How to swim with the sharks and hunt for deals at auto auctions

Everyone likes to brag about the great deal they got buying a car. But the truth is that precious few of us are ever able to pull it off — and every so often, the search for that killer deal leads into the daunting world of auto auctions, where dealers make their living hunting for bargains.

Over the last 14 years, I have attended well over 3,000 auto auctions. I’ve been the owner, the buyer, the seller and the auctioneer, and I've learned the tricks with my own money at stake. As someone who has purchased and liquidated thousands of vehicles, here’s the first ingredient in this recipe of success.

Research

Before you ever step inside an auction, any auction, whether it’s a county, city, state or public auction, you should always research the history of the vehicle. No exceptions. Let me be blunt here: If you don't do this, you're screwing yourself.

Public auctions will usually provide an online list of vehicles for sale along with their VIN. Narrow down which specific vehicles interest you and immediately get a monthly Carfax subscription. At this time, Carfax is the only company that offers extensive maintenance information on vehicles, and dealers have come to rely on them for refining their search for good inventory.

What should you look for on the Carfax report? Severe accidents, airbag deployments, title issues, salvage histories and flood area registrations will pop out. Beyond those headlines, I want to know how long the prior owner kept the vehicle, and if there are any current emissions issues.

People often trade a car quickly for a reason; mechanical defects, emissions issues or electrical gremlins. All of these point to what we call a "hot potato" in our business. Late-model cars these days also have catalytic converters that can often cost well over $1,000 to replace.

Cross out the cars that don't pass your "hot potato” test. As for the ones that seem to be good candidates, you now need to go on to the next level.

Who's Selling The Car?

Independent used car dealerships use public auctions as dumping grounds for vehicles they can't retail. Some of these models may simply be unpopular, but the overwhelming majority will have some type of defect that could make your purchase a fatal one. Treat these cars as if you could catch tetanus from touching them.

The next most common seller will be new-car dealers. It may seem strange that they’re often willing to sell cars through an auction instead of their retail lot. The truth is that new car dealerships usually make more money financing new- and late-model vehicles than they do trying to sell cheap cars that attract cash buyers.

With these sellers, you may be able to find a few good deals on older vehicles; however, many will have hidden problems as well. Only buy one of these cars if you are fully capable of repairing the vehicle under the worst-case scenario.

Finally, you have the credit unions, banks, government agencies and finance companies.

Banks and finance firms sell their repossessed cars at auction, and as you would expect, the banks care only about the money. Since they are not trying to retail these vehicles, they will often accept a lower price. You will usually see dealers bidding on these vehicles at the public auctions for this simple reason.

Government vehicles are also popular, but for a different reason: County and city governments can either provide you with a treasure trove of detail or nothing but hot air. You can often call an agency and try to get details about a particular car through the maintenance, purchasing or accounting department. Don't expect them to go over every detail over the phone. However, if they do have records on a vehicle, you can ask to stop buy and see what maintenance has been done to a particular vehicle that interests you.

I have found vehicles with recently replaced engines and transmissions that I ended up buying for less than the cost of repair. There have been vehicles owned by mayors and county commissioners that were given diligent maintenance. I’ve also seen police cars that have been so thoroughly abused they belonged in a scrap yard.

Think of yourself as a history detective, where exposing a vehicle's past offers the only key to the right decisions.

Go To the Auction, But Don't Go Alone

Have you found a car or two that look promising? Great!

Ask yourself these questions. Do you know how to work on a car? Better yet, do you know what can be done to a car to make it seem far better than it actually is? Nowhere does the phrase "buyer beware" apply more aptly than in an auto auction.