This is the second installment in a three part post. Part one discussed how to buy a used car from a private party. This section will discuss the overview of buying a used car from an auction.

There are two different types of auctions, dealer auctions and all the rest. Dealer auctions are conducted by various auctioneers across the country including Mannheim. In order to buy at or even visit these auctions you need to be a licensed auto dealer in your area. These auctions are where auto dealers auction used cars that were traded that they don’t want or can’t sell, rental car companies unload entire fleets, or wholesalers sell cars they have acquired from their sources. Finance companies and lenders will also auction repossessed cars here as well. These auctions are the most likely to have a great selection of quality used cars.

If you do not have an auto dealers license than you need to find a dealer that is willing to acquire a vehicle for you. You can find these on Craigslist sometimes or in the newspaper. Any used car dealer (and new car dealers in many areas) is able to do this, the question is what level of service you will receive. The advantage to buying a used car in this manner is that you are likely to get a great deal at prices below private party prices. With the right dealer at your side, you can find some real gems.

There are disadvantages though. This is a professional’s game, and it is no joke. The auction moves fast and you will be bidding against people that do just this for a living. You could easily get roped into paying more for a used car than you should. Basically, if you have the highest bid, you probably overpaid. So make sure you have done your research and work with someone you trust. Also, you will not be able to test drive the car or be able to have a comprehensive prepurchase inspection done. So there is a certain leap of faith required.

Depending on your state, you will likely have to pay sales tax and other assorted fees since you have to conduct the transaction through a licensed used car dealer. Depending on the dealer are working with you may have to pay for the car at the auction itself, so if you are planning on financing the purchase of the used car this can complicate things.

The rest include any auction that is conducted by government agencies or any auction that allows any average Joe to participate. I would not recommend buying anything at any of these, unless you are prepared for the possibility that you will end up with a piece of junk. These auctions are often promoted as having repos or trade-ins, but likely they will have one or none of these. I would stay away from these.

Interested in learning how to buy a used car from a dealer? Read part 3.

Buying a used car can be much more tricky than buying a new car. There are several ways to buy a used car, private party, auction or from a dealer. Which method is best depends on what is most important to you. If you are interested in hassle free buying, then buying a used car from a private party is probably the best way.

When you are buying from a private party there are some distinct advantages and disadvantages. The advantages include dealing directly with the owner of the car. There is no middle man, no run around, it is nice and easy. You can often get a better deal on a used car from a private party. Another advantage is that some states do not require sales tax on a private car sale; this alone could save $1,000s.

However, there are some disadvantages as well. First of all, if the person you are buying the used car from has financed or leased the vehicle then they do not have the title, which means you cannot drive off with the car clean and clear. It can take up to 10 business days to get a title from a lender. So basically, you hand over your hard earned money to someone you don’t know, accept some sort of agreement (make sure it is in writing, ideally a Bill of Sale) and wait for the title. Where this gets complicated is what happens to the car in the meantime? You paid for it, but it legally belongs to the seller. So do you take the car? Not likely, the seller is still responsible for the car. Do they keep the car? You already paid for it. What if they put miles on it, or scratch it, or wreck it? Then what? See the problem?

Another potential pitfall when buying a used car from a private party is that unless that car is still under factory warranty, what are you really getting? If the transmission goes out the next day, week or month, then how good of a deal did you get? You are unprotected. A prepurchase inspection is always recommended, but it can’t protect you from what might break, just what is broken or showing significant wear. A resource for you is a used car history report from a service like AutoCheck, or Carfax. These services compile information on vehicles. While not always accurate they can help you identify problems such as if the car has a salvage title, how many owners it has had and where it came from. This last one is important because there are a lot of hurricane damaged cars around being passed off in far off states as quality used cars. The history reports will only show accidents if there was a police report filed and/or the auto body shop reports the damage.

Buying a used car from a private party using financing can be a challenge as well. There are fewer lenders that will finance a private party used car purchase because there is greater risk to the bank due to the aforementioned factors. The ones that will often charge a higher interest rate to do the deal.

Read the next section of this post if you are interested in finding out how to buy a used car from an auction.