The Basics of Appraising and Bidding on Auction Vehicles

The Basics of Appraising and Bidding on Auction Vehicles

This article is adapted from A Dealer Guide to Auctions: Controlling Inventory, Increasing Profits (SL17), available through NADA Universitys Resource Toolbox.

As with any business venture, preparation is the key to success, so before ever leaving for the auction you should examine your inventory needs and check recent auction reports. What price did the vehicles you need bring at auction? How do they compare to wholesale valuation books and guides? Are they in a range that seems reasonable to you, or are they higher or lower than you expected? If prices dont seem compatible with prices you would have bid, try to find out why. Is your own market research current, or has it been a while since you last studied your market?

On the day of the auction, go early. Auction personnel will give you the lane schedule, a list of the vehicles that will be offered at the sale. The vehicles will be grouped according to the lane in which they will be sold and the time that particular auction will begin. Armed with your inventory wish list, look over the lane schedule and place a check mark next to the vehicles that interest you. Recognize that others will be bidding on the same cars and that your bid might not always be the winning bid. If you plan to buy five cars, select at least ten cars to appraise.

You are encouraged by auction personnel to look over the vehicles before the sale begins, and you should take advantage of this opportunity. When appraising vehicles at the auction, use the same used-vehicle appraisal form you use in the dealership and the same appraisal procedure. The more you do it, the easier it will become and the faster you will be able to complete the appraisal. Being able to appraise thoroughly but quickly is essential if you plan to become a successful auction regular.

Accomplished auction buyers suggest that you write down the top price youre willing to spend on a particular car and refuse to bid more than $200 above that. The excitement of the auction is contagious, and it can be hard to stop if the biddings still going strong. Remember, however, that you have carefully calculated the value of the vehicle in your market. The competing bidders may be able to get more for the same car in their markets. For that reason, they may be able to spend more. Know your limits and stay within the boundaries you have set.

First-time auction buyers might wish to do a Select Ten exercise. This stress free visit will prepare you to buy on your second visit. Before the auction begins, select 10 cars that interest you (preferably of the type youd want to buy for your dealership). Using your dealership appraisal form, appraise each selected vehicle to determine the price youd be willing to pay. When the auction begins, dont bid, just watch the action. When the hammer falls on one of your vehicles, write down the sale price. Later on, compare your estimated buying price with the actual sale price of the vehicle. This exercise will help you see if youre ready to buy next week or if you need to spend a little more time studying guide books, auction reports, and market values.

For more on auctions, join NADA and Manheim Online Solutions for the free MarketINSIGHT mini-webinar Maximizing In-lane and Online Auctions to Save Time, Save Money and Get the Best of Both Worlds March 24.