How Much Cheaper Are Cars at Dealer Auctions?
Key Takeaways
6 minute read- Savings potential: Dealer auctions typically offer 20-40% savings compared to dealership prices, with 70% of used cars selling for under $5,000.
- Dealer markups explained: Dealers add 25-40% to auction prices to cover reconditioning, transport, marketing, and profit margins of 10-15%.
- Access options: Non-dealers can access auctions through licensed brokers, public auctions like Copart and IAA, or temporary access passes from services like AutoBidMaster.
- Research is critical: Using auction price history tools and VIN checks helps avoid overbidding and identifies true vehicle value before placing bids.
- Timing and location matter: Late-month, holiday, and mid-week auctions in smaller towns typically have less competition and better deals than urban weekend events.
As car prices rise, many people are looking for alternatives. If you're struggling to buy a new car (or if you're frustrated with dealer markups), you might want to try a dealer auction. But is this really a smarter and more economical way to buy a used car? In many cases, the answer is yes. In this article, we will explain how you can purchase one such cheap car. You will learn why it is important to know auction price history, dealer markups, and how to access auctions as a non-dealer.
Article 1: How cheap are cars at dealer auctions?
The real price difference – auction vs. dealer
Average savings
How much money can you save when buying a car at a dealer auction? According to experts, typical savings range from 20% to 40% compared to dealer prices. For example, a car that sells for $10,000 may go for $6,000 - $8,000 at auction.
Why are cars cheaper at auctions?
These cars are generally cheaper because they are sold as-is. This means that the car may need minor or major repairs. Cars sold at auction also come without warranties or inspections. Additionally, there are no extra marketing or retail costs included in the price of these cars.
Realistic price expectations by car type
But how much can you realistically expect to pay for a car at one of these auctions?
Cheap cars: Auction prices range from $500 - $2,500, dealer prices $3,500 - $5,000
SUVs/Trucks: Auction prices range from $3,000 - $6,000, dealer prices $6,500 - $10,000
Luxury cars: Auction prices range from $5,000 - $12,000, dealer prices $10,000 - $20,000 $+
Average auction prices & trends
But how much do these cars cost on average? Based on auction data from 2023 – 2024, 70% of used auction cars sell for less than $5,000. Additionally, some cars sell for as little as $500. This often happens when demand is low or the car's condition is poor.
Article 2: Why do dealers raise auction car prices?
Understanding dealer profit margins
Average dealer margin on auction cars
Dealers actually buy cars at auctions. Their margins typically range from 25% to 40% over the purchase prices at auctions. This margin price includes costs for preparation (mechanical repairs, cleaning, and paint touch-ups), transportation/logistics costs, marketing, labor costs, overhead, and desired profit (usually 10-15%).
Example
Buying at auction: 2017 Toyota Camry for $6,000
Preparation/repair: $1,200
Dealer list price: $9,500
Net profit (after expenses): $1,500
Why do dealers go to auctions?
Dealers often attend auctions because they have access to a large inventory at low prices. They also have the opportunity to select cars with high potential. Additionally, auctions give them control over preparation and resale strategies.
Article 3: How to access dealer auctions and save like a pro
Insider tips for non-dealers
Types of dealer auctions
There are two types of auctions.
Public auctions: These auctions are open to everyone and include places like Copart, IAA, and GovDeals.
Dealer-only auctions: These auctions are only available to dealers and require a dealer license or partnership for access.
How to enter a dealer auction as a non-dealer
There are three ways to do this. First, you can use a licensed agent. This person will bid on your behalf for a fixed fee or commission. You can also participate in public car auctions. The number of cars at these auctions is lower, but competition is higher. The third way is to obtain a temporary access pass to an auction. You can do this through services like AutoBidMaster or RideSafely.
Essential tools for evaluation
How do you assess the true value of the car you are bidding on? There are two ways to do this.
Auction price history tools: You can use tools like AutoCheck auction reports and also view previous sales data on websites like Copart or Manheim Market Report.
Comparing dealer prices: Check price data in Kelley Blue Book or Edmunds' true market value. You can also compare car prices on Facebook Marketplace/Craigslist and private sales.
Due-Diligence tips
Due diligence is extremely important. You don’t want to buy a damaged car or be scammed. To avoid this, always request a VIN check before bidding. Also, try to estimate repair costs before you place your maximum bid. Finally, you should observe 2-3 auctions as a spectator before participating.
Article 4: Factors that influence auction price formation
Why do some cars sell for $500 and others do not
Condition of the car
The initial bid will be lower if the car is damaged or has a salvage title. These are cars that the insurance company has declared a total loss or salvaged due to significant damage. Cars that have a clean title and good service history are in higher demand and thus command higher prices.
Time & bidder competition
Auctioning at the end of the month often has more motivated sellers. You can also try auctions on holidays or mid-week. These auctions often have fewer participants, less competition, and better deals.
Mileage, model popularity, and seasonality
Cars with high mileage often lose value significantly. Demand for SUVs and trucks increases in winter, while demand for convertibles decreases. Demand for fuel-efficient cars may rise during times of increasing fuel prices.
Location matters
Being out of town may provide you with better deals. This is because prices fluctuate based on local demand. Small towns and rural areas may have cheaper prices. Generally, urban auctions have higher volume, but rural auctions may have fewer bidders.
Article 5: Auction price history & research – benefits for smart buyers
How to use historical data to predict auction prices
Why auction price history is important
It’s always a good idea to observe auction price history. This will help you avoid overbidding. Price history will also help you identify features of resale and depreciation of true value.
Where to find auction price history
But where should you look for this data? The best places to search are websites like Manheim Market Report (MMR) and AutoAuctionMall. Companies like BidFax and AutoCheck can also provide you with history based on VIN.
Strategic use of data
When studying this data, you should compare historical auction prices for the same model over the last 6-12 months. Also, check competitive brands with similar mileage/features. Use this data to determine your ideal bidding range before heading to the auction.
Conclusion
Buying cars at dealer auctions can help you save money. On average, you can save about $1,000 - $5,000. That said, you need to do your homework. Make sure to research auction history, understand dealer markups, and smartly utilize available tools. Thorough preparation of car data will help you take advantage of the best auction opportunities. You can also use the services of a dealer partner or agent. With their help, you can find the best deals.