How Much Cheaper Are Cars at Dealer Auctions?

• How Much Do Cars Sell for at Auctions
• How Does a Car Auction Work?
• How Much Do Dealers Markup Cars at Auctions?
• How to Buy Cars at Auctions
• Final Thoughts: How Much Cheaper Are Cars at Dealer Auctions?
• Frequently Asked Questions: How Much Cheaper Are Cars at Dealer Auctions?

Part of shopping for a new car involves the goal of saving money, often leading buyers to auto auctions. With the proper knowledge, shopping for the best deal can happen at a car auction.

But how much cheaper are cars at dealer auctions? It’s a valid question that most people purchasing cars want to know. Read on as we check out auto auction prices and how auctions work.

Dealer auctions are wholesale auctions with dealer auction prices. Naturally, any vehicle bought at this type of auction will be cheaper than at a dealership (that’s what wholesale prices mean). But how does this impact the numbers? Typically, but not always, dealer auctions sell vehicles for 10% to 20% less than private sellers and 15% to 30% lower than retail used car dealers. 

Keep in mind that used car prices are volatile due to pandemic-related supply chain issues affecting new cars and dealer profits. So informed bidding and buying are always the way to go. Using two publicly accessible data sources (AuctionTime and KBB), we analyzed recent used car auctions to see how the pricing stacks up against private sale and retail dealership prices. 

In one example, a 2016 Chevrolet Malibu with 105,000 miles and all other factors being equal sold at auction for $5,830 versus an estimated private sale transaction of $7,412. That same vehicle would sell for $8,524 at a dealer, a 46% premium over a car auction. You can see where the profits come from.

Meanwhile, a 2020 Ford F-150 XLT with 69,000 miles sold for $30,000, almost identical to what KBB estimates it would sell for in a private trade. However, this pickup would head out the door at a dealer for $34,492, 15% more than at an auction (which creates dealer profit).

Here are some other examples:

You’ll see that in a few cases, the auction and private sales prices are similar. But, in all instances, the dealer retail price is always more than the dealer auction “sold for” price.

Car auctions are an efficient and money-saving way of purchasing used vehicles. The auction process happens in a few steps:

• Before car auctions begin, buyers can inspect the vehicle(s) (in-person or online, depending on the auction). 
• The seller will often set a reserve price (the minimum they are willing to accept), but some car auctions occur without price restrictions. 
• Registered buyers bid against each other, which drives up the price. The person with the highest bid wins the vehicle (assuming the reserve price has been met) and is obligated to pay the final price.
• The winning bidder pays for the vehicle, including any auction fees like processing charges and a buyer’s premium (a percentage or flat rate added to the final price). The winner also arranges pick up of the vehicle to have it delivered. 
• Depending on the auction you choose to buy from, it can occur in person, online, or over the phone (or through a combination of these methods). 

What Types of Vehicles Are Available at Auctions?

Auto auctions (including online car auctions) offer numerous vehicle types:

• Trade-Ins: Dealerships will often turn to car auctions to off-load excess inventory or sell recent trade-ins that don’t match their particular selling approach. For example, a Porsche dealer probably won’t stock a Hyundai trade-in in inventory. They’ll let other dealers handle these types of cars. 
• Lease Returns: Leasing companies sell returned vehicles at the end of the term (usually three years). 
• Repossessions: Lending institutions sell cars recovered due to failed financing.
• Salvage Cars: Insurance companies sell totaled cars to recover some money from an accident. These cars are either restored to roadworthy condition or dismantled for parts. 

Some auctions may specialize in a specific vehicle type, like salvage cars.

Here are a few auto auction hacks to consider before bidding:

• Set a Budget: If there’s one piece of advice to follow, it’s setting a budget before bidding on any vehicle. Your research will help create this cap and prevent you from getting caught up in a bidding frenzy. Other costs, like auction fees and repair expenses, should be included in the total.
• Seek Out Less Popular Cars: The more in-demand an auction car is, the higher the bidding. If your primary purpose for buying an auction car is to get a good deal, search for a less-popular automobile. This could involve a sedan over an SUV or a car with a few minor dents instead of a showroom-worthy body.
• Practice Is Wise: Before getting neck-deep into an auction, think about joining an auction as an observer only. It’s an ideal way to get experience and build confidence before placing bids.