I can't tell you how many times friends and customers ask about auto auctions. They are surprised when I tell them that I have not purchased a car at an auction in years. Here are some of the questions that I have been asked.
Aren't there great deals at auctions ?
Remember when a car gets to the auction block, only ONE person can buy it. That buyer must pay MORE than EVERYONE else interested in that car to get it. That's how an auction works. So if you get the car, it means no one else thought that it was worth the money that you just spent on it.
How do you get cars then ?
I get many vehicles directly from the original owner. I am always looking for QUALITY automobiles. I also get them as trade-ins, from other dealers, and from leasing companies and remarketers (off-lease vehicle returns - NOT REPOs - there is a difference).
Would you bring me to a dealer auction to buy exactly the car that I want ?
No. Dealer auctions prohibit such practices, but that's not the whole story. The dealer auctions are filled with second rate, unwanted, and difficult to move inventory. Why would you want that ?
I have a friend that told me that many manufacturers sell off lease and repossessed cars at auction. They are supposed to be CHEAP - and anyway - Isn't that what you sell ?
Let me use an example: Mercedes-Benz Credit Corporation leases new vehicles to customers through Mercedes-Benz dealerships. At the end of the term, or when a customer can no longer pay, the cars are returned to Mercedes-Benz for remarketing.
Who do you think gets their pick of all of these vehicles ?
Right. The authorized Mercedes-Benz dealer. If you ran Mercedes-Benz, who would YOU want to get the pick of your BEST pre-owned cars ?
The balance (unwanted vehicles) is then remarketed through auction. Not only are they "seconds", but they come with little recourse should the car need major repairs. There is no such thing as Pre-Owned Certified or Extended Warranty at the dealer auction.
Secondly, do you REALLY want to purchase a car that someone else stopped paying for ?
If the owner knows that the bank is coming for the car anyway (and he is already in financially difficult times), I am confident that he is not having repairs or maintenance done. Not the mention that the NUMBER ONE REASON FOR NON-PAYMENT IS THAT THE CAR IS NOT WORKING PROPERLY.
I still think that I might get lucky and find a great car that no one else notices, and I can be the only bidder. What should I know ?
I guess that my first piece of advice would be: Dealer auctions are not absolute auctions. This means that the seller has the right to refuse bids and keep his car. So if you find a cream puff, and for some reason no one else notices, your bid is not binding. Just like E-Bay, the cars have a reserve price.
Many cars DO NOT sell !!! At a local auction last week, over 5000 cars were auctioned off, and less than 50 % actually sold.
Don't be fooled, the sellers are professional car people, they know what their car is worth, and will wait for the right money to sell it.
What about E-Bay ?
I have an E-Bay business, and think it is a great way to sell and buy. Cars, however, are not one of those things. Forget about the fact that cars have thousands of moving parts, and you don't get to see or drive it first. You are sending money to a complete stranger for a car that you have never seen.
Not to mention that ... dealers are experiencing record profits for their E-Bay departments. Some dealers that I know actually put cars on E-Bay first, because they sell for more money than if they were on the lot.
Remember the auction explanation earlier. Only the high bidder gets the car. On E-Bay, we're not just talking about a few dozen bidders. Everyone with a computer can bid on the car. If you are the one who gets it, I would confidently say that you paid more than ANYONE else would.