Most Americans have gone through the experience of buying a vehicle. Whether it’s your first car or your 15th, there is certainly an art to the deal. While many people visit used car lots to find a suitable four-wheeled candidate, used car auctions are rising in popularity.
Although the process is relatively straightforward, it can be incredibly confusing if you’re not familiar with the terminology. Since a misunderstanding can easily lead to a poor purchase (and a waste of money), knowing the lingo is vital. Let’s take a look at six important pre-sale and sale terms that will get you started off on the right foot.
Conversations and casual exchanges often take place before the auction actually begins. Beyond the basic information (such as the vehicle’s make, model, and year), you may hear the following three terms being thrown around.
- Pre-bid: A pre-bid is exactly what it sounds like. If buyers are particularly interested in a certain car, truck, or other vehicle, they are allowed to place bids before it is auctioned live. As you can imagine, this has some adverse effects; pre-bids automatically raise the starting bid on a vehicle and, by extension, its final selling price. If you’re looking for something specific, however, pre-bids permit you to get in on the action to secure your place.
- Buy Now price: If you’re someone who positively loathes competition, auctions may still work for you. The Buy Now price — which has quickly become a favorite among car shoppers — establishes a base amount that auction houses are willing to accept. Generally speaking, the offer is valid until one hour before the auction begins, allowing people the opportunity to get precisely what vehicle they want, when they want it.
- Reserve Auction price: Sellers set a reserve price on vehicles that they hope will bring bidders desperate enough for ownership that they’ll pay the additional cost. If the auction ends without anyone meeting the reserve price, most sellers will provide a counteroffer; buyers can either agree to or reject this offer, which forces the seller to decide whether they want to accept, come to a new agreement, or re-enter the vehicle in another auction.
Even if you’ve never been to or experienced an auction, you’ll most likely recognize the next terms. They don’t require as much background knowledge as the previous three, but they’re good to know regardless.
- Winning bid: The winning bid is the price at which a vehicle on auction is actually sold for. To put things simply, the winning bid is the one that takes the car home. If your bid is the highest, you have officially become the proud new owner of a used vehicle!
- Documentation fee: Auto auctions aren’t free. It costs money to process a vehicle’s paperwork, proving that it is in safe, working condition and is registered to a legal owner. Though this fee tends to vary depending on what auction you’re attending, it is usually less than $100.
- Security deposit: Not many people can buy a car outright, even if they’re getting an affordable used car for just a few thousand dollars. As such, a security deposit is required; it ensures that the buyer will see the auction through. If they don’t, the security deposit covers the cost of any penalties so the dealership doesn’t lose money on the exchange. Most vehicle auction security deposits should cover one-tenth of the vehicle’s total cost.
Used car auctions can be remarkably profitable if you know what you’re doing. Since language has a lot (re: everything) to do with understanding, studying auction lingo is not a bad idea. Before you head to your next vehicle auction, make sure you do your homework; once you’re able to tackle the terminology, the rest will come naturally.