A lot of folks think that auto auctions are the equivalent of a motorized candy store.
There are all these new, recent and popular models that are supposedly easy pickings for those with a dealer license. Pristine Wranglers. Accords and Camrys that you can simply spec and buy to your heart’s desire. And of course Lexus/BMW/Mercedes vehicles aplenty, all the luxury and sport you would ever desire for several thousand less than retail.
The truth is that the best rarely make it up to the auction line.
Franchised dealerships always have the first choice on the popular trade-ins and off-lease vehicles. These vehicles are liquidated online and at ‘closed’ sales where only those chosen new car dealers who sell that specific brand have the opportunity to bid and buy.
When they get finished buying up their inventory, everybody else can join in on what remains. This is where large independent dealer networks like Carmax and CarSmart step in to buy their inventory. They get the same shot as all the other independent dealers like yours truly, and although they have far deeper pockets like me, the access and opportunity is all the same.
This gets me around to the auction this morning. It was a fairly small deal, and I managed to get three vehicles at a sale that I usually buy in ones and twos.
NOTE 2005 Focus SE : Same car per specs, but not the one at today’s sale.
Picture Courtesy GTCarlot.com
The sale started off with a 2005 Ford Focus SE. 92,000 miles, automatic, white and clean. This was an inoperable vehicle because the dealer selling it had used it as a showroom floor model for nearly six years and now couldn’t get it to start.
Judging by the Carfax and Autocheck history, it looked like the vehicle had a good chance of running fine. So I bid it up to $2900 since vehicles like this represent a sweet spot for financing those who want a 30+ mpg gas sipper and an automatic. The majority of folks who come to the lot see this as an optimal combination. So I bid harder than usual, but got outbid at $3k.
The same outcome took place on a 2003 BMW 330i with 120k and an automatic. It had a blown head gasket, but the exterior and interior were kept in great shape.
However this one had been a ‘hot potato’ for nearly five years (several owners kept it for less than a year), and I was inclined to think that I would have to put in around $1500 to $2000 in order to get it front line ready. I bid $1900… a lady bid $2000… and I had officially clocked two ‘seconds’ with the first two vehicles sold.
My bidding did get a bit better in due time. The fourth vehicle out of the barn, a 1996 Nissan Sentra with 138k, in good shape, autonmatic, and power windows, was bought for $1600 (plus the auction fee). It was a cloudy day today, but silver compacts like this Sentra are easy vehicles to sell.
This was followed by a 1998 Toyota Corolla VE that had an ‘Engine Needs Service’ announcement. That one had some paint fade, but the engine was fine. Someone had mixed the Toyota red coolant with the generic green antifreeze and the result was a deceptive brown emulsion inside the radiator. I got that for $1200.
From this point forward I was either a ‘second’ or a spectator.
There was a 2004 Nissan 350Z Convertible that needed a new transmission. 87k, some scuffs here and there. That went for about $8000 if you include the auction fee.
A 1999 Chrysler Town & Country with leather, but manual doors, was showing 31,725 original miles and had a branded title. In Georgia, everything from a court order to a salvage vehicle requires a branded title. However salvage is always announced on the auction block no matter what. This one sold for $4000. A good price if you are able to self-finance older vehicles. Since minivans are the automotive version of leprosy these days, I tend to stay away from them.
One of the more interesting vehicles that came across the block was a 2011 BMW 128i Convertible with 114,902 miles.
That’s not a misprint. Someone apparently drove the wheels off of this car, although with an automatic and leather seats, it still got more than a few eyes. The 1-Series sold for close to $12,500 altogether.
A 2003 BMW M3 with nearly the same miles (107,600) sold for $12,600, about $500 more.
And on the opposite side of the desirability ledger, there was a 2000 Lincoln Town Car in an ugly shade of brown, dents and scuffs all over, a landau roof, and 121,365 miles. My camera decided to lose the battery charge at the exact moment I was going to take the picture, and that was only fitting. Since these days I can’t sell an old man’s V8 luxobarge to save my hide.
