May 2012, Business Fleet - Feature

So You Want to Buy Vehicles for Your Fleet at Auction?

While buying used vehicles for your fleet at auto auctions may not be available to you, there are ways to use the auctions to get close-to-wholesale prices.

By By Tim Yopp and Mark Eckhaus

Photography by Chris Wolski
Dealers bid for cars during a closed sale at South Bay Auto Auction in Gardena, Calif.

So you’re looking for a few pickups, vans or sedans to add to your fleet and you’re thinking about buying used. Generally, the best prices are found in the wholesale auto auction lanes. It would be great to cut out the middle man and get a piece of that action. But can you?

If you run a fleet and you’re thinking about waltzing into an auction to buy cars, you can’t — you need a dealer’s license. And if you’re thinking about getting a dealer’s license, think again. Dealer’s licenses are designed for businesses that will be selling cars.

While requirements vary from state to state, obtaining a dealer’s license requires passing a test with the DMV, having a properly zoned location for auto sales, appropriate insurance and a performance bond posted with the DMV, among other hoops to jump through. Insurance alone could run $20,000 a year. In short, getting a dealer’s license to buy fleet cheap just doesn’t add up.

But what about those public auctions, the types that sell government surplus vehicles and government-seized property? Your business should have no business at public auctions. The majority of those vehicles are ones that couldn’t sell on dealer lots; they have no warranties or guarantees and are at the end of their lives.

If you’ve seen the customs or U.S. Marshal’s sales that advertise late-model, high-line vehicles, you can bet there will be competition — experienced competition — bidding against you.

So What Can You Do?

Though you’ll most likely be shut out of buying at auction yourself, don’t despair. You can still buy vehicles from them — you just need someone to do your bidding for you. Auto dealers, licensed brokers and major fleet companies can provide that service, if you can convince them to help you.

How do you do that? The first step is to go to your source of new cars. If you have a good relationship with any of your dealers, ask them if they’d be able to pick up units at auction for you, for a negotiated fee, of course. If they don’t want to bother, ask them if they’d refer you to a broker they’ve worked with.

Fleet companies such as Eckhaus Fleet operate similarly to a dealer or fleet management company and can work to source used cars for you. You may think you’re back to the middleman you wanted to cut out. Yes, a fleet company will also take a fee; however, its buying power at auction offers advantages, such as a lower fee structure, the ability to sometimes buy before the sale and the ability to source vehicles from closed auctions only available to franchised dealers of a certain manufacturer.

How an Auction Works

If you’re lucky enough to have a representative to buy vehicles for you, don’t worry about accompanying them to the auction. It’s getting harder and harder for non-licensed buyers to get on an auction floor. Trust your representative, but understand the process this person must work through.

While the general processes are similar for all auctions, each is a standalone business with separate policies. Here are things you should educate yourself on before selling or buying from an auction:

• Familiarize yourself with the specific auction’s fee schedule.
• Look at the available services (for a fee), such as washing, after-sale reconditioning and transportation.
• Understand the auction’s arbitration policy.
• Be aware of the payment process.
• Know how and when you will get your title.