wanted to use one of these car auctions or a police auction of stolen or confiscated items, but still have yet to attend one.
    This is a decently informative article, its good to broaden the catagories of articles on this site.

    Thanks Clark.

  13. 13. tiggerzzz

    Repos:

    One note on repo auctions…

    It is often the case that the people who were not diligent in keeping up with their payments were also not diligent with maintenance. Go to a repo lot and start pulling dipsticks… you will likely see the blackest motor oil and brownest tranny fluid of your life.

    It is also amazing how much interior and body damage some people can do in only a few years of ownership.

  14. 14. Alexis

    Thanks for these tips. We were actually going to head to our next local auction & reading this really helped me. I didn’t know they let you go see the cars the days before to check them out. Thanks a lot!

  15. 15. Melanie Samson

    Excellent post.

    I went to a used car dealer who frequently buys at auction and I told him the kind of car I wanted for what price. He managed to produce exactly what I wanted (in 2005, this was a 2001 Nissan Sentra for under 10k on the road). It was an excellent buy.

  16. 16. used tires

    I’ve always felt that car auctions are a good way to get decent automobiles as long as you know a little something about it. But if you don’t, it’s best to stay away or take someone with you that knows their stuff when it comes to automobiles.

    Till then,

    Jean

  17. 17. Ed Rempel

    A friend of mine worked at the police auction years ago. These are often seized at a crime. At that time, he used to say that you should bid an absolute maximum of $2-3,000 below a used price, to allow for possible repairs.

    Often the savings were quite a bit more than that. He saw virtually new luxury vehicles that looked to be in great shape other than the dashboard cut open sell for $5,000 or less.

    The police auction does not allow test driving the vehicles – you can just look at them and start them up.

    If you have a good mechanic and someone knowledgeable about cars and repair costs, an auction can be a relatively easy way to save thousands.

    Ed

  18. 18. Ed Rempel

    Does any one know a flat-fee car finder that they would recommend in the Toronto area?

    We have always thought of buying used cars as one of the easiest ways to save thousands of dollars. However, most people hate used car dealerships.

    For a few years, we had a retired car dealer that would talk with our clients to find out what they wanted in a car and then get them the best deal – sometimes from an auction, sometimes directly from a leasing company (that only allows dealers in), or sometimes from a dealership.

    His reputation is what brought him business and he made the same amount (he charged $1,000), regardless of the price or type of car, so he was motivated to be on our side.

    Our clients that worked with him all had a very good experience, saved thousands and were very happy with the car he recommended and found.

    Unfortunately, he passed away and we are still looking for a good carfinder to recommend. Does anyone know someone like this that they would recommend in the GTA?

    Ed

  19. 19. Jouleous

    I think it is always a good idea buying a car at an auto auction if you don’t get carried away from the competition of over bidding your price that you can afford versus the actual current value of the car.

    Ulysses

  20. 20. Hasib

    Well if you buy from Kijiji and local classifieds to begin with an auction isn’t any worse. But that is assuming you are already prepared to identify the lemons.

    Personally I bought my car from a dealer who bought it from an auction. It came with the safety certificate AND a warranty for major parts. So far it has a leak, a transmission sensor ($250) that needs to be replaced, and its battery died shortly after I bought it. It’s a nice car for the price, but it is truly a POS. And the warranty is useless.

    I have a buddy who bought a Nissan 350z 2003 (8-12k value) for $8k. That was a cool story but I’d be surprised if his car ran smooth without issues.

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