A few weeks ago I finally sold another, far better looking Y2k model Town Car Signature in burgundy that had been dealer maintained since day one. It took nearly five months to get that vehicle down the road, and it was as clean as a pin. This one was a rolling atrocity in comparison. It sold for a bit over $1200 and yes, all of what I told you still didn’t stop yours truly from becoming the second highest bidder for this car.
Finally, I struck gold in the form of a 1996 Mazda MX-5 Miata Raodster Eunos with a long, long list of modifications with the name Aizawa on them. The convertible top is brand new. The interior is immaculate and I’m inclined to keep it for at least a little while.
Everything checks out for now, and no, this will definitely be a cash sale. Nothing can test the Gods more than self-financing a heavily modified roadster; especially one that shows 113,000 miles I bought it for $3000 and will likely sell it for around $5000.
Anything can happen between the auction and the retail purchase. Research and a good eye for examining issues helps me even on the block, but I don’t get to drive these things and only get a day to arbitrate them for major powertrain issues. So, hopefully luck will be with me this time as well.
Another interesting article – a good read as always.
Possible future topic… as someone who’s been on both sides of the auction business, what are your thoughts on online bidding at traditional auctions? The “big boys” have been doing it for some time now, and many of the smaller auctions around here added it in the past few years as well.
Can’t say I’m crazy about it myself, as the one smaller salvage auction I used to frequent pretty much got turned upside down by online bidders. There used to be deals regularly… now it’s nothing but people in foreign countries driving prices beyond (often WAY beyond) reason.
After reading your previous article about auctioneer “tricks”, it would seem that online bidding would make for a ready supply of nonexistent bidders, and an easy explanation for their absence. Have you ever seen/heard of that being used as a tactic?
So do you ever enjoy any auction purchases for yourself a few months before you resell? I’m polygamous when it comes to cars 🙂
Every once in a blue moon.
My old 74 Chevy and the 01 Insight were my more recent few month keepers.
At the moment I’m just puttering along in an old 99′ V70 that I have about $1300 in. I love Volvo seats but as soon as I get a bite, it will be down the road.
Wow – $4k wholesale for a 99 T&C. Low miles or not, that seems like really high money for something that old, especially with a pentastar on it. I guess not everyone has so much trouble selling minivans.
Very interesting to me, what sells for you and what doesn’t. I guess it is good to know that with my tastes running towards old man land yachts and minivans, I am still opposite of the market.
I was thinking the same thing about that T&C, $4K sounds high. The ’03 M3 is interesting. I wonder how something like that ended up at an auction. Couldn’t be an off-lease vehicle that old. Came from an insurance or finance company I’m guessing.
Trade-in.
I never think that because the guy probably got far less than the $12.6K on the trade so why not just sell a unique car like that private party, for a lot more… unless there is something really wrong with it. Seems like a big gamble.
Greatly appreciate/enjoy your posts.
What would you have retailed the T&C for? I ask because Mom’s in assisted living now and her 99 T&C (loaded) has 65K (always dealer maintained) and I didn’t realize these were now pariah.
That was my reaction on the minivan, too – price was a little stiff; but what’s the problem with minivans? The Chrysler ones have issues; I get it…but they are THE most practical body style EVER to be manufactured!
I had a new 2007 T&C; I dumped it because I abused the snot out of it and it was still running great. I was getting vibes…but GD it, do I wish I had it back!
Buying a used in my area is risky because of rust. Someday, maybe soon…a trip to Vegas and come back in a rust-free mini!
The problem is that they don’t sit high enough for the soccer moms, which is why SUV’s got so popular. Now CUV’s are popular now. The minivan has gone the way of the big woodgrain station wagon.
I’m not sure I agree.
Now the only minivans I’ve owned were Chryslers…a Gen1 panel truck, a Gen3, and a Gen4…the very last of the teardrop ones. The Gen1 the driver did sit low; but that was back when women couldn’t get enough of them. The Gen3 and Gen4 had the driver sitting pretty high – higher than in a Dodge full-size van, which I later had (2003).
I…just…don’t…get it.
They were comfortable in the front seats (the back seats varied by layout and generation). They had room up the ying-yang. They carried as much or more than a full-size van. They were easy on gas…my 2007 T&C V6 got me 24 miles a gallon. Outstanding, given the kind of vehicle it was. As good as my long-ago Super Beetle.
