We'll review the basic types of car auctions, give the pros and cons of each auto auction, the scams you may encounter, how to tell if a car has been damaged and repaired, or flooded. We'll help you answer the question "should I try to buy a car from an auto auction?". You'll also find the most comprehensive resource on the web with information on car title checks, spotting stolen cars, flooded cars, and rebuilt wrecks, airbag and other scams to avoid. We'll show you how to run a Vehicle History Report (car title search) to find out a used car's dirty past and avoid huge losses. We'll cover buying cars from online auto auctions like eBay Motors, and Yahoo Auctions, Manheim Auctions, Police Seized Car Auctions, and Salvage Auctions.

World Trade Center Damaged Cars
Thousands of cars were damaged in New York City on 9/11/2001 when terrorists brought down the World Trade Center towers by crashing hijacked planes into them. It's a prime example of disasters having long term effects other than the initial death and destruction. These cars will no doubt be salvaged, rebuilt, sold at car auctions and have their titles rebuilt, most likely out of state. The only way to catch these cars is by running a CARFAX Vehicle History Report on every used car before you buy.

The Definition Of An Auction
According to the dictionary, here is the definition of an auction:
auc·tion (ôk-shen), noun.
"A public sale in which property or items of merchandise are sold to the highest bidder."

Sounds simple enough, but this one word causes more excitement, confusion, hardship, happiness, disappointment, misconceptions, lying, and cheating than the word "love". When you take out an ad in the paper to sell your car, that's sort of an auction too, because you eventually sell it to the highest bidder.

Many auto auctions use a bare bones car title check, while many do no car title check at all. The car auction thus provides you with nothing to guarantee you that the title is clean. Auto auctions try to cut cost and run the cheaper bare bones title checks, some of which are not very thorough at all. In my opinion no one has a more thorough car title check than CARFAX, I don't care what any auction says. CARFAX was doing this for 15 years before other companies and has over 1 billion records from well over 400 sources including auctions in their database. In the game of buyer beware, the CARFAX Report is the most powerful weapon that you and I have to protect ourselves against fraud. Remember what I said, buyer beware. Keep in mind that the auction has a vested interest in selling the car. Don't take anyone's word for it, not even mine, always run your our own car title check.

The price you pay for the car is always higher than what you bid!
Don't forget that on top of your winning bid at the auto auction, there is usually a buyer's premium. Sometimes the premium is only a few hundred dollars, sometimes it's 5% of the winning bid, sometimes it's 10% of the winning bid. This means if there is a 5% buyer's premium and you just won the $20,000 bidding war on a used Lexus, you now have to pay $1,000 on top of that to the auction house running this car auction. When you're caught up in a bidding war, it's easy to forget that you have a buyers premium to pay also, and when you're done, the addition of the buyers premium takes the car over fair market value. Oops! The whole idea of an auto auction is to buy a used car at a significant savings below fair market value, otherwise you could just go buy that same car from a private seller, take your time, and do it right.

What About Buying Used Cars From Car Rental Agencies Instead?
Keep in mind, a rental car is a used car, just like any other car. But we feel rental cars are probably maintained better than many privately owned cars, as they are kept in constant care and maintenance during use. When you rent a car from the top companies, they are clean, and I have never had a rental car break down. The companies tend to take them out of service by one to two years of age, so you are getting a decent car which the rental company has already absorbed the largest portion of the depreciation.. But all our rules for buying used cars still apply, because they are used cars. The used cars from car rental agencies usually still have their factory warranties in affect. Some car rental agencies may offer you a free limited warranty on used cars. If you want full coverage, read our article on Extended Warranty Scams & Tips. One last point, they may not be willing to haggle over the price, so make sure you know the value of that car before you visit them.

Auctions can be dangerous because that's where the junked, flooded, and rebuilt cars are most likely to be found.

