3 surefire ways to access the bargains in dealer-only car auctions

By ,
Ask a Lender
December 18, 2017


Key Points

Three ways to get into a dealer-only car auction

  • Become a dealer — difficult, but worth it for the entrepreneurial-minded
  • Use a proxy to bid on your behalf at live auctions
  • Bid in online auctions using online proxy services

Car auctions seem like a great opportunity to buy a car at a great price. What many buyers fail to realize is that the best car prices are available from dealer-only auctions which, like the name implies, are only open to licensed car dealers.

Dealer auctions — also known as wholesale auctions — are generally considered the Holy Grail for bargains found at car auctions. Though savvy buyers used to be able to find great deals at government and public auctions, increased competition has made it tough to find bargains without going dealer-only.

Dealer-only auction prices tend to offer better values than at public auctions. Dealers intend to resell the cars, so they need to turn a profit. Dealers also can’t sink too much money into repairing their investments, so these auctions tend to offer newer cars than you’d find at government or public auctions. It’s not unusual to find cars at dealer auctions that still have a valid manufacturer’s warranty. Keep in mind, however, that it’s still possible to end up with a lemon at a dealer auction.

So, you’ve decided to buy a car at a dealer-only auction. Now, how do you get into one?

Option 1: Become a dealer

The most obvious solution is to become a licensed auto dealer. Unfortunately, this is also the most impractical solution. Though each state’s requirements for obtaining a dealer’s license vary, it’s typically not an easy — or very affordable — process. It’s much more involved than simply getting a state business license, and may include obtaining surety bonds, background checks, and various business documents and applications, many with accompanying fees. Unless you have aspirations to become an actual used car dealer, this option probably isn’t for you.

If you have an entrepreneurial inclination and want to pursue the life of a used car dealer, however, this is the option for you. You should start by getting in touch with your state’s licensing agency and state Department of Motor Vehicles to learn about the requirements. Keep in mind that, just like starting any business, ample research and preparation are key to success.

Option 2: Bid by proxy

Not ready for a big career move to become a dealer? There’s a simpler option: Hire a proxy.

A proxy is an individual or group with a dealer’s license who can bid on your behalf, using your money, at dealer auctions. Unless you have a personal relationship with a dealer who can bid on your behalf, proxies typically charge a fee. You may be able to accompany the proxy if the auction allows it; if not, be sure to communicate clearly – and in writing – what kind of car you want and how much you’re willing to spend.

Option 3: Bid online

Many dealer auctions take place online. Just as with live auctions, there are websites that allow you to bid by proxy for a fee. By piggybacking off the site’s dealer license, you can gain access to an array of bargain cars you wouldn’t have otherwise known existed.

If you decide to use an online proxy site, take care to make sure it’s legitimate. Cars – even cheap ones – are big-ticket items, and scammers will take advantage of people looking to buy one. If you suspect you’re a victim of fraud, you may file a complaint with the Internet Crime Complaint Center (IC3), or with the Federal Trade Commission.

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