Buying a used car at an auto auction? Here are some tips

Here are a few easy steps to follow to ensure your visit to the auction yard is a great experience:

1: Think about your requirements

Don’t go rushing in – before you even check out the auction times, you’ll need to decide what kind of vehicle is going to suit your lifestyle and needs. Take into consideration the main things you’re going to be using the car for, and what features you can and can’t compromise on.

For starters…

Size: If you’re mainly going to be travelling short distances to and from work, something compact should do you nicely (and help save on your petrol bill). On the other hand, if you’re constantly travelling out of town or need to fit your fishing gear or skis in the back, you’re going to want something roomier.

Safety: The newer the vehicle, the more safety features it’s likely to have. Nearly all cars on the market nowadays are likely to have ABS brakes and driver/passenger airbags, but you might only feel comfortable on the road with more advanced features such as side curtain airbags. Do your research into the various safety features available and decide which you want.

Practicality: If you’ve got kids and car seats to contend with, a coupe is quickly going to become a nightmare. Likewise, a monster SUV isn’t the best for an inexperienced driver. Do the thinking and save yourself hassle later on.

Engine type and size: Need to tow a boat? A 2.0 Liter 4 cyldiner probably isn’t going to cut it. And you might not need four-wheel-drive capability around the city, but if you’re likely to drive on country roads or visit the ski fields you might want to consider 4WD or AWD as a requirement. If you can drive a manual, remember that they’re often cheaper to both buy and maintain.

2. Decide on a budget

Pick an upper limit of what you’re prepared to pay for your new car, being realistic about what you can afford given your list of requirements. Many people choose to finance their purchase, although obviously you need to be careful here.

3. Do your homework

If you have a specific type of car in mind, it’s a good idea to research what similar models and years have sold for in the past, so you don’t get ripped off. eBay is a great place to check this out. If you’re in New Zealand, you can use Turners car valuation tool.

3. Choose a reputable auction company

When buying a second hand car, its rare that it will be in exactly the same condition as when it was new, and with so many mechanical parts, it’s very easy for something break or not work properly. That’s why it’s important to work through a reputable auction company that checks their cars before the auction, and who are willing to help should something go wrong, post-purchase.

4. Arrive with plenty of time

The auction yards generally open a couple of hours before auctions are due to begin, so make sure you’re down there as early as possible so you can test-drive the vehicles you’re interested in, carefully inspect them, and familiarise yourself with the auction process . It might pay to ask a friend or family member with some mechanical knowledge to come along too.

Don’t forget your driver’s licence; you’ll need it in order to carry out test drives!

5. Inspect the vehicle/s you’re interested in thoroughly

Right, you’re there in the auction yard, with a car you like the look of sitting in front of you. Now what?

Well, first up, have a look at the bodywork. Are any panels clearly out of alignment? A vehicle history report will usually tell you if a car has been imported as damaged, but it pays to look carefully all the same. Are areas of paint coloured slightly differently to the rest? These are signs of poor repair jobs and may indicate more significant underlying structural damage.

Next, pop the hood. Look for signs of oil leakage under the engine, scan for any signs of rust or wear and tear on the engine itself, and check the oil and water. Check the tyre tread. Test the head and brake lights, the air conditioning, the CD player, the central locking and the electric windows (if any).

Look inside the car’s interior for steering wheel and brake/accelerator pedal wear, upholstery tears, wear on the floor carpet (lift up the floor mats and look underneath) and any other flaws. There are likely to be a few imperfections on any second hand vehicles, but you need to ask yourself if you can live with them – or alternatively how much it will cost to repair the faults.

6. Inspect the vehicle/s you’re interested in even more thoroughly

This is a major purchase and you should carry out as many checks in order to protect yourself.

One possibility is to get a vehicle inspection report from one of the many online providers offering them. This will help you ensure the vehicle you’re looking at purchasing has genuine mileage and hasn’t been imported as damaged.

If you pre-arrange it and arrive with plenty of time to spare, it’s also possible to carry out your own pre-purchase inspection report – there are many companies that provide this service. Just keep in mind that this probably isn’t necessary with a reputable auction house who run their own checks.

7. Take it for a spin

Now it’s time to spend some time behind the wheel. Get the key and start ‘er up. Listen carefully – does the car run smoothly, or is the engine rattly or sound as though it’s struggling?

Next, drive the car around the test-drive track. Does it list to one side or the other? Does the wheel feel overly ‘heavy’ in your hands (this may indicate problems with power steering)? Does it turn corners well? How does it respond when you hit the accelerator or the brake? Quickly? Smoothly? Jerkily? If it’s a manual, how do the clutch and gearbox feel?

By the time you’re done, you’ll probably have a good idea whether the car ‘feels right’ in terms of handling. If all is well, it’s time to bid!

8. Remember to factor in your auction costs to the overall bid

It’s a good idea, before you sit down ready for the auction to begin, to factor in any associated auction costs to your budget. New imports often require an additional fee to be paid for the vehicle to be registered and warranted, and there’s a small extra cost required for the auction house’s services.

9. Stay calm

Right, bidding is about to kick off. Make sure you know where and when the car/s you are interested in buying are being auctioned, and that you have a good view of the auctioneer (make sure also that he/she can easily see you when you raise your hand!)