If SO MANY people are that hung up on IMAGE…well, gawd help us all. Be a shame to see the minivan go away…the perfect people- and stuff-mover.
“Franchised dealerships always have the first choice on the popular trade-ins and off-lease vehicles.”
As good a reason as any to look for 3 or 4 year old off-lease cars from the dealer that sold them originally. I’m sure there’s a premium (Steve probably knows exactly what it is for a given model) but it still seems like a sweet spot; someone else has taken the new-car depreciation, but its wear and tear is something of a known quantity.
I agree with this, but I think that saving on the depreciation by buying used depends on what you are buying. If you are talking an expensive and quickly depreciating vehicle, this is very true. I was looking around at a few lots yesterday, and noticed that you can get into a few year old Cadillac or Lincoln for about half of it’s original cost.
On the other hand, if you are talking cars with high resale values, especially Honda and Toyota dealers with the whole “certified vehicle” racket, there is less of a savings over buying new. I think that is the game; they get you in to look at the “certified used” Accord with 30,000 miles on it, then they show you how you can get a new one for only $1,500 more. At least this seems to be the case in my area.
In my area (Balt-Wash area) it is ground zero for Accords and Camrys and Sorentos. All the dealers think their used 30,000-70,000 mile Accord, Corolla or Camry are gold and raise the prices accordingly. It actually makes better sense to go and buy a brand new Honda or Toyota. most folks keep their Honda Accord or Toyota camry for years and by the time it is traded in or sold, depreciation does not even influence anything.
Yep, that’s the same in my area (SF). Last year, when I was looking at Subaru Foresters, it was only 4k more to buy a new forester vs. a 3 year old private party sale. I ended up buying new.
We have a Fusion and a 3 bought this way. I guess neither is as appealing as the Hon/Toy options, as the spreads were much more favorable than what others are describing.
Yup, because the cream gets skimmed off the top at those closed sales and only the dogs go to the open auctions either if they don’t sell at the closed auction or they go directly there if they are in particularly poor condition. The best of the best trade ins often stay at the dealer where they were traded in and never make it to auction.
Has to be a dog. If it is can’t imagine the real value being more than $15K; at $12.6K purchased not much margin unless the dealer had a buyer lined up ahead of time.
The last owner would have to be a guy who was too busy to put it on CL to pocket another $10K or so (assuming retail is $18K for a good high miler and he got $8K on the trade).
Could happen but then the trade-in dealer not selling it himself wouldn’t make sense, unless there is an age or mileage limit on their inventory which of course you see.
I’m sure guys like Steve develop a sixth sense for good cars that “escape” the selling route. For me not worth taking a chance for <$3K profit. I wouldn't even consider it knowing it was a trade-in. Bank repo or insurance recovery maybe.
For many people trying to sell the car themselves is too much of a hassle and they don’t have the cash to purchase the new car until they get the money out of the old one. Selling the old one first could be a burden for some people since they could end up with a gap when they have no transportation.
If you are referring to the M3 For many new car dealers, particularly those that deal in “prestige” makes, they do have both an age and mileage limit for cars they put on their lot. They don’t want the riff-raff that would buy a 10 year old car sullying their lot and the lenders that people who actually have high credit scores and can get the best rates use often won’t loan money on cars with more than a certain number of miles or that are older than a certain age. So my bet is that the BMW came from a trade-in and it didn’t make the cut to stay on their lot due to the age and/or mileage.
BTW the retail according to KBB.com is just over $15K for one with that miles in excellent condition. For me it being a trade in would certainly be preferred to it being a repo or insurance recovery, though I doubt it would be in this nice of condition if it was a recovery.
I guess if that’s the case, that 107K miles is too high for a franchised dealer, then I would have spun the article differently. I would have said auctions are a decent place to find high mileage but otherwise good cars.
The number of owners on the Carfax would give you a clue. One owner and I wouldn’t be too worried except… why didn’t he sell it himself. Sure at only $15K high book (a surprise) it could have been the hassle factor.
But he could have picked up another $2-3K selling it directly to Carmax rather than trading in for lowest possible book. That’s one of the best things about the Carmax business model, they buy directly from private sellers. Seller gets more than low book, Carmax gets first crack at the best cars. The transaction takes only minutes. He probably didn’t know.
