How to Buy a Car at an Auction
Internet and in-person car auctions offer plenty of thrills and can be a great place to score a new vehicle: if you know what you're doing.
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Auctions can be daunting to the uninitiated. Between the impulsive bidding and the leap of faith involved in buying a vehicle you may not have seen in person, they definitely aren’t for everyone. But shoppers looking for something special or an unbeatable deal may find a lot to like at these events.
Used-car dealers routinely acquire and sell vehicles at wholesale auctions, but those sales aren’t open to the general public. Regular car buyers have fewer options, which can be narrowed down even further based on what you’re hoping to purchase. Here’s a look at how to buy a car from an in-person or online auction.
How to Buy a Car at a Live Auction
Live sales put on by auction houses like Barrett-Jackson, Mecum, and RM Sotheby’s often feel like a spectacle, with a circus-like atmosphere. These events may not ride into town on a train loaded up with elephants and giraffes, but their bright lights, flashy signage, and polished presentation all feed into a sense of excitement that encourages frothy spending.
These auctions are geared toward car lovers, and for enthusiasts with a big budget, they can be a thrill. Even spectators who don’t register to bid can have a lot of fun checking out the cars. If you visit the auction as a prospective buyer, you’ll have the opportunity to inspect the vehicle up close, and you might be able to hear it run. You generally won’t have the opportunity to drive it, but the seller may very well be present to answer questions.
You’ll likely find some great vehicles at a collector-car auction, but you won’t see many bargains. For more common vehicles and lower prices, seek out a government or university fleet auction or an estate sale, where you may find vehicles mixed in with everything from furniture to jewelry. At these types of auctions, the bidding works largely the same way as at collector-car events, although often with less pomp and circumstance.
Registration
You’ll need to register—often for a nominal fee—before you can place a bid at an auction. While you can generally do this on-site, most auction houses recommend you fill out all the forms online at least 24 hours ahead of the event so they have time to process your application. You’ll need to provide a credit card number and perhaps a bank’s letter of guarantee, proving to the auction house that you have funds available for an immediate wire transfer following the close of the auction.
How to Bid
An in-person bidder will be issued a paddle with a number on it. At the start of each auction, a commentator will announce the car up for bid, giving a brief description of it and possibly revealing new information about the car not listed in the catalog. The auctioneer will then call out a starting price, and any interested parties will raise their paddles. An eagle-eyed auction-house representative will note their intention to bid at the current price. An auction house representative may politely hover around a bidder in an effort to gently encourage more bidding. The auction is over after the auctioneer’s calls for more bids go unanswered and the hammer (or gavel) drops. Live auctions don’t have a set time limit, but bidding usually lasts just a minute or two, even for high-value vehicles.
If you’re unable to attend an event in person, some live events allow you to bid online, over the phone, or via a proxy who will place bids on your behalf up to your stated maximum. Using these methods, however, may require additional fees.
Reserve Prices
Sellers can decide to list their car with or without a reserve price—that is, the minimum amount the seller will accept, which is unknown to bidders. To set this safety net, many auction houses charge an additional fee and may work with the seller to determine a fair value. Should a car cross the block without meeting the reserve, the lot will not sell. In certain cases—for instance, if the highest bid nearly met the reserve—the auction house might try to facilitate a sale in the following days.
Payment
In addition to the registration fee and the vehicle’s sale (or hammer) price, the winner will pay the auction house a buyer’s premium. This is typically around 10% of the final bid; so if a car sells for $25,000, the winner will owe the auction house another $2,500. Sales tax can also tack on hundreds or thousands more to the price.
That winning bid and the accompanying fees must be paid at the end of the auction, typically with a wire transfer or certified check. Should a bidder default on the purchase, the auction house will still collect its fee via the credit card on file, and the bidder remains financially responsible for the full sum as well as legal costs to resolve the issue. Non-paying high bidders will likely be banned from participating in future auctions.
How to Buy a Car at an Online Auction
Online auctions lack the “pomp and circumstance” of live events but allow for a much bigger pool of sellers and bidders. That means you’ll have a greater chance of finding the specific vehicle you want but potentially more competition in bidding.
