Hey there, I’m Greg Smokes with Car Auction Network. I’ve spent years in the used car business, and I want to share my knowledge to help you understand the lingo used at public car auctions.
Before you jump into the bidding process, it’s essential to familiarize yourself with some key terms. From reserve prices to “as is” conditions, understanding these phrases will prepare you to confidently bid on your desired vehicle.
Once you get the hang of it, you’ll find that participating in car auctions can be quite a thrill!
What is Reserve Price And Starting Bid?
When you’re considering buying at a car auction, it’s important to understand the difference between auction reserve price and starting bid.
Public car auctions can be an exciting way to purchase your next vehicle, but knowing these key terms will help you avoid mistakes. Open to public car auctions (click to open auction directory) are often fast-paced events where many vehicles are sold in quick succession, so being well-prepared is helpful for you.
Let’s talk about the “reserve price.” This is the lowest amount a seller will accept for their car. Think of it as their secret minimum. They usually won’t reveal this number during the auction.
If no one bids at or above the reserve price, the seller can pull their car out of the auction. No sale! But, if the bidding goes higher than the reserve, the car is sold to the highest bidder.
Now, about the “starting bid.” This is simply the first price announced for a car at the auction. It’s just a starting point for the bidding to begin, not necessarily an indicator of the car’s true value.
As the bidding gets going, it’s important to keep an eye on your budget and not get carried away. Remember, the goal is to get a good deal on a car you want, not overspend on something just because the excitement of the auction gets to you.
The reserve price is a predetermined minimum amount the seller will accept for their vehicle. They rarely disclose this price to bidders during the auction.
Buyer’s Premium And Auction Fees: What to Know
Now, let me explain something called a “buyer’s premium.” This is an extra charge you’ll pay on top of your winning bid. Think of it as a commission for the auction company. In addition to the buyer’s premium, there might also be “auction fees” for things like registration or participating in the auction.
My advice? Always check what these fees are beforehand. That way, you can factor them into your budget and avoid any surprises when it comes time to pay. Also, make sure you understand the different ways you can pay and if there are any extra costs for using a certain payment method.
Auction Buyer’s Premium
So, you’ve done your work beforehand on the flipping used cars at auto auctions (click to read my guide) and you’re ready to find a great deal at this used car auction. You spot the perfect car for you, place your winning bid, and then are hit with an unexpected fee: the auto auction buyer’s fee.
The buyer’s premium is a common fee many may not be aware of when attending used car auctions or bidding in online car auctions.
The buyer’s premium is an additional percentage added to the final bid price of a vehicle that goes directly to the auction house as their commission for facilitating the sale. This means that if you win a bid on a car at $10,000 and there is a 10% buyer’s premium, you’ll actually be paying $11,000 for your purchase.
Inquire about any applicable fees like registration fees and taxes during auction registration so that there are no surprises when it comes time to pay for your new ride.
Remember: just because anyone can buy cars at auction doesn’t mean everyone knows all the details going in—don’t be afraid to ask questions and clarify anything that might seem unclear about these hidden fees before placing your bids!
My Tips on Car Auction Fees
Whether you’re trying to understand how a car auction works or attending a specific car auction in the USA, be prepared for additional charges like tax and auction fees. This is especially true when attending repo car auctions, where bank repos and other repossessed vehicles often have associated fees.
Some common auction fees include registration fees, vehicle purchase taxes, and even auction transportation costs if you need to move your newly gained vehicle.
These extra expenses can quickly add up, so factor them into your budget before bidding on any cars at a local car auction or online auto auction. Also, be sure to verify any potential fees with the auction house beforehand.
Learn the Car Auction Light System
At car auctions, you need to know what each color light means in the auction light system. These can vary slightly at different auctions, but these are the most common uses.
You will see these lights next to the auctioneer, or in online auto auctions, they will be displayed onscreen during the bidding.
| Light Color | Meaning | |
|---|---|---|
| Green Light | Ride and Drive | The car is mechanically sound with no known defects or issues, and it usually comes with a limited warranty. |
| Yellow Light | Caution / Announced Conditions | The auctioneer has disclosed certain issues or defects with the vehicle. Bidders should pay close attention to these announcements, as the car may have specific problems that affect its value. |
| Red Light | As-Is / No Warranty | The vehicle is being sold with no guarantees regarding its condition. Bidders are buying the car at their own risk, and any issues discovered after the purchase will not be covered. |
| Blue Light | Title Issue / Delay | The vehicle has a title issue or delay. The auction house guarantees that the title will be delivered within a specified time frame, but bidders should be aware of potential delays in receiving the title. |
Green Light
For first-time attendees, it can be an overwhelming experience, but understanding the auction light system is helpful. One important term to know is “Green Light,” which indicates that a specific car has been deemed mechanically sound and ready for purchase.
