Auto auctions

Poll without page-refresh

	del.icio.us
	Digg
	Furl
	Reddit
	Rojo
	Add to OnlyWire

Auto auctions are a method of selling new, and most often, used vehicles based on auction system. Auto auctions can be found in most nations, but are often unknown to most people. This is, such as in the case of the United States, because this a protected source for used car dealers. In other countries, such as Japan, auto auctions are well known and used (indirectly) by most people.

1 Country Specific
- 1.1 Japan
- 1.2 United States
2 Car dealer auctions
3 See also
4 External Links
5 References

Country Specific

Japan

Auto auctions are the most popular method to sell used vehicles in Japan. Most customers are Japanese seeking a cheap vehicle to start with or replace their older vehicle. Also there many also trying to sell their vehicles. Individuals though cannot directly use auto auctions, but must go through those holding auction membership. In Japanese law, only dealerships may become members to auto auctions. The way the system is set up allows people to have access to information, but keep the auctions orderly with only professionals actually able to bid.

A small percentage of the dealers that are members of Japanese auto auctions are also used vehicle exporters that most often use the auto auctions as their primary source of used vehicles. Other than these exporters, most members are used vehicle dealership that sell in Japan and are used by Japanese people to find a car they want.

In Japan there are over 30 well known auto auction groups and over 200 auto auction locations throughout Japan.^[1] Additionally, there are more smaller auctions held for specialized items.

United States

In the USA, auto auctions are relatively unknown to the public at large, but play a major role as a wholesale market for second-hand vehicles. Most auto auctions are closed auctions, meaning only dealers can use them. There are also auctions that are open to the public. These auctions are a primary outlet for financial services firms to dispose of their large volume of off-lease returns, for rental and other companies to sell off their aging fleets and for car dealerships to dump trade-ins or other unwanted inventory. Some auctions in the United States are used by banks, the IRS, and other government agencies to sell vehicles that were repossessed for failure to make monthly payments or pay taxes, or were seized by the FBI, DEA, or the police. Also, there are some that sell US Government vehicles. Finally, there are those catering to the salvage market where insurance companies sell totaled vehicles.

Online auto auctions are also growing in popularity. One of the most popular online car auctions is eBay. On eBay, any user can create an account and put their vehicle(s) up for auction. There is usually a small fee associated with selling your vehicle on eBay. At the time of this writing (2/5/2008), there is a $40 insertion fee, and a $50 transaction fee (total: $90.00) for passenger vehicles ^[2]. The transaction fee is only charged when the first bid is made (if your automobile has no reserve price), or if your reserve price is met. If there are no bids on your vehicle, or if none of the bids meet your reserved price, you will not be charged the transaction fee. Buying a car on eBay is even simpler. All you need to do is create an account, then proceed with bidding on your desired vehicle. Some automobiles will have a 'Reserve Price' which is the minimum price the seller will accept for the vehicle. If the reserve price is not met, the vehicle will be considered unsold. The bidding on some cars, particularly popular cars with a low reserve, can become fierce. Bids may be entered up to the very last second.

eBay Motors' open API has also encouraged the development of a number of tools to improve the search experience^[3].

There is currently a Car Auction Listings by State resource squidoo.com/carauctionsdirectory. This is a compiled list of both dealer and public auto auctions.

Car dealer auctions

A Car dealer auction is a specialized form of auction.

Millions of vehicles are sold at dealer auto auctions every year.^[4] These auctions are restricted for the general public and only licensed dealers can participate. Prices of vehicles sold at dealer auctions tend to be lower than those advertised on any dealer’s lot. Sellers forgo a potentially higher sticker price to take their inventory to a dealer auction where it will be auctioned off for thousands less than retail for a number of reasons.

Maintaining aging inventory costs dealers both money and reputation. Most vehicles sold are off-lease returns, replaced rental fleets, company cars, repossessed vehicles, and trade-ins.

