Published: April 2020

The Used Car Industry: Auctions with No Warranties or Guarantees

The used car industry in the USA represents almost half of the USA auto market and is also the largest segment of the economy in terms of retail sales. Thus it represents a grand economic wheel for the disposal of over twenty million vehicles a year and an opportunity to support many other side industries such as recycling car parts, demolition yards and metal salvaging.

Many of these used cars are sold through nationwide auction sales which provide opportunities for licensed car buyers and used car buyers to purchase vehicles. These are then reconditioned and displayed in showrooms or lots for resale. I described this interaction as a grand economic wheel as it perpetuates a never ending cycle of cars changing hands from one buyer to the next owner.

When I have attended these auctions I often relate them to the ‘Theatre of the Absurd’ as they often seem to take a page out of Dante’s inferno which begins in the depths of Hell but might end up with the joys of Heaven. Smoke from exhausts lingers in the run lanes, expectation on the one hand and disillusionment on the other runs rampant, bidding is fast and quicker then a blink and people are standing next to one another in tight quarters for hours on end. Many colors, sizes and shapes in both the vehicles and the audience. There might be two or three lanes of vehicles up for bids which makes for difficult observation. Sometimes to create more of a buzz the auctioneer will announce a free give away which punches up the anticipation and the good humor so people will bid higher. Meantime, unless you have superior mechanical skills or mystical abilities you are purchasing an as is vehicle without a provenance. It really is a crapshoot which many of the people in attendance don’t seem to mind. It seems to be a poker mentality as there is always a winner somewhere. Of course there are previews beforehand if you want to walk miles in a huge lot to look at cars you might not be able to start up. Not for the weary or the impatient. The walk from Hell to Heaven might just be too long!!

However, not everyone can participate in auction sales. For really large auction venues, only licensed used car dealers are included in the lucky few. Enthusiasts and other interested buyers are allowed to participate in minor auction sales which are usually organized by banks and financing institutions.

Intent to Sell notices are usually posted weeks before the Auction venue in newspapers, online and on television. Usually preview times are mentioned so dealers and individuals can get a first hand look at the conditions of the vehicles put up for sale. Using a reference point of examining the exterior of a given car first and noting the finish, paint and bodywork condition and any signs of a vehicular accident are important parameters. If you are prepared for checking out the underneath of the vehicle then confirm the capability of the chassis, the suspension system and any rust issues. Finally appraise the condition of the interior to see what needs to be refurbished and is any controls/lights or dials are missing. Then consider what you will need to accomplish in materials and time in order to resell the vehicle. This process will assist in arriving at a suitable bid price.

If you are an individual buyer attending one of the smaller auctions led by bank owned vehicles consider bringing a person that is an auto mechanic with you. This expert can assist in determining the best acquisition price to maximize a profit once the sale is awarded. Although there are many manuals to guide prospective bidders, only you can gauge the financial viability of a sale.

Here I shall caution you to not get caught up in the fever of the bidding process. I have seen so many people purchasing models over the price range for a successful resale. These vehicles end up costing the buyer any profit. Be aware that any resale vehicle that sits on a dealer’s lot or on a person’s home lot for any amount of time is a cost in space rental. Similar to inventory that sits on a shelf in a retail store for months on end which depreciates the value of that product and takes away from any profit margin that might be gained. Additionally, that investment could easily have turned a profit if you had acted in a wiser and more mature manner. Be patient, do your research thoroughly and attend a few auctions first before bidding to become accustomed to the process. Good luck.