That’s not what the people I’ve seen that took their car to Carmax or similar places to try to sell them a car, they were offered below or well below blue book value. One of the guys on the Marauder forum took his to one of those used car super stores and for a car that the trade-in was ~$7k and retail was ~$10k they offered him ~$4500 and the car was in excellent shape.
Another thing to consider on the trade in vs sell it yourself decision is how sales tax is handled in that state. In my state you now only pay tax on the difference which is at or near 10% in many municipalities. So that could reduce the net difference to just $1000 if they received the excellent trade-in value vs excellent private party based on my zip code at KBB. Of course most dealers will low ball you on the trade offering poor condition value on a perfect car and others will seriously low ball you since it doesn’t meet the criteria to stay on their lot, what ever that criteria is.
Just had a family member do it. $2K more from Carmax than the Mercedes dealer as a trade-in. It has to be that way. The Mercedes dealer would have sent the car to the kind of auction that this article is about.
Carmax, with first crack at it, will pay a bit more than low book for a good car. Buyer wins… and so does Carmax. Look at the M3… $12.6K is way above low book and much more than they would have paid the seller.
At say $11K seller gets $2K more than selling it to the Mercedes (or whatever) dealer, Carmax gets the car for $1.6K less than at auction, and avoids fees. Win-win.
Carmax is a great alternative to trading in a high mileage car to a tier 1 dealer, who in turn will wholesale it out. People just don’t know, my friends didn’t. Sharing it so others can benefit but again rule #1 from me is to try selling it yourself first.
Carmax uses some pretty sophisticated software to calculate to calculate how much they offer for your car. It takes into account stuff like how much demand they have for that car, so if you are trading in something that they need or that fits the parameters of stuff that they like to sell or know that sells well or that they are low on, it will probably come up with a higher number.
I traded in my Ranger there when I bought a leftover Pathfinder (they had a Nissan franchise). Blue book was $8k, I think they gave me $6600. I took it, as I didn’t want to deal with craigslist creepers.
A 30-mpg 05 Focus? Really? My 06 gets 22 in town and 26-28 hwy.
I remember Ford marketing the Focus as a 30+ mpg high way vehicle. Apparently, the old EPA stickers reflected that.
http://www.fueleconomy.gov/feg/calculatorCompareSideBySide.jsp?column=1&id=20702
You must have a brown one 😉
Silver! Just the ticket for an easy sale, or so you’d have me believe!
My BIL had a Focus new as a company car 34mpg imperial on the highway in manual i thought they’d be better
My 2005 Ford Focus SE auto sedan with the 2.0l duratec got 32-33 miles per gallon on the highway and I drove on 495(Capital Beltway) with it to work everyday. When there was no traffic(yup a shocker) I used to beat the thing like a drum.
Perhaps because mine was silver….
I miss that car. It gave me no trouble at all but I had to get a hatchback/wagon and I had to chose a Toyota product(Scion XB) so I traded it in. During Snowmageddon in 2010 the Focus drove like a champ.
Mr Grey, I would try to keep that Focus if I was you. Parts are cheap, most interior parts(except for the main dashboard) are the same from 2000-2007. Need a new set of seats and you can only find a good set in a 2000? no problem it bolts up fine.
Does your car have the telescoping/tilt steering wheel?(to check release the lever for the tilt(as if you were going to adjust the tilt) then pull the steering wheel towards you or push it back towards the dash. If it telescopes then you got that feature
Brother in law’s ’07 Focus SES with automatic delivers constant 35, sometimes 40 mpg highway on his 55 mile round trip freeway commute.
He must have a feather foot!
Those of us who have worked on cars, generally used (who works on new cars?), know that under the skin, all cars are just pieces of crap, especially when subjected to 60,000 plus miles of use. You don’t find collector cars at auto auctions. What you find is, USED CARS! Some are just more expensive to fix than others.
The world that Steve works in is totally objective. Wow! A BMW M3!? It’s either a beaten street racer or a BMW that mainstream buyers avoid like the plague. $$$$. Ever go to track day at your closest SCCA track? That’s where you find used M3s.
