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.
To begin choosing the vehicles you want, go online and find out where the vehicles that match your parameters of make, model, year, miles and options are selling.
If your representative will allow you access, ADESA Dealerblock and Manheim PowerSearch can help you search for vehicles that meet your parameters. Check pricing online using ADESA Market Guide and Manheim Market Report. Black Book and the NADA guide are also essential pricing tools.
If the vehicles you want are at a local auction, you’ll need to print a run list before the auction, which can be found on the auction’s website. Check the vehicles’ condition reports stating the vehicle’s equipment, interior and exterior conditions and tire wear. Some reports also provide auction estimates of any repairs that may be needed as well as dents or scratches.
Condition reports are only snapshots of the vehicles’ cosmetic condition — they should not be used to judge mechanical soundness. Run CARFAX and AutoCheck reports for vehicle histories for accidents, title problems, number of owners and other data on the vehicle.
At a physical auction, a conscientious dealer will arrive early and inspect the vehicles to make sure they’re worth bidding on. Depending on the auction’s size, several lanes will run simultaneously. The vehicles drive up on the block, the auctioneer talks loud and fast, and the bids can come fast and furious or not at all.
If the bids reach the seller’s minimum price, or “auction floor,” the vehicle is sold to the highest bidder. Otherwise, the vehicle is not sold and the next vehicle is announced. This is why you need to do your homework to avoid getting caught up in a bidding frenzy and overpaying for the vehicle.
The sale is not final until your representative has signed the block ticket or appropriate document. Depending on the auction, there may be a test area to drive and inspect the vehicle. If undisclosed conditions are found, the sale may be voided depending on the auction’s arbitration policies.
Licensed dealers and brokers can also bid through online auctions. They tend to be one of two types:
Simulcast: This is a live cast of a physical auction, where you can see the auction from your computer and bid on the vehicles as they go through the block.
Auction via the Web: The other type is exclusive to online bidding, like an eBay auction. The vehicles are posted on sites such as OVE.com, run by Manheim, for a set number of days. There can be a “buy it now” price and a starting bid. If you don’t “buy it now,” you can bid and follow the auction until it ends. Check the bidding regularly for competing bids. If your rep wins the auction, you have to pay for the vehicle, provide appropriate paperwork and get it moved to your location.
If you just want to sell vehicles, that’s a different story. Auctions are happy to sell your cars!
You can sign up for auction access with a valid Federal Tax ID. In addition to your local auction, consider an Auction Access Card, which gives you access to more than 210 wholesale auctions and online channels across North America. This can be done at your local auction, if it is a member of the Auction Access Network, or online at auctionaccess.com.
Remember, the same reason you’d want to buy at auction is the same reason you should think twice about selling through one — the transactions are at wholesale prices. Stick to your traditional selling channels, unless you have exhausted them and need to sell as soon as possible.