Basic Types Of Auto Auctions
There are many different types of car auctions out there. But there are 5 main categories of auctions that we'll cover here, as these apply to the most amount of people. These are:

• Online auto auctions like eBay Motors auto auctions and Yahoo Auctions.
• Wholesale Auto Auctions (Usually dealer to dealer type auctions)
• Public Auto Auctions (Open to any sucker. Oops, I meant consumer).
• Police Auctions & Government Auctions (Usually open to anyone)
• Insurance Auto Auctions & Salvage Auto Auctions (Usually open to only to dealers)

eBay Auctions and Yahoo Auctions
All the car auction tips in this chapter apply to the eBay auto auctions as well. The correct name for eBay car auctions is eBay Motors. Try to get the VIN of the car you are bidding on from the seller on eBay so that you can run the CARFAX Vehicle History Report before you even decide whether or not to bid on the car. Just like e Bay Auctions, the same goes for any cars that you plan to bid on at Yahoo auctions as well. You must keep in mind that if you are the wining bidder at eBay Motors, you are contractually obligated to buy that vehicle. So don't bid on it unless you are 100% prepared to buy it. You might want to use eBay's escrow service, where a trust account is setup and the seller is not paid until you receive the car. The buyer and seller can also agree on an inspection period so that you can have a certified mechanic inspect the car and determine if there is any unsatisfactory damages, or needed repairs that were not disclosed by the seller. These are all the hassles you go through when you cannot see the car in person before you bid.

Keep in mind that bidding on a car at eBay Motors is no different than buying a used car from someone through the Auto Trader. You must still know the blue book value of that used car, and don't bid too high. Bid with your brain, not your heart. If you see the price of the car shooting up, just walk away. Your goal is to get that car for less than blue book fair market value, or it's not worth it. You might as well buy a car locally out of the used car classifieds. In order to make all the risk and effort worthwhile, the eBay Motors auction price must be less than you could get it locally from the classifieds.

Caveats to watch out for on eBay auctions and Yahoo Auctions:

• You cannot see the car in person. You are contractually obligated to buy a car you have not seen.
• Some sellers don't list a VIN# of the car, or they list a fake VIN#. You must run a used car title check on the VIN# to verify.
• Some sellers don't list the correct engine configuration, or even the correct model or year. A CARFAX Vehicle History Report will straighten that out.
• Sellers can get 20 people to lie and hype up their rating, or shill bid, which means falsely bidding the price of the car up.
• You may have to go cross country to pick up the car, or pay shipping fees, which can approach $1000.

• Cars that are returned after their lease expires.
• Rental Cars from car rental agencies.
• Brands of used cars that a dealer received as a trade in, but does not normally sell.
• A new hot seller that a dealer may be able to sell over MSRP in the car auctions.
• Exotic cars, either new or used, that some collector dealers are trying to sell.
• Used cars over 4 years old that most major dealers don't want on their lots.

One way you can get a car from wholesale auto auctions.
Hopefully you know a licensed private dealer who can get into these auctions, and they can get the advance list of all the cars they plan to auction off that day. Then you can tell your dealer friend which car you want and how much to pay for it. The dealer will most likely want something for their trouble.

How dealers know how much to bid: The Little Black Book
Some guys use a little black book for phone numbers of their girlfriends. At the wholesale auto auctions however, this has a completely different meaning. You'll see dealers walking around with their "Black Books", which is a pocket sized, subscription based mini car pricing book updated at least monthly with regional selling prices from wholesale auto auctions. It's like a Kelley Blue Book for auto auctions. It lists most vehicle makes, and models, and what they should sell for if the vehicle is in bad, fair or good condition. Ideally, the dealers would like to bid on a car and pay less than the black book price for the car, to be sure they are getting a good deal. Many other dealers will use the NADA guide for their pricing. At one wholesale auction I attended, I noted many dealers getting cars for $500 - $1500 below Black Book value, which is really good for them. When they resell the car for fair market value, they will maximize their investment.

You can't just walk the down the row of cars at an auction and determine what it's worth, because the car is only worth as much as the winning bid. The buyers determine that. The pricing books might say that Mercedes is worth $50,000 and you would be foolish to bid that much if the bidding only reaches $47,000, and maybe the seller accepts. Then you were $3,000 to high, and you would have left money on the table. That's why bidding typically starts way less than the published value. By using the Black Book, many bidders have a goal of what price range to shoot for, and usually end up getting slightly less than the book value on a car. Other factors affect the price too, like regional areas, that's why many used car pricing sites ask for the zip code before they. In Florida, black cars will not bid as high as silver, because black cars get too hot. Up north, SUVs and trucks tend to sell higher as winter approaches, and less as summer approaches.

Selling cars at an auto auction
If you're a dealer selling cars at an auto auction it's like a game of poker. The vehicles that you transport to the car auctions are your deck of cards. Everyone is calling everyone else's bluff, and you must convince the bidders that your car is worth the minimum opening bid. You sure don't want to have to drive a transport full of unsold cars all the way back home, it could be a long, lonely ride. If you do sell a vehicle the auto auction house might charge you a $250 sellers fee, depending on the auction house. Sometimes it could be a percent of the sale. If your car does not sell, they still charge you a fee anyway, so life really sucks for a seller who transports several cars to an auction and does not sell any. I feel your pain!

