Buying used cars at auction; Honda Civic LX

If you are in the market for a used car, don't overlook the auction market!

These days, most new car dealers don't hold on to their trade-in vehicles more than a few months, especially cars with higher mileage. By the time they invest the time and money (likely to be several hundred or into a thousand+ dollars in repairs and other things to make a used car "sale ready"), it's just cheaper for them to send it to auction. This is where most, ok all, used car dealers get the bulk of their inventory. Auction prices allow used car dealers to pick up those 100,000+ mile cars and many with less miles depending on the make and model, at prices that are low enough that if they themselves run a auto repair shop (or partner with one), can fix up the car, turn it around and still make a decent profit.

New car dealers simply do not want the trouble involved with fixing up a high mileage car and then dealing with potential headaches after reselling it.

That being said, there are plenty of cars with 150,000+ that still maintain a very good resale value. Toyota and Honda of course two of the best for keeping their values well into the high miles. Look up any 2001-2003 Honda Civic, Toyota Corolla, or even a Ford Focus with 150k+ miles on it on any of the popular used car inventory web sites, Autotrader, Cars.com, Kelly Blue Book, etc, and see for yourself!

No wait, I'm going to do it for you. I looked at all three, a 2003 Toyota Corolla with 129,699 miles, a 2001 Civic with 177,433 miles, and a 2000 Ford Focus with 159,659 miles. Comparing the Kelly Blue Book trade-in, private sale and *retail values for each of those vehicle with the price that the cars sold for at a recent auto auction out of Salem, NH.

For this article, I'll going to highlite the 2001 Honda Civic LX with 177,433 miles on it. It sold at auction for $3000.

I know what you're thinking, three grand! For a car with 177k miles on it, crazy. Until I searched Kelly Blue Book for the same model year Civic with similar mileage in my area (Boston area) in their used car inventory. I found a 2001 Honda Civic LX with 191,339 miles on it and the seller was asking $5,995. TIP: Usually when you see a price that ends in ",995" or ",999", it's a used car dealer. I decided to dig deeper at the KBB values for the Civic that sold at auction for $3000.

First some introduction in to how Kelly Blue Book, KBB, prices the vehicle(s) you are researching. To start, the prices are always based on "regional" data, and you are always asked to enter you zip code to start. For my purposes, I'm in Watertown, MA. So any comparison to vehicles searched on KBB using your zip code will most certainly result in something different. Also, KBB lets you look at vehicle prices in 3 categories. Suggested Retail Value, the price a "dealer" would put on the vehicle for sale, and is always listed at the "Excellent" condition price. A dealer would be expected to have invested time and money into the vehicle to make it sellable in KBB's Excellent category. You can also see the Private Party Values, the price an individual owner would ask for the vehicle. Then finally you can view the Trade In Values, which is the price you would expect a new car dealer to give an owner for the car as trade in for a new car. The Trade In Values lets us examine what the dealer that sent the car to auction may have paid for the car in trade.

Here is the Kelly Blue Book price breakdown for the 2001 Honda Civic LX with 177,433 that sold at auction on on 12/28/2011 for $3000^*.

KBB Suggested Retail Value: $5,662^*

KBB Private Party Values^*:
Excellent Condition: $4,262
Very Good Condition: $3,962
Good Condition: $3,837
Fair Condition: $3,137

KBB Trade In Values^*:
Excellent Condition: $2,837
Very Good Condition: $2,762
Good Condition: $2,462
Fair Condition: $1,837

If we go back to the used car dealer on KBB that has the 2001 Civic with 191k miles on it listed for $5,995. The dealer most likely bought that 2001 Civic LX at auction and my guess is they DID NOT pay more than $3000 for it. They are looking to resell it for nearly $6000. Worst case they find a buyer for the car at $5000.

So if after auction that high mileage Civic needed some TLC, and you know it did... maybe a new exhaust, brakes, tires, a good cleaning and detailing, etc., as long as they didn't get a complete junker, even if they drop $1000 into it, sell it for $5000, they make an easy $1000. In this tough market, I'm sure they'd take it.

Now if you were shopping locally for a similar 2001 Civic from a private seller using the newspaper, Craigslist, or whatever, let's see what you would expect to pay for it. KBB lists 2001 Civic LX with 177k miles on it for $4,262 in excellent condition, $3,962 in very good condition, $3,837 in good condition, and $3,137 in fair condition. So the $3000 auction price is still lower than all the private sale values.

If you were the seller of this Civic, and traded it on a new car, knowing car dealers as I do, they would very likely give you the trade-in value that is on the lower end of the KBB prices. So for discussion purposes, I would put a trade-in value of the 2001 Civic LX with 177k miles on it at around $2000. Which means the car dealer that sent the Civic to auction may very well have made $1000 at auction. Not a bad deal for them as well.

So here's my point, if you are in the market for a decent used car and your budget is in that $4000-$6000 range, don't overlook the auctions. That 2001 Civic with 177k miles on it, sold at auction for $3000 and even with $1500 more into it for TLC, at $4500 is still less than either what you would pay a private seller for the car, and at least $1000 less than you would pay for the car from a used car dealer. In both the private sale and used car dealer sale, there's a very good chance you'll find that you'll have to throw additional money at it for repairs as well.

Public auctions take place all over the country weekly if not daily. Though some states may require a used car dealer permit or some nonsense, there are some that do not. Most if not all allow you to browse the inventory either the day of the auction or days running up to it, so you'll get the opportunity to touch the car if you want. If you have the mechanical skills and the appropriate tools, and don't mind busting a knuckle or two, you can save a lot of money on any simple repairs the car might need. Or if you have a really good mechanic you know and trust, even if you drop several hundred more into the car, you will very likely still end up spending less than paying a seller's asking price on Autotrader or any of the other popular used car web sites.

With all the research tools available today online, CarFax history reports, make and model specs, pricing guides, owner reviews, recall information and technical service bulletins (TSB), etc, it's very easy to do the necessary due diligence even before you pack up and go to the auction to preview the car you are interested. You could even do it all from the comfort of your home, either online bidding or even using the phone. It really depends on how comfortable you are with the company running the auction and the car you are bidding on.

To wrap up, there are plenty of good cars at auction regardless of your budget. You can find what you are looking for and save a lot of money when buying at auction.

.rd

Article References

Interstate Public Auto Auction, Salem, NH

Kelly Blue Book

* Article publication date 01/12/2012, data collected from Interstate Public Auto Auction of New Hampshire and Kelly Blue Book between Dec 28 2011 and Jan 12, 2012. KBB and other pricing data subject to change.