Buy auction cars with a dealer license | Auctions for buying cars

Buy auction cars with a dealer license | Auctions for buying cars

February 9th, 2024 by Garrett Eddings

Car dealer auctions play a pivotal role in the automotive industry, offering a dynamic marketplace where dealers can buy and sell vehicles to meet the demands of their customers.

In California, a state known for its vibrant automotive culture, dealer auctions are particularly significant. This article explores the ins and outs of car dealer auctions in California, shedding light on the key aspects that make this marketplace thrive.

Taking a class to get certified is the 1st step towards buying cars at auction and is required by the California DMV.

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Types of Car Dealer Auctions

In California, there are primarily two types of car dealer auctions: Public auctions and dealer only auctions. It’s important to understand both to see which option is going to be better for you.

Keep in mind, if you buy cars with the intention of making profit in the state of California, then you need to obtain a dealer’s license. Click here to learn how to get a dealer license in California.

Public Auctions: Public auctions are usually held in towing yards, designated holding lots, or at salvage auto auctions for the purpose of selling vehicles that are in As Is condition. Keep in mind that most public auctions are a lot of the vehicles that licensed dealers have picked over and that the public is now looking to purchase. That isn’t to say that you couldn’t find good deals at a public auction, but it is always a buyer beware.

Get your license to buy cars at auction

Here is a list of tools that you should bring with you to auction:

  • OBD 2 code reader – This is a tool that plugs into the terminal port of a car to read the computer. This is important for several reasons but the main thing you’re looking for is for any stored, active or pending trouble codes that can let you know how the vehicle is operating. Another reason why a code reader is important is because it will tell you if the monitors on a vehicle have been set and if you’re getting a true reading of the status of the vehicle.
  • Paint meter – A paint meter can help you identify and check if the vehicle has been painted and can help you identify accidents and structural damage on a vehicle as well.
  • Flashlight – This allows you to see under the hood of the vehicle while at auction to help identify potential accident damage.
  • Tire gauge – This will help you read the tire measurements on the vehicle.

Dealer only auctions- Dealer only auctions are auctions where you must be a licensed dealer to attend. This allows you to get access to fresh trades that dealers would rather wholesale than spend the time running the vehicle through their show for reconditioning.

Speedometer on Car

Why is a car at a dealer auction to begin with?

The answer might surprise you. For most dealer auctions, they are predominantly made up of inventory from franchise dealerships like your local Toyota and Honda stores or you have a larger independent, like Carmax, that holds their own private auctions. Most people think that a car at auction is because it’s damaged or beyond repair, however did you know that franchise stores must run their trades through their service department? What you might also not know is the used car department is required to pay the same shop rate as the public does. Anywhere from $140/hr and up depending on the brand and the going rate in the region. As a used car manager, I then must decide if I want to pay my internal labor rate and fix the vehicle, or do I send it out to auction and see what kind of wholesale profit I can get on the vehicle in its current condition. Without franchise stores, dealer auctions would be a very underwhelming event.

Licensing and Registration

Participating in car dealer auctions in California requires a valid dealer license. Obtaining a license involves meeting specific criteria set by the California Department of Motor Vehicles (DMV). This process typically includes completing a pre-licensing education course, submitting an application, and passing an examination. Licensed dealers must also register with the auction houses they plan to attend.

Auction Houses in California

California boasts a multitude of auction houses catering to the diverse needs of dealers. Some of the largest physical auctions in the world can be accessed through Auction Access. Auction access allows for a licensed dealer to register all of their information into an account and then be able to transfer that data with a few clicks to register for many of the physical auctions that are found in California.

Since Covid, the rise in popularity of digital auctions has greatly increased because it allows dealers to buy and sell their products with the push of a button without having to physically transfer their vehicles to an auction location. Auctions like ACV Auctions allow a buyer to buy directly from their phone and computer and sellers to be able to sell their inventory directly from their dealership.

Auction Formats

Car dealer auctions in California feature different formats, such as live auctions, online auctions, and simulcast auctions. Live auctions are held on-site, providing a physical space for dealers to inspect vehicles before bidding. Online auctions, conducted through dedicated platforms, offer convenience and accessibility. Simulcast auctions combine the best of both worlds, allowing dealers to attend auctions physically or bid remotely in real-time.

Inspection and Condition Reports

Dealers participating in California car auctions have the opportunity to inspect vehicles before placing bids. Auction houses often provide detailed condition reports, outlining the mechanical, cosmetic, and functional aspects of each vehicle. This information empowers dealers to make informed decisions and assess the value of the vehicles on offer.

Bidding Process and Fees

The bidding process in California car dealer auctions can vary, with auctions adopting different methods such as ascending bids, sealed bids, or proxy bidding. Dealers should be aware of the auction fees, which may include buyer's premiums, registration fees, and other charges. Understanding the fee structure is crucial for budgeting and optimizing the profitability of each transaction.

Title Transfer and Paperwork

Once a dealer successfully wins a bid, the process of title transfer and paperwork begins. The auction house facilitates the transfer of ownership and ensures that all necessary documentation is completed accurately. Dealers must comply with state regulations to ensure a smooth and legally sound transaction.

Market Trends and Dynamics

Staying informed about market trends is essential for success in the dynamic world of car dealer auctions. Dealers should keep an eye on factors such as consumer demand, emerging vehicle models, and economic indicators to make strategic buying decisions and maximize profits.

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Car dealer auctions in California represent a thriving marketplace where licensed dealers engage in buying and selling vehicles. Navigating this dynamic landscape requires a combination of industry knowledge, strategic planning, and a keen understanding of market trends. Whether attending live auctions, participating in online bidding, or exploring closed auctions, California's diverse automotive market provides ample opportunities for dealers to build their inventory and meet the demands of an ever-evolving consumer base.

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