Why I avoid dealer cars at salvage auto auctions, and why you should too
Last edit: March 14 2024 • 814 view
Read time: 9 minutes
TL/DR
Dealer or public cars at salvage auto auctions will cause you a lot of headaches. About 99% of them having potential issues. You might encounter problems such as a dead engine, broken transmission, missing airbags or expensive computer parts, frame damage, and many other hidden damages. It’s best to avoid them. Use the Seller feature available at CARS4.BID to identify the seller. Also avoid any seller besides ‘Insurance’, check VIN.DOCTOR, and conduct thorough research in my 5 steps.
Introduction
Hello, everyone! My name is Andrew Ivanov, known as Autohacker, and my mission is to build the friendliest platform for public buyers to shop for salvage cars at auctions. I do this through an easy-to-use website, CARS4.BID. CARS4.BID is a platform where public buyers can buy vehicles at salvage auto auctions, which were previously only available to car dealers. This access comes with the responsibility of being experienced enough to buy at salvage auto auctions. Great savings come with risk. I try to mitigate it by sharing my knowledge through my free courses, YouTube videos, and Facebook community. Today, I want to address the biggest issue I see newcomers facing at auctions. They purchase dealer cars at salvage auto auctions expecting great savings with no consequences. Let’s see why I avoid dealer cars at salvage auto auctions and why you should too.
Negative feedbacks from newcomers
I strive to make your experience buying cars as salvage auto auctions as pleasant as possible. It is disappointing to receive messages like this from our customers:
“DO NOT DEAL WITH THIS COMPANY; REFUND ME MY MONEY. NIGHTMARE EXPERIENCE.”
Unfortunately, customers who purchase these cars often neglect my free course. They fail to conduct proper research, and even overlook the car descriptions. Some cars have engine running videos where you can hear the “knock, knock, knock”. Guys, seriously?! Not watching them?!
Regrettably, they do not read this blog as well, but they are quick to act by calling their lawyers. If I were paid $1 for each instance I heard it, I’d already be a multi-millionaire. Jokes aside, let’s determine the main reason why these vehicles failed to deliver on their promise.
Who is the seller?
Check who sells the car for the first negative review I got, the Seller is Public consignment, meaning a regular private person sells the car at Copart.
Check who sells the car for the second negative review, the Seller is ‘Not Insurance’. In 99% this is a dealer owned car. We show ‘Not Insurance’ for IAAI auctions and ‘Dealer’ for cars at Copart.
Do you see the problem already?
Both vehicles were sold by a party other than insurance company.
“So, what’s wrong with these cars at auctions? Why should I hunt for cars that Seller is Insurance company” – I got these question very often.
There is a saying among seasoned car dealers: “Not every car at the auction is bad, but every bad car goes to the auction.” I will explain this shortly or you got an idea already, right?!
Business model of salvage auto auctions
You see, the original business plan of salvage auto auctions was pretty simple: sell insurance-owned vehicles to car dealers through a broker auction that connects sellers (insurance companies) and buyers (car dealers/dismantlers). Insurance companies get their money quickly, dealers/dismantlers acquire new cars as inventory, and auto auctions earn commission based on transactions. It’s a WIN-WIN-WIN for all parties.
Initially, the public was not allowed at auto auctions because, as I already said, salvage cars carry risks!
Parties involved
The sellers are insurance companies. They are the source of salvage cars that come from accidents, theft recoveries, floods, and other damages.
The buyers are car dealers, dismantlers, exporters. These are the businesses that understand the risk of buying salvage cars and know what to do with this inventory.
For many years, car dealers experienced in body works and mechanics would buy cars from salvage auctions, fix them properly, pass inspection, and sell them to the public.
When Copart and IAAI went online (circa 2000s), they became accessible to public buyers as well in some states. These public buyers saw the opportunity to purchase and save a significant amount of money on damaged cars. Although most inventory still required a dealer’s license to buy, public buyers would often find a local car dealer who could act as a broker facilitating the purchase and handling the paperwork.
As a car dealer myself, I was approached by many public buyers back in 2007-2008 to buy salvage auction cars. It gave me the idea to start a broker business. I founded CARSFROMWEST.com, which has exported over 15,000 cars since 2007, and later evolved into CARS4.BID, offering services in the USA.
‘Staged cars’ business model
With public accessibility to salvage auto auctions came another business model that benefited only the seller and the salvage auto auctions, leaving the buyer at a loss. The business model involves purchasing badly damaged cars, poorly repairing them, making them look appealing in photos, and reselling them at the auction with no warranty.
As you may know or have just learned, every car sold at Copart, IAAI, or any broker platform comes with no warranty. Cars are sold AS IS WHERE IS, giving the seller the advantage to get rid off bad vehicles.
