How Much Cheaper Are Cars at Dealer Auctions?

June 4th, 2024 by Garrett Eddings

When it comes to purchasing a car, savvy buyers often look for ways to save money, and one of the best-kept secrets in the automotive industry is the dealer auction. Dealer auctions, which are typically closed to the public and accessible only to licensed dealers, can offer significant savings on vehicles. This article explores just how much cheaper cars can be at dealer auctions compared to traditional retail channels, and what factors influence these savings.

Understanding Dealer Auctions

Dealer auctions are events where dealerships buy and sell vehicles amongst themselves. These auctions include a variety of cars, from trade-ins and lease returns to repossessed vehicles and those from rental fleets. Since these auctions are restricted to licensed dealers, the public does not have direct access. However, potential car buyers can work with a licensed dealer or broker to purchase a vehicle from these auctions.

Price Differences: Dealer Auctions vs. Retail

The primary allure of dealer auctions is the lower prices. On average, cars purchased at dealer auctions can be 20-50% cheaper than those bought at a retail dealership. Several factors contribute to these significant savings:

Lower Markup: Dealerships typically markup the price of cars they purchase at auction to cover their overhead costs, profit margins, and other expenses. When a dealer buys a car at auction, the price they pay is closer to the wholesale value. By eliminating the retail markup, buyers can access these lower prices through a dealer or broker.

Supply and Demand: Dealer auctions can feature many vehicles in a single event, creating a competitive environment where prices are driven down. If there are more cars available than dealers interested in purchasing them, prices can drop significantly below retail levels.

Condition and Mileage: Cars at dealer auctions vary widely in condition and mileage. While some may be in excellent shape, others might need repairs or have higher mileage. These factors can lower the auction price but still represent a good deal for buyers willing to invest in minor repairs or overlook higher mileage.

Examples of Savings

To illustrate the potential savings, let's consider a few examples:

2018 Honda Civic: A 2018 Honda Civic with 30,000 miles might retail for around $18,000 at a dealership. At a dealer auction, the same car might sell for $12,000 to $14,000, representing a savings of $4,000 to $6,000 or about 22-33%.
2019 Ford F-150: A 2019 Ford F-150 with 40,000 miles typically retails for around $30,000. At auction, the same truck might go for $22,000 to $25,000, offering a potential savings of $5,000 to $8,000 or 17-27%.
2017 Toyota Camry: A 2017 Toyota Camry with 50,000 miles might retail for $15,000. At a dealer auction, it could sell for $10,000 to $12,000, resulting in savings of $3,000 to $5,000 or 20-33%.

Factors Influencing Auction Prices

While the potential for savings is substantial, several factors influence the final auction price of a vehicle:

Vehicle History: Cars with clean histories typically fetch higher prices than those with accident reports or salvage titles. However, even vehicles with minor issues can be a great bargain if buyers are informed and prepared.
Market Conditions: The automotive market's overall health affects auction prices. During economic downturns, auction prices might be lower due to decreased demand, whereas in strong markets, prices might rise due to higher competition.
Seasonality: Certain times of the year can influence auction prices. For example, convertibles and sports cars may be more expensive in the spring and summer, while SUVs and trucks might fetch higher prices in the fall and winter.
Auction Type: Different types of auctions (e.g., closed dealer auctions, public auctions, government auctions) can have varying price levels. Closed dealer auctions typically offer the best deals but are not accessible to the public without a dealer's help.
Condition Reports: Most dealer auctions provide condition reports detailing the vehicle's state. Cars with detailed and favorable condition reports tend to sell for higher prices than those with limited information or negative reports.

Pros and Cons of Buying from Dealer Auctions

While the cost savings are significant, buying a car from a dealer auction comes with its own set of pros and cons.

Pros:

Significant Savings: As discussed, cars at dealer auctions can be substantially cheaper than retail prices.
Variety: Auctions offer a wide range of vehicles, from luxury cars to budget-friendly options.
Quick Turnaround: The auction process is typically fast, allowing buyers to purchase and receive their vehicles quickly.

Cons:

Limited Access: Auctions are generally not open to the public, requiring buyers to go through a dealer or broker.
Risk of Condition: While many cars at auction are in good condition, some may require repairs or have undisclosed issues.
No Test Drives: Buyers cannot usually test drive cars at auction, which adds a level of uncertainty.

How to Access Dealer Auctions

Since dealer auctions are not open to the public, your first step in the process is getting your dealer license. The first step towards getting your license is taking a class to get certified.

California Dealer Academy is a preferred provider to get certified to get you California Dealer License.

Research: Before using a dealer or broker, research their reputation and fee structure to ensure transparency and fair pricing.

Know Your Budget: Set a clear budget before attending an auction and stick to it. Auctions can be fast-paced, and it's easy to get caught up in the bidding excitement.

Dealer auctions present a fantastic opportunity to buy cars at significantly reduced prices, often 20-50% cheaper than traditional retail prices. However, the process requires some insider access and a bit of homework to navigate successfully. By understanding the auction dynamics, working with a reputable dealer or broker, and knowing what to expect, buyers can score great deals on their next vehicle while saving thousands of dollars.

Tags: auction, dealer license

Posted in: Education