What Is a Car Auction, and How Does It Work?

The used car market is hot these days due to stagnant wages and increased living expenses. Both individuals and dealerships are taking advantage of the oversupply of used cars by increasing their habits of buying a car at auctions.

The two 800-lb gorillas in auto auctions are Mannheim and Copart, but those dynamics have changed due to online selling. Due to online expansion, experts believe that in the next five years, the automotive auction market will fundamentally change more than in the last two decades.

A simple online search for car auctions will yield thousands of results, including the location, public or private, and online.

Mannheim has over 100 physical locations selling a variety of cars and trucks in several different formats, such as live sales, online, and mobile. The company offers an extensive line-up, from cars and trucks to boats, RVs, heavy equipment, and trailers.

Public Auctions

• Copart Auctions has developed one of the most strategically balanced platforms in the automotive industry. The company features over 250 physical locations coupled with its online bidding platform. Find the car you wish to purchase, visit the location for a hands-on inspection, and start bidding online, or shop online and have the vehicle shipped the same day.

Thousands of live public auto auctions are scattered around the country and owned by different groups. One such organization is the Stanley-Autenrieth Group, which owns the Carolina Auto Auction and the Indiana Auto Auction. The National Auto Auction Association ties together hundreds of these auction networks.

Top Online Auction Sites

• IAAI – used, repairable, salvageable
• ADESA – online and location auctions
• Salvage Bid – repairable and salvage only
   

Dealer and Industry Auctions

Dealer and industry groups are slowly but surely gaining confidence in digital buying and selling platforms. Condition reports, innovative imagery solutions, and consistent, reliable data are giving Mannheim and similar companies an edge. Producing an accurate visual representation of a specific vehicle is indispensable for hardened industry professionals to make buying and selling decisions.

Digital buying and selling has improved in all aspects of used car inventory control and floorplans. Companies such as Floorplan Express help single dealers precisely manage their used inventory by offering specific auction locations and online inventory control making buying a car at an auction more efficient and streamlined. 

Digital Solutions transforming the automotive industry:

• ACV Auto – data outsourcing
• AXLE Funding – dealer floorplan auctions
• ALLY – dealer financing, smart auctions, shipping
• Auction Edge – software

Car auctions are typically fast-paced affairs when the bidding starts, and any bidder hoping for success must be prepared. Reputable auction houses have dealer attendees with decades of car buying and selling experience. Industry veterans thrive on the fast-paced action of 10-, 15-, and 25-lane auctions.

Auction Day

Once you have found an auction house that has the types of cars you may be interested in, go to one of their auctions without the intention of buying. Walk around, talk to people, and see the flow of cars and how they are brought to the lanes. Absorb the atmosphere to see how things work. Familiarize yourself with the rules on how bidding starts, and pay close attention to the auctioneer’s pace.

Inspection Period

Inexperienced bidders should arrive as early as possible on auction day to register and review the Run List or block summary. Auction yards allow vehicle inspections at specific times before bidding begins. Have the GoodCar mobile app handy to check VINs and read over a vehicle's history and any abnormalities. Be thorough with any inspections. Auto auction houses do not allow test drives due to liability issues.

The Car Auction Begins

Always track the auction times and lane positions carefully, knowing precisely when the car you want to buy at auction is ready to bid and where to go ahead of time. Whether you are attending an online or live auction, always have a ceiling price. This magic number keeps you on track so you don't get swept up in the heat of the moment.

Once the bidding is ready to start, the auctioneer starts his chant or auction cry by announcing the starting initial bid and the vehicle’s lane position. Depending on the auction house, bids are placed by raising the hand or bidder number, a paddle, by phone, or through an online portal.

Winning The Bid

For the uninitiated, there is nothing more exciting than placing the winning bid at a car auction. Hours of research and planning finally pay off in a single raised hand, and the perfect car is yours. Hardened industry veterans see auctions as the first step in a profitable transaction.

Auctioneers provide the information for each vehicle as it comes down the lane. Along with their Ringmen and other personnel, auctioneers control the bidding process. They make sure interested buyers are recognized with their bids and call an end to each bidding lot or if any additional terms are needed. If the floor price is not met, the auctioneer moves on to the next vehicle. The entire process of buying a car at auction takes about 60 seconds.

