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Risks of Buying a Car at Auction

The general perception is that buying cars at auction is a great way to save a lot of money. However, while some people have been successful at making big savings, it is important to do your due diligence or you can find yourself losing a grip.

In the United States, government auctions are conducted in virtually every major city by the Government Services Administration, the police, FBI, IRS, DEA, and the state and local government.

There’s no doubt that anyone can get a great deal at these auctions. At police auctions, a canny buyer might buy a 2005 Dodge RAM SRT10 for as little as $1999 and sell it off for a healthy profit. Police auctions differ from traditional dealer actions in many ways. Anyone can take part, and you can purchase any vehicle as long as you have a valid driver’s license. You can resell these vehicles without a Dealer’s License. Police Auctions vary from state to state regarding the actual title transfer between buyers and sellers, so you’d have to do some research to find what the law says in your own state.

Now, just in case you’re wondering how the police got hold of these cars to sell off in the first place, every state in the United States has a seizure law relating to property. Any piece of property can be seized if it was used in the commission of crime. Vehicles can also be confiscated as a result of expired tags, missed payments, lack of insurance or where the driver doesn’t have a valid driver license.

The items are then held for approximately thirty days and then auctioned off to the highest bidder if, for whatever reason, they are not claimed by the original owner within that time frame. The types of vehicles that you can pick up at a police auction include vintage cars, SUVs, high-end BMWs, motorhomes, motorcycles to junk cars. Cars can also end up in auctions if they have been repossessed, a company has gone bust and the stock needs to be sold or if someone’s estate goes up for auction.

As good a deal as police auctions might sound however, the reality is that not everybody wins at actions. There are certain pitfalls that you need to be wary of before buying from auctions in general. If you are not careful you could find yourself paying far more for a car than you would have spent elsewhere.

Worse, the car could turn out to be a total piece of junk! The fact of the matter is, it is best not to buy in an auction unless you are an expert in car electronics or have a friend who is and is also a skilled mechanic with tools and facilities who knows the car you want to buy. With car auctions, the consequence of getting it could be pretty severe.

Here are some tips that will help you avoid losing out if you’re considering buying at any type of car auction:

Legal Requirements

You need to transfer the purchased vehicle into your name within 14 days of purchase. Failure to do this can result in penalties. The Department Of Motor Vehicles in most states can issue you a temporary license plate which is good for 30, 60 or 90 days if the vehicle has issues obtaining title.

It is important to keep in mind that a vehicle without a license plate and is parked on a public street can be towed and impounded. So it is essential that you either have a temporary license plate or park the vehicle on private property if the vehicle has not been legally plated.

Learn the market value of the car you’re buying

Because of the competitive atmosphere, it is easy to get carried away and overbid at auctions. This can have seriously bad consequences for you as you could easily end up paying much more than the car is actually worth. Keep in mind that you will be bidding against experienced and savvy professional dealers for a very clean car or truck, and you need to be prepared. Research the car you want and what you should be paying for it before going.

Do your homework on the cars you are interested in. Make sure you know exactly how much you can get for both new and second hand versions of the car. Rather than choosing cars to buy at random, zero in on one type of car at a time. For example, start by focusing only on BMW and become an expert in the market price and value of that car. Use the Kelley Blue Book to find out the car’s value and fix your budget. Once you do this, set a sale price that you will not bid above, and stick to it.

Consider the fees

Make sure you include buyers’ fees, which tends to increase with the amount you spend. In addition, instead of just looking at the screen price, you’ll need to factor in other costs such as, delivery charges, HPI checks, servicing, repairs, MOT and warranty. Note that BCA’s buyers fees come down if you buy vehicles regularly, which gives dealers an advantage.

In the United States, you’ll have to meet a number of requirements in order to obtain a clear title. You will be responsible for all of the registration fees from previous years, as well as the title and registration fees for the current year. You will also be responsible for sales tax, a smog certificate if required in your state, an auction fee, vehicle insurance, and a tow truck if needed.

To avoid being hit with shock of high fees after you have purchased your vehicle, contact the Department Of Motor Vehicles prior to the sale and find out the fees required. A Carfax report can actually tell you if the vehicle has ever failed a smog test.

Find out the car’s condition before buying

Cars at auction are sold without a warranty. They are sold “as is”. This means that unlike cars you buy from a dealer or private buyer, if the engine falls off when you’re driving it home, you have no legal recourse whatsoever. It is your loss. Many of these auctions take place online, but it is not generally recommended to buy online if you cannot check the vehicle over yourself, so it is important to find out the condition of the car you are trying to bid for.

If you are unsure of its condition, do not risk bidding for it. The truth is, as far as the BCA is concerned, fleet cars are the best cars to buy. The problem however, is that are often only sold to trade, not to private buyers.

At many auctions they do not allow a drive around but will let you start it up. That is all a good mechanic needs because of their mechanical know-how. They can hear many problems, such as a worn or loose timing belt that often need expensive replacing after 50K.

Be alert

Make sure you give the car you’re interested in a good inspection. Prior to leaving the auction, check the VIN (Vechicle Identification Number). The number on the windshield should be the same VIN number as the one found on the rest of the car. Make sure the VIN number on the car also matches your paperwork.

Check the air conditioning even in winter to see that it works. Also ask to see all paperwork especially service history. If not available remember the buyer beware rule. You should also be careful with Japanese cars that have been driven in Japan especially near Fukushima. The air filters can have quite a lot of radioactive material in them. Cars have been bought cheaply, de registered, then moved to another area for export.

Check the interior of the car for water marks or a musty smell. These are clear indicators of flood damage. You also need a good eye for detail to spot blemished bodywork or crash damage. Observe the body of the car for signs of efforts to mask bodywork, like use of Bondo or excessive paint. Carefully pull the dipsticks – the fluids should all be clean and clear.

Summary

If you’re an amateur mechanic with tools and equipment for car repair and a knack for basic auto maintenance, then buying cars at auction would be perfect for you. If you know nothing about cars, you’ll want to avoid taking any kind of risks at car auctions because any money you might be saving on the car itself initially might come back to haunt you in the form of expensive repairs later.

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