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January 11, 2021
What if you find out the dealer bought the car you're interested in from an auction?
Understandably, it can be a bit concerning, but it's not always bad. You can still find a reliable and quality vehicle, and still have room for negotiations.
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Used car dealers can get inventory from several sources, including:
Auctions are a common way for dealers to get used inventory, but before considering buying one you'll need to understand a bit more about car auctions. Some reasons cars end up in auctions include:
Public auctions are quite common. Most often, they're held by car auction houses and insurance companies. The purpose is typically to sell used cars that have been repossessed but have very little to no issues.
Private auctions are only accessible by car dealers, not by the general public. This is the type of auction that a used car dealer will typically go to for inventory.
Some auctions are now held online, and they allow people to buy the car virtually. Buyers register for the auction site to join and use the site's information to choose their car.
The US customs service or another government body may also hold auctions. These auctions are meant to sell off excess or old vehicles that were impounded or seized. Police or government agencies may also use auctions to sell off their fleet of vehicles when they upgrade.
While some low-end auctions sell troubled cars, most cars at auctions are high-quality used cars. This is especially true of the private auctions that many dealers attend. Compared to an average car buyer, a dealer also has a better eye for vehicles and can quickly assess feasible options. They're also likely to get the cars repaired and cleaned up so they can sell them for more.
However, it would be best if you still were careful when buying a car from a dealer that came from an auction. Here are some things you should do to ensure you get a quality vehicle:
One of the major benefits of buying a car from a dealer from an auction is the ability to negotiate. First, pay attention to the window stickers. Two important stickers to watch out for are "MDA" (market value adjustment) and "ADM" (adjusted dealer markup). Both of those stickers indicate that the price adjustment could be to sell the vehicle for a larger price without a clear reason.
Either way, you can use the knowledge that the car came from an auction to your advantage. If the dealer bought the car from an auction, there's a great chance they got a huge deal on it, which means they will have more room to negotiate.
Auctions are a common source of inventory for dealers that sell used cars, as they offer an affordable way for dealers to get the inventory they want. Often, the vehicles that come from the private auction dealers are in good condition. Investigate the vehicle's source and condition and consider a pre-sale inspection when buying a car from a dealer who bought from an auction.
Dealers provide a wider selection of inventory, financing options, and a bit more reliability (in the form of warranties) than a private seller.
Dealers head to private car auctions to get quality vehicles at a reasonable price. They can purchase several vehicles that suit their lot with one trip which is cost and time effective.
You can get a quality car that came from an auction from a dealer, and you can often negotiate the price significantly. However, you should still proceed with caution. Consider a pre-sale inspection.
When dealers buy cars from an auction, they typically make a profit between 25-45% because they can pay far less than the trade-in value for the vehicle. Dealers then mark the car up to the market price.
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Posted in Car Buying Tips |