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How Do Auto Auctions Work?

  • 6 min read

An auto auction is a facility that sells cars on behalf of the consignor. The consignors who are selling the vehicle. Most of the time the consignor is actually a dealership. Most of the larger auctions are dealer auctions.

The consignors are usually dealerships because they have access to large numbers of vehicles and they want to move them quickly so that they can make more room for new inventory.

When most people think of an auto auction, they think of a live public auction with an auctioneer. While there are still live auto auctions, many auction houses also hold online-only auctions. Online auto auctions work the same way as traditional auctions. Bidders place their bids and the highest bidder wins the car. There are no physical inspections or test drives, so you need to be careful when buying at an online auction house.

What are the most common types of auto auctions?

Insurance auctions

Insurance auctions, like Copart and IAAI, auction off vehicles that have insurance claims. These auctions are generally held by the insurance company to recoup some of their losses due to the damaged vehicle. The vehicle may be a total loss or salvageable depending on its damage and condition.

The downside is that you never know what condition the vehicle will be in when you purchase it. You could find yourself buying a car that has been in an accident or is otherwise not roadworthy. It’s also important to note that some insurance companies require proof of purchase before they’ll let you take possession of the vehicle.

Dealer auctions

Dealer auctions, like Manheim and Adesa, auction off vehicles from dealerships. These auctions may either be dealer-only or open to the public. If the auction is dealer-only, you must have a dealer license to participate.

Dealer auctions can be a great way for dealers to liquidate inventory on a regular basis. The public can get great deals on cars that are in good condition at these auctions. In some cases, you may even see new cars being sold at these auctions.

Government and police auctions

The federal government, military, and state police often hold auctions to get rid of their old vehicles. They’re usually old vehicles that they are no longer actively using. These cars can be auctioned off in a number of ways. You can go online and see what’s available in your area. In addition, you can also go to any local police or sheriff’s department and see if they have any available cars for sale.

One of the main reasons why these cars are sold is because they are no longer needed by law enforcement agencies. They may have been involved in accidents or have reached the end of their useful life. The police usually sell them off at very low prices so that someone else can continue using them as transportation vehicles or even as parts cars if necessary. Check with your local police department or state government, or check out Govdeals.com for examples of government auction listings.

Towing auctions

Towing auctions are a way to get rid of vehicles that have been repossessed or towed. A towing company may use a public auction to get rid of cars, trucks, motorcycles, boats, and more that they’ve been hired to tow away.

When a towing company repossesses or tows a vehicle but it’s never picked up, they can go through the mechanic’s lien process to auction off the vehicle. These types of auctions are usually held by the local DMV or sheriff’s office.

The most common type of towing auction is when a car owner has defaulted on their loan and the bank hires a tow company to repossess their car. The bank then sells off the vehicle at an auction in an effort to recover some of its losses from having to take back the car in the first place.

Auto auction tips for titles

Salvage titles

Many insurance claim vehicles are sold with a salvage title. If it’s not too much work and you have the means to fix up the vehicle, you will need to get it inspected before you are able to get a title. Salvage inspections are notoriously strict. For example, say you live in Florida and you purchased a salvage vehicle that had minor damage but was last titled in New York. If your vehicle was given a salvage title in New York, it can only have a salvage inspection conducted in New York. No other state will inspect a New York salvage vehicle.

Additionally, you must provide the receipts for all of the parts used to fix the vehicle. If you don’t have the receipts or the parts are not up to standard, the vehicle will not pass inspection and you will not be able to obtain a title.

Parts-only, certificate of destruction, nonrepairable designations

When purchasing any vehicle, more specifically from an insurance auction or towing auction, make sure that the title is not parts-only, certificate of destruction, or nonrepairable. These title brands are permanent and make the vehicle ineligible to ever obtain a title again. Meaning, that if you have to junk the vehicle or sell it for parts, it can never go back on the road.

Dealer title requirements

When buying from a dealer auction, dealers are required by law to get you a title. It states in their licensing that when they sell a vehicle, they have to provide a valid certificate of title. However, many dealer auctions include title waiver forms that waive the expectation of receiving a title at the time of purchase. Make sure you are not signing any title waivers before buying a vehicle!

Government and police title differences

Government and police auctions may provide you with title documentation that you’re not familiar with. Since these vehicles were originally intended for municipal use, they don’t have the same civilian title requirements. Check through the title documents provided and make sure that you have the title documents equivalent to the vehicle title.

VIN Check

Just like with any other vehicle purchase, make sure that you check the VIN before buying. Not only should you check the VIN to learn about the car’s history, but you should check the VIN to make sure it matches the vehicle and matches where it’s listed on other parts of the vehicle. If the VIN provided for the car doesn’t decode to the description the auction house provided, this should be a red flag of a permanent title brand or title problem.

Auction titles can be tricky. Unless you have the title in your hand at the time of purchase, your money is at risk. Before purchasing from an auction, ask the seller what ownership documentation will accompany the vehicle so you don’t get stuck with a car you can never put on the road.

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