When the time is right, raise your bidding number sign. Listen carefully, and continue bidding as long as you feel comfortable. Remember to stick to your budget – emotions can sometimes run a bit high in an auction.

If you’re lucky, the hammer will fall, and you’ll have a brand new ride to take home.

10. Know your payment method

Most of the time, you’re required to pay the balance owing by the end of the day or arrange an appropriate finance deal. Make sure you’re able to do this – it may mean visiting a bank and coming back with the money (keep in mind that banks often place limits on how much can be spend on a debit card during a single day).

11. Enjoy

You’ve done the hard yards, researched your dream car, kept a cool head and come out of it all with something that will hopefully give you many years of hassle-free driving. Congratulations!

When it comes to a used car, each of these guides will give you two numbers – the wholesale value (also known as the trade-in value) and the retail value.

Wholesale or Trade-In Value: This is what you can expect to get for a vehicle that has normal wear and tear. It’s usually a fair price for vehicles in average condition for their mileage and age. Because this is an average, half of the vehicles on the road will be worth more, and half will be worth less.

Retail Value: This is what you’ll pay for a vehicle that is completely free from defects – it has been 100% refurbished, and it’s as nice a car as you can hope to find for that year and for that mileage. Dealers and private individuals will try to charge full retail value, but keep in mind that less than 3 percent of the cars in the United States are in such excellent condition and worth retail value. In other words, retail value is usually the most you should ever pay for a used car.

When figuring out a fair price for a particular vehicle, it’s important to remember you must adjust for miles and condition. Here are some of the things you’ll need to account for:

• The average annual mileage in the U.S. is 12-15k miles. If the car you’re looking at or trading in has more than twice the average, you should expect to deduct more than the recommended mileage deduction. It’s commonplace to double or even triple the mileage penalty for extreme mileage situations (this is particularly true with NADAGuides).
• If the vehicle needs tires, deduct $400-$600 from the value of the car– if you’re not sure how much you can always call the local tire store and find out.
• If the vehicle needs a windshield, deduct at least $300 from the value.
• If the vehicle needs minor scratches repaired or small dents knocked out, that again will cost a few hundred dollars.
• If you can stand five feet away from the vehicle and see dents or scratches on the car, you should have a body shop look at it to get a sense of how much it’s really going to cost. Believe it or not, a seemingly minor cosmetic flaw can run into the hundreds or thousands of dollars.
• If you’re looking at any substantial body damage, get a second opinion. Body estimates can vary widely.
• Whatever the damage is, it’s best to have an estimate in hand. That will make determining the actual value of a car much easier.

It’s important to remember that you should be just as aggressive valuing your own car as you would a car you’re trying to buy – fair is fair.

The process of valuing a car using kbb.com or Edmunds.com is only a guide. The actual price of the car will be determined by factors such as the local market, the time of year, and how available that type of vehicle is. When you come up with a value, don’t feel like that is the only acceptable one. Too many times people get caught up in a specific number – instead, tell yourself that if you can get within $500-$1000 of the value you’ve determined, you’ve done pretty well. Besides, if you’ve done your homework and you’ve followed all our car buying negotiation tips, you’re going to get a good deal.

As always, take your time when buying a used car. Do your used car research, get multiple used car financing quotes, and feel free to contact us with your questions.

1. Used Car Financing Rates Are Higher

Used vehicle interest rates are higher than new vehicles for a few reasons, but the main reason is that used vehicles represent more risk to the lender. Used vehicles are more likely to suffer a major mechanical failure that could render them worthless (like a engine replacement, or instance).

2. It’s Harder To Get Financing For A Used Car Than A New Car

It’s much harder to acquire used vehicle financing than new vehicle financing, and the reason is really simple. New car manufacturers (like Toyota, Ford, Chevy, etc.) want to sell cars, so they’ll provide special financing to people to help them be able to buy. Additionally, new vehicles often come with rebates and/or special interest rates. If you have less-than-perfect credit, it might make sense to buy a new car.

3. Used Car Financing Is More Restrictive

Typically, most banks will not lend money on any used vehicle that has more than 100k miles or is more than 8 years old. These higher miles, older vehicles represent much more risk for the lender because they’re more likely to suffer a major breakdown. Older vehicles are also more likely to be stolen and “chopped up”, making recovery impossible. NOTE: If your credit is less-than-perfect, lenders will probably restrict you to a vehicle that’s not more than 5 years old and/or one that has less than 75k miles.

4. Credit Unions Are Great Used Car Lenders

In just about every case, your local credit union will offer the best financing for a used car. I strongly recommend you join whatever credit union you can. Credit Union interest rates are usually excellent, and they are much more likely to provide Often times you can join a credit union through your work (your HR department should know about this). If not, many credit unions allow people to join based on the neighborhood they live in. Search for a credit union to join here.

5. Leasing A Used Car Is Usually A Bad Idea

In my entire career, I have never seen a used car lease that made financial sense. Typically, used car leases are structured just like new car leases. There’s an upfront payment, a low monthly payment, and a low mileage limit. Unlike new car leases, however, every used vehicle lease I’ve seen had $500-$1,000 in extra fees. Finally, used vehicle leases aren’t usually substantially less expensive than a comparable new vehicle lease. For all these reasons, plus the fact that most used vehicle leases don’t protect a customer the way a new vehicle lease does, I don’t recommend anyone lease a used car.

For more information, check out our section on New and Used Car Financing.