Who sells these poor-quality cars? Car dealers, mostly. Insurance companies typically have no interest in scamming buyers, as it’s not their business model. It’s worth noting that Copart and IAAI do not disclose the sellers of the cars (this raises a question as to why). It leads many buyers to mistakenly believe that IAAI, which stands for Insurance Auto Auctions, only sells insurance-owned vehicles. However, that’s not the case; it’s just the name of the auction.
Therefore, I take pride in the Seller feature at CARS4.BID that reveals who the seller is. It has helped numerous customers of mine avoid making bad car purchases.
Why dealer cars are bad?
“Not every car at the auction is bad, but every bad car goes to the auction.”
Every bad car, whether from the public or dealers, ends up at the auction! The main issues I’ve seen with dealer-owned cars are:
- Engine problems: Repairs are too expensive, so the seller brings it to auction to sell quickly.
- Transmission problems: Similar situation. Repairs are too expensive, so it’s better to get rid of the car than to fix it.
- Frame damage: Poor repair work poses safety issues for the driver and passengers. I believe such negligence should result in jail time. Check out the video below. I inspected a Toyota Highlander with a clean title at Copart, which had major side damage and was not properly repaired.
- Missing airbags, removed seat belts, and a trashed airbag module are issues not visible to the naked eye in photos, but they are expensive to fix.
- Missing catalytic converter. If only catalytic converter is missing, you might be lucky, but usually, it comes with additional issues. You can read about who steals catalytic converters here.
- Missing expensive computer parts: Dealers buy cars to source expensive parts for their project cars instead of purchasing individual parts. Once they strip the car, they sell it to get their money back. The buyer has no idea what parts are missing until they start diagnosing the problem.
My story
I learned this the hard way from my own experience. I purchased a 2003 Toyota Celica back in 2006 from Copart. It looked good in photos – no visible damage, just minor dents and scratches. However, when I received it, I found lots of issues. It had missing airbags (only covers present), a broken transmission, a broken A/C condenser, many broken plastic parts in the engine compartment, and so on.
I spent countless hours fixing it, repainting it, and in the end, when I sold it, I lost $3,500. That amount was equivalent to six months’ rent for me back then, and I was extremely stressed about it. Honestly, I didn’t sleep well during that time. I was upset, stressed, and frustrated, and I thought my car hobby was over.
But if that had not happened to me, I would not have become an Autohacker I am today. The pain caused me to fight the injustice, reveal my secrets in my free course that over 50,000 people have taken, and at the same time, allowed my business to grow by selling over 15,000 cars in the last 6 years.
That’s why I fight against dealer-owned cars at salvage auto auctions! Not all dealer-owned cars are bad. There might be some good cars owned by dealers, as explained here, but you need to be highly experienced enough to identify them. To avoid any unpleasant experiences, I would avoid dealer-owned cars altogether. Yes, even if they are labeled as “Run and Drive” and “No Damages.” It’s a trap.
CARS4.BID assists you further by providing a free preview of VIN.DOCTOR report. It is a VIN report that gathers information from NMVTIS (National Motor Vehicle Title Information System) and salvage auctions. It allows you to see how many times the dealer-owned car was for sale, and even the original condition of the car.
‘Staged car’ example
For instance, consider a 2020 Ford Expedition for sale by a dealer:
It has been at the auction 14 times. Free preview from VIN.DOCTOR is right there on the car’s page:
When I ran VIN.DOCTOR, it showed me the car’s original purchase condition:
Would I bid on this vehicle after seeing these conditions? Of course not, but we still have a customer who placed bid on it:
They don’t do any research or spend a few dollars to run VIN.DOCTOR. Instead, they buy a bad car at the auction and later threaten me with lawsuits. Go ahead, folks, I have lawyers on payroll who need to feed their families who are ready. lol.
But seriously, I’d like to avoid situations like that. And it is impossible on our end to check every car bid. CARS4.BID is a platform, where we provide all tools necessary to make educated decision. It is only the lack of effort on customer’s end is the fault here.
Please do your homework! If you’re reading this article – kudos to you. You are part of an elite club of 1% of salvage car buyers who do proper research before buying cars.
Overview
Dealer or public cars at salvage auto auctions will likely cause you a lot of headaches. About 99% of them having potential issues. You might encounter problems such as a dead engine, broken transmission, missing airbags, expensive computer parts, frame damage, and many other hidden damages. It’s best to avoid them. Use the Seller feature available at CARS4.BID to identify the seller. Check VIN.DOCTOR, and conduct thorough research as I explained here.
Facebook community
The best way to master it and avoid mistakes at salvage auto auctions is by joining my free Autohacker’s facebook community. You gain access to the best supportive community out there with 1000+ members and you get my free mini-course that can make you a PRO salvage buyer within one hour.