Off-lease: vehicles returned to the financial institution at the end of a lease term. Closed auctions are usually the only venue for such financial institutions to dispose of a large volume of end-of-lease returns. The terms of a lease normally put a restriction on the number of miles driven, require regular maintenance and penalize for excessive wear. Usually, off-lease vehicles are returned within 2-3 years, often before their original factory warranty expires.
Off-rental: rental companies normally replace their fleets once a year, releasing a flood of late-model cars to the secondary market. Like the big financial institutions that underwrite car leases, rental companies also rely on auto auctions to sell off their used inventory. These vehicles tend to be well maintained and driven for only one year. Mileage tends to accumulate quickly on a rental car. Optional features are limited to an A/C and automatic transmission, but these cars are otherwise as close to the base model as they can get. Usage of rental cars is rough; it is safe to assume are that during that first year each rental car will be driven by a normal distribution of all types of drivers in all kinds of conditions.
Company/fleet cars: companies of varying sizes own or lease cars, trucks or vans that they typically keep for two or more years, although it is not uncommon to see current year models sold at the auctions. Adequate maintenance and large volumes of similar vehicles are typical characteristics. Like rentals, these fleet vehicles do not have many extras and get thoroughly exploited on a daily basis. Unlike rentals, usage of company cars varies greatly from the executive luxury sedan driven slowly and carefully on occasion to the delivery truck that regularly mounts curbs and gets abused in city traffic.
Repossessed: vehicles can be voluntarily or involuntarily repossessed by financial institutions for delinquency or another reason for recall. Auto auctions are again the bank’s only option for deliverance. Repossessed vehicles can feasibly sell for less because the financial institution disposing of them only seeks to offset its losses (also restricted by federal regulations). The condition of such cars may be compromised by neglect; if the owner can't pay the loan, repairs could also be neglected. There is also the potential for sabotage from ill-meaning previous users (e.g., extensive keying or tearing of the interior).
Trade-in: dealer inventory that is aging or does not meet their profile (e.g., an old Toyota Avalon that was traded in for a new CLK350 Cabriolet at a Mercedes-Benz franchised dealership). Traded-in cars may have useful extras and sometimes even after market modifications. The overall condition of such vehicles varies greatly. Some may be considerably older and out of warranty.

Among these types of vehicles there are a number of quality cars ready to market. Late models with remaining factory warranty are not uncommon. The law requires listing dealers to disclose bigger mechanical problems, which may void the manufacturer’s warranty and classify the vehicle as junk, salvage, lemon/consumer buy-back, etc. There are special auctions for these types of vehicles (salvage, rebuilt or junk vehicles), sold mostly by insurance companies. Other types of auctions specialize in the sale of police or government cars; some of those actually allow public access.

Pricing. Regardless of their source, vehicles are sent to auction with the main purpose to be sold quickly and hassle-free, and this usually happens at prices that dealers can easily recoup with a small profit from a resale. Contrary to popular belief, cars seldom sell for unreasonably low prices at the dealer auctions. This may happen if there are not enough interested bidders or if the vehicle is exceptionally unattractive and should not be taken for granted. Many sellers put reserve prices on their stock specifically to prevent this from happening. The reserve price is not disclosed publicly and a “winning” auction bid is only considered a sale if the reserve price is met. Sellers have the option to re-list vehicles that did not sell at a particular auction.

Condition. As with any used vehicle, overall vehicle condition varies greatly. Many aspects of the vehicle appearance may suffer in the term of everyday use and result in any of the following damages: stained or otherwise used upholstery, scratched bumpers, dings on the doors, chipped hood, dented quarter panels. Most of these can be fixed with touch-up paint and/or a dent removing kit. Scraped wheels and worn tires may cost more to repair or replace.

Inspection. Pre-sale vehicle inspection or test-driving is not allowed at some of the auctions. Mechanics and guests are not usually allowed to see the cars until after the sale is completed. Some auction locations inspect and prepare the cars for sale if the listing dealer so chooses (at a premium). More extensive reconditioning is also available.

Alternatives. In addition to Dealer Auctions, many dealers use Auto Brokers or Online Vehicle Marketplaces to move aged inventory. Brokers are typically service professionals who will actively market aged or excess inventory to other dealers with whom they have contracts to find vehicles. Online marketplaces (like DealerGenius.com, for example) use websites to create online listings of dealer vehicles for sale to other dealers. Dealers use Brokers because they are highly specific in their searches and are easy to manage. They tend to cost more than Auctions or Marketplaces. Marketplaces are typically cheaper than Brokers or Auctions and give access to the most vehicles, but tend to require attention on the dealers' part to manage their inventory listings (like auctions).