Never try to auction your car at a wholesale auto auction
Unless you have a rare car that is worth something, always retail it on the open market, because auction prices are wholesale, near trade in value, and much less than fair market value. Only auction your car if you need to dump it fast. Don't let your finances get you into the position where you need to unload your car fast, you'll lose the maximum amount of money that way.

Beauty is only skin deep!
Some bidders at car auctions are smart and don't take any chances. They use a clever $549 device called the Elcometer digital coating thickness gauge to measure the thickness of the paint. This tool is simple, you just touch it to the car's painted surfaces, and the LCD readout tells you how thick the paint is. This is useful in flagging cars that have had body work done. You see, the factory paint jobs are usually 4.5 mils thick. When a body shop paints a panel, their process is not refined like the factory, and they often paint over existing paint, doubling the thickness. Once your LCD readout hits the 8-12 mil range, you know that body work was done on this car. As each car in the auction drives up the auction lane to be bid on, you'll see a group of dealers rush up to it and start placing their Elcometer on all the major panels, doors, hood, and trunk, looking for "evidence" of body work.

Some of the better auctions have the mileage written on the windshields so you can rapidly walk up a row of cars in the lot and determine if it meets your mileage requirements without having to open each car up and check the odometer. If the car had previously been in a wreck, sometimes the windshield will have the word "Unibody" written on it, indicating prior accident damage that had been repaired. Mercedes and BMW leasing companies usually do this, GM usually does not. Beware of cars with more than 12,000 miles per year on the odometer. They should bid for much less than similar models with lower mileage.

Get Yourself An Extended Warranty For That used Car
Get an extended warranty whenever you buy a used car. We'll review extended car warranty companies like Warranty Direct. Be sure to read our chapter on Extended Warranty Scams & Tips. If you buy a used car and an extended warranty, and if the car is found to have a salvaged title, it will void your extended warranty. You'll be out several hundred dollars. We also link to DMV Web Sites For All 50 States.

Run A Vehicle History Report Before You Buy That Used Car
The most popular site for car title checks is CARFAX. You MUST run this report if you buy a used car so you don't get scammed. You have been warned. I just love receiving email from our visitors when they find out the used car they almost bought was a rebuilt wreck. One visitor told me he saved himself $7500. You can find the VIN# on the a plate on the dashboard by looking through the windshield. Some cars also have the 17 digit VIN# printed on stickers on the drivers side door, trunk, other doors.

If you plan to buy a car made before 1981...
No one can get you a car title report for a car before 1981, as the 17 digit VIN did not become standard until 1981. Every car manufacturer had their own format, and each state tracked them differently with unique formats, so you're out of luck Why the heck are you buying a car that old anyway?

Where can you get a VIN decoder?
Many people ask this. The software to decode a VIN is prohibitively expensive. Some car fan pages decode a VIN only on one particular car. But one good benefit of the CARFAX Vehicle History Reports is that part of their report includes a VIN decode on your car including the model, options, year, engine size and type, drive train info, country of manufacture, EPA gas mileage, etc.

For car history reports, don't just run the free lemon checks, few cars are returned as lemons, so run the CARFAX Database has a costly hidden problem. CARFAX also has a $5,000 Clean Title History Guarantee Coverage to pay you 10% of the wholesale value of the car, up to $5,000, if the report indicates a "Clean Title History" and a Problem Title actually exists for the vehicle. The average person looks at 7-10 used cars before they buy, so I chose the premium account. This allows you to check the history of every used car you are shopping for. I highly recommend that one. You want to be certain the used car you are about to buy did not come from an auto salvage auction, or had the odometer rolled back, fire damage, flood damage, or was reported stolen. I know people who paid cash for their used car and went to the DMV, then discovered it had been stolen. These problems can be avoided by running the history report.

The auto auction process
Usually at the bidding area there are several lanes going at once, each with its own auction running. Typical of auctions, the auctioneer is talking very fast, in fact, too fast for most people to understand what they are saying. It takes you about 20 minutes to get used to it. They sometimes have helpers in the lanes watching for your bid. As the car drives up the lane to be bid on, flocks of potential buyers will come up to it, you'll see several buyers rub their Elcometers on the paint to determine thickness, and they'll sometimes open the hood and trunk to check for signs of body damage. This is not the time to evaluate the car you are about to buy. That is why you should arrive early before the auction starts to view the car.