The guys that go to auto auctions aren’t in it for love, as Steve has tried to inculcate us, they just want to make a buck, if possible.
Who works on new cars? Those poor souls that worked at a GM dealership. I cannot tell you how many of those stupid Cavaliers came off the truck broken when I was working at the dealership as an apprentice tech(and this was 2001-2004) The dealership I worked at also owned for a time a Kia dealership. We used to keep a couple of complete engines for Sportages because every two truckloads of them that came to the dealer, were guaranteed to have blown engines(and these were vehicles with 6 or 10 miles on them)
As for all cars are crap under the skin, this is true. The average car has lots of parts that are just scheming how to break when you least expect them too. But that is subjective too. All cars maybe crap under the skin but some cars are bigger pieces of crap.
I was on same page as you Kevin. It’s hard to fathom a more risky purchase than a 10 year old, high mileage M3 at auction. But a professional did pay $12.6K for a car that Eric says has $15K high book.
I wonder what the dealer saw here… one owner perhaps? Did he have a buyer already lined up, someone who maybe knew about the car?
Keep in mind that 15K figure was based on my zip code and w/o selecting any options so it could be worth more in that market. Or maybe that particular dealer thought it would be good for building foot traffic, or has plans to drive it himself for awhile.
Or he’s planning on financing it and making money off that.
Interesting read, thank you Steven! Fascinating too thinking of the values similar makes/models would get here.
Ex-lease is definitely the way I’d go next time I want to buy – the discount if you take a car as-is where-is before it even gets back to the lease company is impressive.
Case in point: my November 2005 Mazda 6 GSX sportwagon (2.3 auto) was NZ$43,745 new. I drove it for 3 years and 143,800km; when the lease was up in December 2008 the lease company offered it to me for NZ$10,500. Even better, they also offered me a co-worker’s identical 6 with just over 200,000km for NZ$7,500. I couldn’t afford either (and didn’t need one as I got a new lease one with my job anyway), and my workmate’s was silver which I didn’t like, and he was a terrible driver. But my sister loved my blue one and bought it through me. The annual registration had been renewed just before the lease ran out; the tyres were all less than 5,000km old; and it had just been repainted after an unfortunate incident of the bovine variety.
The local Mazda dealer who’d always serviced it said it was NZ$2,000 less than the wholesale dealer-only rate. The low, low price was solely because the lease company didn’t have to take it back and appraise it or anything. Five years later, now with 182,000km on it, it’s still worth close to the $10,500 my sister paid.
Our next lot of Mazda 6 wagons (2010 models) are all on longer leases which are up early next year; they’ll be available for around $12,000. This time I’ll be buying one for myself and maybe even a second to sell on!
In the US many leases have the option to purchase at the end of the lease at a price that was set as part of calculating the lease payment. So when the lease nears it’s end you compare that buy out price with the current market value and what they may hit you with for excess mileage or damage charges and make your purchase decision. Of course what you are hoping for is that the buy out is higher than the value of the car meaning that the lessor is going to take a hit. If you are the lessee and the buyout is less than the value of the car that means you paid too much on the lease.
Interesting, makes sense. The lease on mine was based on 160,000km over the 3 years, 16K less than I did. So my employers likely did pay too much on the lease. I wasn’t paying the lease though, so I guess I won out of it! (Or my sister did seeing as she bought it). My employers are now much more strict on the mileage, and now swap cars from rep to rep to ensure they build up mileage at the budgetted rate.
When I had a job that gave me a company car they would replace a vehicle and let the existing one sit sometimes as long as 3-4 months, once it got to the allotted miles, rather than pay the mileage overage fees. I’m not sure how hard they were hitting them with the excess mileage fees but it must have been pretty significant for them to sit on a vehicle for that long. On the other end they never did any swapping around of vehicles to make sure that they racked up the mileage, since you got to pick your vehicle from different brands and the different colors so it was “yours”.
New price on those isnt very high if you work at John Andrews 25k will see you in a new one my BIL is a panel rep there he got my sister a great deal on a black on black 2.5 sport Mazda 6 lightly used by a parts manager. Their rep cars are sold off as demonstrators after 15k any more and its hard to claim they are ‘new’.