How to buy a car at auction

Looking for a bargain on your next used car? You might want to check out car auctions, where you bid on vehicles against other buyers rather than directly negotiating with the seller. Unlike with buying from a dealership, you typically can’t get a refund if you change your mind after purchase. And auction cars often don’t come with a warranty. You’ll also want to thoroughly check the condition of the car before buying to ensure you don’t end up with a lemon.

How does the auction process work?

Auction houses access used cars from a variety of sources, such as ex-police or government cars, cars repossessed by finance companies and former rental cars that are due for replacement. You can find auctions that only deal with specific types of vehicles like classic cars, as well as more general auctions.

Here are the steps you can expect to go through when buying a car at auction:

1. Research car auctions near you

Search online for auctions in your area. After you find one you’re interested in, check to see if there’s a catalog available of the vehicles that will be auctioned. This typically provides information on each car’s model, ownership history and potential costs for maintenance and repairs.

You also might want to consider visiting a few auctions in advance to get a better understanding of how they work.

2. Register in advance

You’ll likely need to register for the auction and provide identification in advance. You may also be required to prove you have enough money to pay for a car at auction, so have a bank statement, credit card statement or loan preapproval offer on hand just in case. When you get to the auction, the auctioneer will give you an identifying marker like a numbered car or paddle which you can then use to make bids.

3. Compare the different cars available

Don’t rush to bid on the first car you see. Look at each vehicle to compare builds and see which one you’re interested in most. If the seller is at the auction, ask them why they’re choosing to sell the vehicle and if there was any repair work that was done. If you have any questions or concerns about a vehicle, raise them before the auction rather than after it commences.

4. Inspect the vehicle

If possible, look thoroughly at the interior and exterior of the car to check for defects, such as signs of previous accidents, rust or broken parts. Check for registration papers as well as the vehicle identification number (VIN).

The VIN can typically be found on the dashboard, driver’s side door and in front of the engine — make sure the numbers match, otherwise the car might be stolen. You can then use the car’s VIN to look up the vehicle history report, which verifies ownership history, accidents and repairs.

5. Start bidding

This is when you’re facing off against other people interested in purchasing the same car as you. Vehicles typically come with a reserve price, which is the lowest bid that will be accepted. If no bid reaches the reserve price, the seller can choose not to sell the car. But if a bid is above the reserve price, the seller must accept it.

If you have the highest bid at or above the reserve price, you’re required to complete the sale. For whichever car you’re interested in buying, keep the market value in mind to determine if you’re actually getting a good deal.

6. Negotiate with the owner if the car doesn’t sell

You can try doing this if a car failed to reach the reserve price. You can possibly get the seller’s details from the auctioneer to negotiate with them directly.

7. Pay for the car and transfer the title

If you’ve bid successfully, you’ll generally be asked to make a down payment of around 10% at the end of the auction. This is why it’s a good idea to have a preapproval offer from a few different lenders to prove you have the funds available to pay for the vehicle.

How do I inspect the vehicle?

Always give the car a thorough inspection before buying. Try following this checklist to make it easier.:

1. Check the exterior

• Look for any signs of a previous accident.
• Check for any rust or corrosion — it may indicate more extensive damage.
• Examine for hail damage, dents and panel irregularities.
• Ensure the door and boot seals are intact.
• Look for chips or variations in the paint.
• Check the engine exterior for any damage or abnormalities.
• Check the engine oil and radiator coolant.

2. Go over the interior

• Check the condition of upholstery and interior panelling.
• Look for any signs of wear and tear on the seat belts.
• Find out whether the electronics — like air conditioning, power windows and the audio system — are functional.

3. Start the car, if possible

• Check for functioning of interior lights and all exterior lights.
• See that dials and electronics such as air conditioning and audio are working as expected.
• Listen for unusual engine noises.

4. Check the documentation

• Transfer of ownership documents (eg. certificate of title, vehicle bill of sale).
• Registration papers.
• Vehicle history report.

Other tips for buying a car at auction

Ready to start bidding? Here are a few pointers to help ensure your car auction experience goes smoothly:

• Check the car’s certifications before buying. Some vehicles might be sold with a certificate of title or pink slip, while others may not. You should add the cost of registration to the cost of the vehicle for an idea of total expenses.
• Bring a friend. If you don’t know enough about cars to inspect it properly, it’ll be worth bringing along someone who does. That way, you can have someone you trust guide you through questions to ask and what to look out for.
• Know the competition. It can help to know whether you’re bidding against dealers or the general public. Dealers tend to look for discounted cars and usually avoid bidding too high, making it easier to get a bargain.

How can I pay for a car I bought at an auction?

You have a few options when it comes to financing a car you bought at auction:

• Used car loan. You can take out a loan through either a bank, credit union or online provider. Check out our guide to used car loans to learn more about the differences between secured and unsecured loans, interest rates and terms.
• Unsecured personal loan. This type of loan generally doesn’t require you to put up any collateral, although they typically come with higher rates.
• Cash. If you have enough money saved up, it might be a good idea to pay for the vehicle directly with cash. At some auctions, this can be the only option to pay.

Although buying a car at auction can be cheaper than getting one at a dealership, the costs can be unpredictable. You may not only need to pay for the car itself, but also taxes, buyer’s premium, registration fees and any repairs that need to be made. Adding up these extra expenses can help you figure out how much you’ll need to borrow.

If you opt for a car loan or personal loan, you may want to consider getting preapproved from a few providers so you know how much you have to spend. This can also give you an idea of what rates and terms you qualify for so that you can find the best deal available to you.

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Bottom line

You may be able to save thousands on a new-to-you car by heading to an auction instead of the dealership. But like with any used car purchases, you’ll need to thoroughly inspect the car and vehicle history report to ensure you don’t end up with a lemon.

Read the auction catalog and ready to sign up? Check out our guide to car loans to compare your financing options.

Frequently asked questions

• Can I get a new car at an auction?

  Generally, no. Typically, the only type of auctions that sell new cars are dealer auctions — and these are usually closed off from the general public. You’ll need a dealer’s license to participate.

• I bought a car at an auction and it turned out to be defective. What can I do?

  Unless the car you bought came with a warranty, the seller may have no legal obligation to provide a refund or any compensation for a defective car. Be sure to make as thorough an inspection as possible before bidding. This ultimately depends on where you live, as each state has different laws for cars that are defective, also known as lemon cars. If you think the vehicle you bought is defective, read our guide on what you should do.

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