Buying Seized Cars
Buying at Government Auctions III: Cars
Thousands of vehicles are auctioned off every year by the government, everything from worthless junk to high-end sports cars to everything in between. Automotive auctions tend be high-ticket items that present a real risk to the buyer since there is so much to lose if the winning bidder overpays or gets stuck with a mechanically unsound vehicle.
Haggling with a car dealer in the retail environment over the price of car is an often-unpleasant affair, and certainly it’s easy to over-pay for a car, especially since the dealer’s objective is to make as much money from your transaction as humanly possible. On the other hand, dealers have to conform to state standards for sales, and often include warranties, even on used vehicles. If something goes wrong with the transaction, you at least have someone to run to, even if you can’t count on the dealer to be completely sympathetic.
If we have offended the honor of car dealers everywhere with these statements, we apologize, especially since we have to warn those who don’t like managing problems with cars to stay away from government auctions for car purchases, where there is a lot of potential for problems due to mechanical issues. For those looking for a hassle-free car purchase, you are better off going to a dealer. At least that’s our opinion.
Like we said earlier in our tutorial, government auctions are a wholesale market where you are trading the convenience of a customer-friendly purchase to a not-so-friendly wholesale opportunity to buy below market value. Yes, it’s an opportunity to save money, but you are responsible for knowing what to bid and any maintenance issues that occur after purchase. That adds risk to the equation.
Having said that, there are some strategies you can employ to minimize the risk. First and foremost, we highly recommend obtaining a copy of Kelly Blue Book car values. This little book will cost you under $10 and can be purchased online at Amazon.com.
You can bring the Kelly Blue Book with you to the auction and base your bidding strategies on those values. The auto industry uses Kelly Blue Book values and it’s the only useful standard that we know of.
Car dealers, when taking used cars in on trade, will look to get the vehicle for several thousand dollars below low Kelly Blue Book value. This allows them to sell the vehicle for somewhere between low and high Kelly Blue Book value and still make a profit. If that is their strategy, it might not be a bad one for you to adopt too.
On older cars, factor in the probability of repairs in your bidding, so if you were planning on bidding on a car with over 36,000 miles, the mileage where the manufacturer warranty typically expires, lower your bidding to compensate for future repairs.
These strategies are conservative and you might not win the car if someone is willing to bid with a riskier strategy. Perhaps your competitor is willing to bid low Kelly Blue Book value. Is it worth it for you to go higher? Only you can answer that question, but we would simply point out that once a car is selling for low Kelly Blue Book, it has a lot of competition because there are many cars in classified ads like craigslist.com and ebay.com that can be acquired for low Kelly Blue Book value.
Another useful tip is to use Carfax.com to research the history of the vehicle. Many government auctions provide the vehicle identification numbers (VIN) in advance of the auction. For a small fee, you can check the number on Carfax.com to see if it has been in an accident or not.
People have written to us to tell us about the money they saved on car purchases using the information they found on PoliceAuctions.com. Some people buy cars at government auction to resell at a profit, but if that is your goal, bear in mind what we said about car values and don’t go crazy with your bidding.
