What do you picture when you think of an auto auction? Perhaps there’s someone with a gavel announcing the latest price, taking bids, and saying “going once….” Or maybe it’s an online setup where one sits glued to the screen for hours trying desperately to be the last person to bid on that Ford Mustang before the time finally runs out.
These are all valid ideas of car auctions, but none of them are what we could call a dealers auto auction. What’s the difference between a regular auction and a dealer only option? How does the latter work? We’ll explore these questions and more.
What is a Dealers Auto Auction?
A dealers auto auction is a special kind of auction where the attendees are primarily licensed car dealers, not members of the public. In fact, these events are typically closed to the public. Instead, attendance may be by invitation only or restricted to licensed industry businesses. On occasion, the doors may open to a broader audience if there’s excess unsold inventory, but this is more the exception than the rule. Events advertised as “wholesale auctions open to the public” are clever marketing and not usually true dealer-only happenings.
Differences from Regular Car Auctions
As mentioned, dealer-only auctions are not accessible to the public. As a result, these auctions tend to be smaller in scale and more specialized. For instance, a particular dealer auction may only involve off-lease vehicles.
Another key difference is that dealer auction prices tend to be lower than public auctions. Although it’s a myth that cars are regularly sold at rock-bottom prices, with dealerships snapping up multiple vehicles for cents on the dollar. This is a view put mainly across in film and television that’s not reflected in reality.
Prices at dealer auctions tend to be lower for the simple reason that these vehicles will be resold at retail by dealerships. The main goal of a wholesale auction is to quickly move high volumes of inventory. To do this, auction prices must be low enough for a dealer to resell these cars at a profit.
What Different Types of Dealers Auto Auction Lots Are There?
There are mostly six types of auto auction inventory sold through these dealer auctions.
Off-lease vehicles are returned to the finance company at the end of the lease (typically a three-year term). The leasing company has received depreciation and interest payments on these cars and is seeking to collect what’s left (the remaining value of each vehicle).
Off-lease cars are appealing for dealers as many still are under factory warranty (which is attractive to a used car customer). At the same time, new car dealers may purchase same-brand off-lease models for resale under a manufacturer’s certified pre-owned (CPO) program.
Big rental car companies like AVIS and Hertz will regularly update their fleets. They won’t replace every single vehicle at once, but they’ll take great swathes of older used cars and auction them off to make way for new inventory. Rental cars tend to fetch good prices at auction because they are well-maintained, have lower mileage, and have only been driven a year or so.
The main downside with rental vehicles is that the bulk of them tend to be somewhat “vanilla” in terms of features and options. They are most often the basic models with simple features. On occasion, higher-end rental vehicles make their way into the auction cycle.
Commercial and company vehicles include a wide range of passenger cars, trucks, and vans that typically get used for two to four years. These vehicles likely come with high miles and a fair share of dings and scratches due to daily use. But, like rental cars, fleet vehicles tend to be well maintained.
When financing on an individual car goes awry, and the borrower misses payments, a bank will have the vehicle repossessed. Other situations, such as a lack of insurance or a problem with a credit application, can cause a similar action. Repossessed cars tend to sell for less at auction because regulations only allow finance companies to sell at amounts that help recoup losses, not for profit. These types of vehicles may have an uncertain maintenance history: the thinking is if someone can’t afford monthly payments, they’re unlikely to spend money on repairs and maintenance.
A trade-in is a car someone sells to a dealership as part of a new vehicle transaction. However, in some cases, the trade-in may not match the dealership. For instance, if you’re trading in a Toyota Camry for a new BMW 3 Series, the acquiring dealer is likely to get rid of the Camry via an auction instead of its used car lot. Independent dealers don’t have to worry about this, but branded ones do.
Finally, insurance companies auction off vehicles damaged or destroyed due to fires, floods, accidents, and other incidents. While generally deemed unsalvageable, these cars are frequently acquired by auto businesses that may attempt restorations, strip the vehicles for parts, or send the remnants to scrap metal recyclers.
You can find a vast range of online options, many of which carry the official name Dealers Auto Auction (DAA). Below are some prominent examples:
- Dealers Auto Auction Group , LLC - in Alabama, Mississippi, Tennessee, South Carolina
- DAA of Idaho
- DAA of Oklahoma
- DAA of the Southwest
These sites provide online platforms for dealer auctions in different parts of the country, running regular auctions, specialty sales, and in some cases public events. These sites are members only and require a login ID and password for access.
Some marketplaces may have information about upcoming auctions and allow online bidding (for authorized users) in place of in-person participation. Some sites may even showcase upcoming stock to increase auction activity and entice new members.
Besides auctions, these auction companies sometimes offer additional services to stand out from competitors and make bidding painless. Reputation is everything to these auction platforms, so it makes business sense to make things easy for its customers (industry professionals).
The auction platform may assist with transporting the vehicle(s) to and from the auction place. This is important because not all dealerships and fleet managers have the means to transport cars en masse.
Paintless Dent Removal and On-site Mechanic Services
Cars that come in with minor dents are fixable before auction to help improve selling prices. While significant bodywork won’t get fixed, dent repair, paint touch-up, and basic reconditioning can be some of the available services.
Windshield Removal and Replacement
Windshield repair and replacement are available through many DAA sites to boost a car’s final value.
Inspections Pre- and Post-Sale
Car inspection services are very common at dealer auctions. In some cases, a dealer may not have the time or staff to check out cars of interest before bidding. At the same time, a post-sale inspection can confirm the details before a transaction gets finalized.
One of the best things about working with DAA sites is the ability for these auction providers to complete the high volume of paperwork involved with vehicle titling.