Depending on the size of the auto auction, one or several block clerks monitor the entire process, recording bidding numbers, amounts, participating dealers, and other transaction details.

You’ve Won

Once the auctioneer throws the gavel, bidding is over. Block clerks record the price and the winning badge or paddle number. Buyers head to the clerk’s counter to receive an invoice for their purchase, and if this is the only vehicle, they are shown to the front office to pay.

Buyers take their invoices to the front office to handle the details of their purchase, such as paying the invoice, transferring title and keys, test drives, and making shipping arrangements. Most large car auction houses have several companies they use to ship vehicles directly to the buyer’s front door.

Once the details have been successfully handled at the office, the vehicle is yours. The gate pass allows the holder to take the vehicle from the auction premises. Buyers can either drive it home or have it shipped.

The answer to this question is a solid yes and no. If the auction is a dealer or industry marketplace, a dealer license and other documentation will be needed. Large auctions with several lanes of cars generally have different buying sections, including public and dealer-private affairs.

Anyone can attend and bid at a public auction. However, if you want to buy a car at auction, you’ll need to fill out a registration form, supplying a government-issued ID, and, in some cases, having a credit/debit card on file to bid and supplying a membership fee.

Online auto auctions require registration to bid. Documentation may include an ID, the last four digits of a social security number, and an email address.

Dealer-Only Auctions and Licensing Requirements

Dealer-only auctions are handled a bit differently. The money is always in the bank or the floorplan agreement, ready to be transferred. Shipping is usually handled by the dealership who bring their own flatbed trucks. Large dealerships often buy and sell dozens of cars and trucks at a single auction.

Dealer License

Anyone wanting to start selling cars should head to the Department of Motor Vehicles website in their state. Every state has specific requirements for obtaining a license to sell cars, trucks, SUVs, motorcycles, and so on. There must also be a permanent business location, either leased or owned.

Dealer auctions and dealer-licensing typically require the following:

• Business contact information, location, and dealership class
• Dealer license and registration documentation, Sales Tax number
• Payment method, ACH, debit card, or dealership floor plan
• Surety Bond: most dealerships use their in-house bond. This guarantees your business will operate ethically and legally.

Auctions are fast-moving car and truck markets that require mere seconds to make a purchase, as opposed to going into your local dealership and spending the day. The key to success is preparation and research.

The speed of auto auctions can be overwhelming for some, and the need to make big decisions under pressure should come naturally. Never ignore a vehicle's flaws, and always run a GoodCar Vin check during the inspection period.

Pros:

• Auctions offer deep discounts to those who know how to bid
• A wide variety of vehicles are available, from domestic cars, SUVs, Ferraris, trucks, and everything in between.
•  Complete transparency of the available models, including condition reports, known issues, and VIN checks.

Cons:

• No test drives (this is a biggy)
•  High-pressure environment is not suitable for some
•  Salvage, rebuilt, and total loss titles are written off vehicles. Caution is the key!
•  Money must be ready when the gavel falls
   

Tips for Success At Car Auctions

Experience is the true difference maker at any automotive auction. Neophytes must understand they are up against industry veterans with decades of experience. Industry bidders can look down the seam of the hood and know it has been in a front-end collision.

To counter the odds against you, scrutinize each vehicle of interest during the inspection period. Since there are no test drives, use this time to your advantage. Inspect thoroughly and have your money ready; otherwise, penalties will be imposed. Always have a ceiling price and never go over that number.

As stated earlier, it is vital to maintain composure while bidding, do not take anything personally, respond decisively, and always have a positive attitude. Attend one or two auctions without any intention of buying to soak up the atmosphere.

Car auctions are an excellent way to get a great deal on a car or truck, and they are also the best way to lose the shirt off your back if you are not careful.

In conclusion, make sure you are cut out for the fast-paced action of a live or online auction. When buying a car at auction, the entire bidding process takes less than a minute, and some people can get swept away by the excitement. Never let AI, automated car buying, or predictive analytic technologies get in the way of a good car deal.