Red Light, Green Light
Behind the auctioneer is usually a traffic light with Red, Yellow, and Green lights. These lights are used to indicate the status of the car's title. Make sure when they write up your purchase that they indicate the color of the light on your contract. If they say it's green, that title better not have any issues. The classier Highline auctions would probably take back the car if something went wrong there, but for other auctions, who knows.

• Red Light - Usually means there are issues with the title, rebuilt, not actual mileage, or some other problem. This is important, because you would not expect to pay as much for that car as one which had not been in a wreck. At wholesale auctions as the cars come up to the block, the ones with bad titles trigger the red title warning light to come on over the auction box. At this point, usually 50% of the bidders take off. The remaining 50% don't know what the heck to do, and the price ends up dropping usually 30%. The reason is a rebuilt car is just bad news. It's one thing to have a quarter panel replaced or door dent removed, but a rebuilt title means something very bad happened to this car. It means the car was totaled in an accident, then rebuilt, and the title was "branded" back to used car status again.

• Yellow Light - Usually means the title is in transit, or there is some frame damage, but not enough to brand the title, and Usually the seller is right there next to the podium and they have the owners manual and title ready to hand over to you, and you settle in the closing room. Ideally, when you buy at a car auction, you'd like to have the title right there, since you are required to pay in full on the spot. Unfortunately, many titles at auctions are "in transit". That stinks because you would like to have the title there on the spot so you can drive home in your new purchase. They expect you to pay in full for that car now, yet they won't give you the title now. Sounds very lopsided. Each car is usually on the auction block for about a minute or 2, and the bidding moves fast. There's a couple of hundred cars there, and they have to get them all through. If the car does not sell, they just roll it right on out the door and the next one comes in. Sometimes they will pass cars through the auction lines a few times hoping they will sell.

• Green Light - means everything is OK with the title.

Flood Warning
If the car had been flooded after a hurricane and there was salt water, everything is corroding right now, and electrical components that work now, will soon fail. Repaired struts could break on you after they were fixed. If the roof was welded back on after a rollover, and the car flips, you may not have the roof strength you once had.

Everybody Lies
You need to remember this at auctions, everybody lies. They lie about how much money they have invested in the car, they lie about prior accidents, claiming "not to my knowledge", or "the previous owner assured me the damage from the wreck was minor". They all skirt the law by hiding behind open ended statements like that, and "AS IS" documents that they make you sign, so remember, everybody lies, trust no one, the only person looking out for you is you. In fact, even I'm lying right now!

Prices seen at a wholesale Florida car auction
This table below shows some auction bidding prices seen at a wholesale auction in April, 2001. You'll note a couple of issues here. During bad economic times like the dot com shake out of 2000 and 2001, no one wanted the high priced cars over $50,000, because everyone lost their butts on the stock market, then got laid off. We saw numerous Mercedes CLK cars go through the auction without even a bid, as did high end Porsches, Jaguars, and Ferraris, indicating a softening market for luxury cars at the time. But look below at the cars that did sell: The Lexus cars, far cheaper, coming off lease, typically sold for $27,000 or less. These cars at the time were $30k to $32k in the dealers. So those were good bargains, as were Infiniti and BMW 3 series. But off color BMW Z3 cars were like a cancer that no one wanted.

Off to the salvage auto yards
Once your wrecked car has been determined by the insurance company to be totaled, the title is branded and the car is sent off to the auto salvage yards and the insurance company pays you whatever they determine to be the going rate for your car being totaled. Once in a while the auto salvage yards have a salvage auction, where dealers can go in to inspect rows of totaled cars and bid on them. This is truly a site to make you wince. I saw an Acura NSX totaled, I saw Mercedes M class SUVs and exotic cars crumpled up like tin cans. Typically the cars will sell for 20-50% of their market value. I know a dealer who bought a 1995 Mercedes-Benz E320 Convertible from a salvage auto auction in 2001. It had over 12,300 miles on it and was titled in New York, got flooded, and ended up in an auto salvage yard in Florida, where it sat for over 9 months until it was bought for $22,000 in June, 2001. If it had been a certified used car from Mercedes, it would sell for $46,473 at the dealers that time. Here is an excerpt of what the CARFAX Vehicle History Report revealed once the car had been salvaged and rebuilt: