How to Buy Cars at Auction as a Dealer

For many independent dealers, auctions are the main source of inventory. They offer volume and variety that private-party buying cannot match. They also reward discipline and punish excitement. The dealers who do well at auction are usually the ones who walk in with a number and stick to it.

Know what you need before you go

Walk in with a short list of what has been selling for you and at what price. Buying a car because it looks like a deal, without knowing whether your customers want it, is how aged inventory is created. Check your last few months of sales: which body styles, price points and mileage ranges moved quickest. Let that guide what you bid on.

Set a budget for the day as well. Decide how many cars you want to leave with and how much cash or credit you are willing to commit. Without a limit, it is easy to buy five cars at the top of your range and find your lot full of the same type of vehicle.

Run lanes with a plan too. Many dealers preview the run list the night before, flag a short list of cars, and look up values in advance, so on sale day they are checking and bidding rather than researching under pressure.

Work backward from your target profit

Your maximum bid is not what the car is worth. It is what you can pay and still make your target. Start with the likely retail price, subtract your target gross, then subtract everything else the car will cost you: buyer fees, transport, expected repairs, detail, and holding cost.

This is a hypothetical example for illustration. You expect a car to retail for $12,500. Your target gross is $2,000. Buyer fees and transport are about $500. You estimate $700 of repairs and $150 for detail. Your max bid is 12,500 minus 2,000 minus 500 minus 700 minus 150, which is $9,150. If the bidding goes past that, you let it go.

Example numbers only. Your fees and targets will differ.

Inspect before you bid

Condition reports are a starting point, not a guarantee. When you can, walk the lot and look at the car yourself.

• Check the VIN and run a history report before bidding, not after.
• Look for uneven panel gaps, mismatched paint and overspray that suggest past body work.
• Check tire wear patterns and brake condition, which are common repair costs.
• Start the car if allowed and watch for warning lights, smoke and rough idle.
• Look for signs of flood damage such as damp carpet, silt or a musty smell.
• Read the announcements and light system carefully, since they describe what the auction will and will not stand behind.

Understand fees and arbitration rules

Buying on credit or through a floorplan adds its own cost, so factor in any interest or curtailment terms before you decide how many cars to buy. A car that looks cheap on the block can stop being cheap once the fees and carrying costs are added.

Auction fees vary by auction, by sale price and by how you pay. Read the fee schedule before you bid so your max bid already includes it. Learn the arbitration window and what conditions qualify a car for a claim. Rules differ between auctions and between sale types, so check the terms of each sale rather than assuming.

Bid with discipline

• Set your max bid before the car runs and write it down.
• Do not chase a car past your number to avoid losing it. Another one will come through.
• Watch how the room is bidding on similar cars so you learn the going rate.
• Track what you actually paid versus what you planned, then adjust your estimates.

Track the results car by car

The only way to improve at auction is to measure it. A dealer management system lets you add a car to inventory from its VIN, then record the purchase cost, auction fees and repairs against that car. The vehicles purchased report and the profit and loss report show which buys paid off and which did not, and vendors can be saved so you can see what you spent with each source. DMS Apex is $28 a month flat with a 15-day free trial.