Sold!

By Kristen Castillo

October 3, 2014 4 min read

Buying a used car from an auto auction can be tempting. Maybe you'll get a gem of a vehicle with low mileage and a solid frame. But you could get stuck with a car that looks good at first glance but turns out to be a jalopy.

*Risk Versus Reward

So is purchasing a car at an auto really a wise buy? Probably not, says Jason Lancaster, editor of AccurateAutoAdvice.com, a website that helps consumers make smart decisions about vehicle ownership.

"Buyers need to know that buying cars at a public auto auction is very risky," says Lancaster, who worked at auto dealerships for over a decade and bid on "thousands and thousands" of cars for sale at auction.

Here's why it's such a risky deal: The majority of the cars sold at auction are ones dealers didn't want to buy.

"Sometimes, dealers don't want a car because it's ugly, because it has too many miles, because it has damage, etc.," says Lancaster. "Other times, dealers don't want a car because it is notoriously unreliable.

"Either way, buying a car at a public auto auction is the same as buying a car that no dealers wanted."

When considering buying a car, dealers inspect the vehicle, and if they don't want it, it goes to the local dealer-only auction. If no one at the dealer auction wants the car, it's sold for a small amount to the local public auction, which Lancaster says is usually run by a dealership masquerading as an auction company.

*Deal or No Deal

Getting a great deal is the biggest reason to buy a car at auction.

"Every month the Federal, state and local governments auction off hundreds, if not thousands, of seized and surplus vehicles via online and live auctions that are open to the general public," says Ian Aronovich, the president and co-founder of GovernmentAuctions.org, a site that compiles and provides information about government auctions. "Often times these cars end up selling for a mere fraction of their market price."

Before you buy, you need to make sure the price is really worth it.

"Unless you can buy for 30 to 50 percent less than you'd expect to pay for a similar car at a dealership, don't bother," advises Lancaster.

A low price doesn't necessarily indicate a dependable or problem-free car. While you can save money on that initial purchase, you could end up spending a lot more on the car to fix it up, especially if it has hidden defects.

"Don't buy a car at an auction unless you're very good at evaluating vehicles or very good at fixing them," says Lancaster. "Don't buy a car at an auction unless you can afford to spend money fixing it."

He also cautions buyers to not use the vehicle as the primary mode of transportation since it may break down or need significant work before it's road-ready.

*Auction Basics

Since many auctions are held online, you don't even have to visit the car lot. Aronovich compares the online-auction-car-buying experience to buying a car on a site such as eBay.

Still you need to be cautious before buying. "Many of the cars may have underlying problems that are simply unknown by the auctioneer at the time of sale," says Aronovich, noting many times the cars don't come with a warranty, making all sales final.

Another concern is that the vehicle sold at auction may have been in an unreported accident. That's why Aronovich recommends getting a Carfax report on the vehicle. Carfax is useful for showing you "all reported accidents, as well as using a paint meter to see whether the paint is original and if there was any work done on the vehicle."

A Carfax report will also indicate any flood damage from hurricanes and other storms, because water damage is notorious for ruining a car's electronics.

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