When a vehicle is on the auction block with a green light, it means that it has passed certain inspections and has no known significant mechanical issues.
Green light vehicles are considered safer bets and lower-risk purchases by bidders. However, it’s still important to inspect the vehicle yourself or have a trusted mechanic check it out before bidding.
Keep in mind that while this assurance is valuable, nothing beats conducting your own research and inspection.
Red Light
Another crucial term to be aware of is the “Red Light.” This color shows a stark contrast from the green light’s assurance of mechanical soundness.
When you see a red light glowing above a vehicle at the auction, it means that there are known or undisclosed issues with the car, and it is being sold as-is without any guarantees or warranties.
In such cases, it’s important to bring along an automotive mechanic or someone well-versed in cars to help you assess whether bidding on a red light vehicle is worth the risk. Remember, these vehicles may require significant repair work or have underlying issues.
However, if you’re up for a challenge and confident in your ability to identify potential issues, purchasing a red light car might result in big savings if you’re prepared to invest time and money into making necessary repairs. Car auctions can be exciting with the right preparation.
Yellow Light
While green and red lights serve as clear indicators of a vehicle’s condition, there’s another light to monitor: the yellow light. This color serves as a warning that the car being auctioned comes with certain disclosures or conditions.
It falls somewhere between the green and red lights, signaling that there may be some issues with the vehicle, but they are not as severe or unknown as those associated with a red light car.
When you see a yellow light at a car auction, pay close attention to the auctioneer’s announcements and any available documentation about the vehicle. This information will help you understand what specific issues or conditions are attached to the car before deciding if it’s worth bidding on.
While yellow light vehicles may not be as mechanically sound as green light cars, they also don’t come with the same level of risk and uncertainty as red light vehicles.
Info on Absentee Bidding And Proxy Bids
You might wonder how you can buy a car in a public car auction if you’re unable to attend in person.
Absentee bidding and proxy bids allow you to still have a chance at bidding on an auction vehicle even if you can’t make it to the event. This option opens up opportunities for people who are busy, live far away, or simply prefer not to attend crowded events.
Absentee bidding involves submitting your maximum bid before the auction takes place. The auction house will then bid on your behalf, trying to secure the vehicle for the lowest possible price without exceeding your limit. Here are three key points about absentee bidding:
- Research: Make sure you’ve looked into the vehicles that interest you and determine their value before submitting an absentee bid. This will help ensure that your maximum bid is realistic and competitive.
- Timing: Submit your absentee bids well before the auction date, as there may be deadlines imposed by the auction house.
- Fees: Be aware of any additional fees that may apply when using an absentee bidding service, such as handling fees or buyer’s premiums.
Proxy bids work similarly to absentee bids, but instead of having the auction house bid on your behalf, you appoint a trusted individual (your proxy) to attend the auction and place bids for you based on pre-agreed instructions and limits.
This method can provide more flexibility during the bidding process, as your proxy can make real-time decisions based on factors like competition or vehicle condition that might not have been apparent during pre-auction research.
Regardless of which method you choose—absentee bidding or proxy bids — it’s essential to stay informed about the vehicles available at public car auctions and set realistic expectations for yourself in terms of budget and desired outcomes.
By leveraging these convenient options, anyone can take advantage of great deals found at public car auctions without even having to step foot on the auction floor.
Final Notes on Bidding in a Public Car Auction
Always research title statuses and vehicle history reports for any cars you’re interested in. This information will provide valuable insights into the history of the auction vehicle. You may obtain the VIN number from the auction to look further into the ownership history.
| Term | Definition | Example |
|---|---|---|
| Reserve Price | The minimum price the seller is willing to accept for a vehicle. | If a car has a reserve price of $5,000, it means that the seller will not sell the vehicle for anything less than that price. |
| No Reserve | An auction where there is no minimum price set by the seller, meaning the highest bid wins. | A car listed as “no reserve” will be sold to the highest bidder, regardless of how low or high the final bid is. |
| Odometer Rollback | When an odometer’s mileage reading has been illegally altered or tampered with to show lower mileage. | A car with an odometer rollback may show 25,000 miles on its odometer but actually have driven over 100,000 miles in reality. |
Last updated on February 9th, 2025 at 02:44 am