As a buyer, you may find online auctions more palatable than in-person ones. Bidding from a computer screen, or even your phone, removes some of the intensity and emotion of a live event. And depending on the site, auctions run anywhere from three days to a couple of weeks, so you have some time to really think about your decision.
What to Do While You Wait
You should use the lead time to better understand the value of the vehicle on offer. If the car is local to you, you may be able to contact the seller to see it in person or take a test drive. If that’s not an option, some sellers will accommodate a pre-purchase inspection by a professional, usually at the bidder’s expense, but this could be wasted money if you don’t win the auction. You can also email the seller or use the site’s commenting function to request additional photos or ask questions about the history of the car and the condition of specific components.
Registration
Registering for an online auction requires filling out a short form with your contact information. You’ll also have to put down a credit card number, which the auction house will use to automatically collect its fee should you win a vehicle. While these forms are not particularly difficult, it’s best to register well before the end of the auction.
How to Bid
While it’s likely not prudent to run up the bidding the moment the auction goes live, it’s a good idea to place a low bid early on so you understand how long it takes for the site to process your offer. You’ll also want to check to see if the site you’re using allows for sniping—where bidders can submit an offer in the final moments of a timed auction so no one else can counter. This practice is not only uncool, but it can backfire if a slow internet connection or page-refresh issue prevents your bid from loading in time. Plus, at least a few online auction sites have taken measures to undermine the practice. For instance, Bring a Trailer, the largest collector-car auction site, will extend any auction by two minutes whenever someone places a last-second bid. Others may require bidders to answer a CAPTCHA test to ensure a person is manually entering the bid and not using software to get an edge.
A few of the traditional auction houses will occasionally offer a vehicle using a sealed-bid procedure in an online auction. In these auctions, you won’t be able to see the current high bid or the final sale price, unless of course you win the lot. Sometimes, the house will tell you where your bid ranks among others, but not always. Sealed-bid auctions, therefore, often encourage higher bidding, as interested parties will want to present their best offers from the outset and not just one-up the leading bid.
Reserve Prices
Much like live auctions, most online sales allow sellers to set a reserve price for a fee. The site won’t disclose what it is to bidders, but it will say if someone has met it. Some sellers will share this information upon request, though, so it’s worth asking.
Buy It Now and Make Offer
Sellers on eBay can decide to add “buy it now” and “make offer” buttons to their auction listing. The former allows buyers to avoid the stress of an auction by paying a premium for the vehicle and buying it outright. The latter allows interested parties to, well, make an offer on the car; the seller then has a set amount of time to accept, counter, or reject it.
Payment
Just as with live events, the online auction house will collect a buyer’s fee (if there is one) from the on-file credit card before the seller receives the winner’s contact information. Once that transaction is confirmed (usually within a few minutes), it’s up to the seller and the auction winner to work out payment and shipping. Most sites recommend a wire transfer, and they urge expedient payment. If the winner fails to follow through, the auction house may step in to apply pressure or even ban them from their platform.
Online auctions tend to charge lower fees than in-person ones. Bring a Trailer requires the winning bidder to pay 5% on top of the hammer price up to $5,000, though competitor sites may have higher or lower maximums. eBay, which serves as a marketplace for everything from brand-new minivans to five-year-old hybrids to million-dollar supercars, doesn’t charge the buyer anything.
Buyer Beware: The Risks of Buying a Car at an Auction
Since auction houses are merely middlemen and not sellers, they typically won’t provide a warranty or guarantee on the cars they list. eBay offers a purchase protection plan on vehicles that meet certain criteria, giving buyers some insurance against issues of fraud (e.g., non-delivery of the vehicle, undisclosed defects in the title, or description inaccuracies), but it won’t solve every problem.
If the seller has a dealer’s license, you may have some financial recourse if the car turns out to be a dud, but it depends on where they are licensed. Buying from a private party offers no protection, though.
That said, auction houses have their own reputations to keep up and will generally try to ensure the vehicles are properly represented before the event. If they ban bad sellers from their platform, you can have more confidence about clicking that “bid now” button or raising your bidder’s paddle up in the air. Some will also try to resolve serious issues by working as an intermediary between the buyer and seller, or they may refund part or all of the buyer’s fee to help offset a sour deal.
