Save Money! Use You Tax Refund to Buy a Car at Auction

In these tough economic times, buying a car with a large payment can be a daunting idea. But where can you purchase a reliable vehicle for under 1,000 dollars? The answer? Quit paying marked up prices at car lots and go where the choice is yours-- an auction. The following are examples of two different types of auctions you can attend to save big bucks.

When banks reposes cars they hire private companies to auction these cars (so they can recoup at least some of their money). These companies can be found with a little research (try typing auto auction in your favorite search engine). I found a company two hours away that holds weekly auctions every Saturday. Their site is well organized and beginning on Mondays you can see an upcoming list of all vehicles for sale, along with pictures and relevant information like year and mileage. There are a wide variety of vehicles from old to new (we once saw a brand new souped up H3). This particular company also incorporates monthly auctions for seized items from the US Marshall's which can include motorcycles, motorhomes, and boats.

Because this business is trying to make money for themselves, most will have some sort of fee to all buyers, charging a certain dollar amount based on the final bid price. For example, at the auction we attended, any car under $1,000 has a $150 fee added to the final price. To make money for the bank, some cars will have a reserve (a number the bank wants before they agree on the sale). This number is generally what was left owed on the vehicle or what the bank thinks the car is worth, but can still be thousands lower than at a car lot. Older vehicles will sell without a reserve and the highest bidder wins!

Prior to the auction, the cars will be open and can be inspected. Generally cars are driven in to the auction (or towed if necessary) so you can see (and hear) the vehicle in action. Two years ago we purchased a 1997 Ford Taurus for $900 (plus $150 in fees). The car needed new spark plugs (it was written on the windshield) which we bought at the local auto parts store and drove home. In the glove box was the last owners promissory note. She still owed over $2,000 on the car--twice as much as we paid for it!

Another auction type is you city's impound lot. (These can be found on your local city or county webpage). Cars that have excessive amounts of tickets will be impounded and towed to a lot where the owner can pay to release their vehicles. Some people can't afford or choose not to release their vehicles and those that have sat for a certain amount of days are sold in an auction (as often as once a month in my area).

Contrary to the private auctions, the government is not as interested in making money as they are in clearing out the property. There is no list of upcoming vehicles. You are able to inspect vehicles one hour prior to the auction. The cars are open but not cleaned (most are filled with trash or forgotten personal items. One truck had two lawn mowers in the bed, and one van looked like it was being slept in). The hoods can be raised to look over the engine, but the cars are never started since most of them don't even have keys. Remember, these cars were towed off the street in most cases. Because of this, these auctions are much more of a crap shoot since you don't really know what condition the vehicle may be in. However, the price generally reflects that gamble. Opening bid at the auction we attended was $250 and most every vehicle sold for under $1,000. The auction was quick (no stalling for new bidders trying to bump up the price). If we had been buying we could have gotten a 1999 Jeep Grand Cherokee (in NICE shape) $450! A large cargo van (at least $2,000 on craigslist) went for $850! Where else can you buy a vehicle for less than $1,000 bucks?

Another consideration at an impound lot is the title you receive. In Ohio, you receive what is called a "salvage title" meaning the original title is unavailable. Salvage titled vehicles can not be driven until after an inspection, so they must be towed from the impound lot. (Inspection fees in Ohio are $50). After a successful inspection, you receive a drivable title; however ,in Ohio your title will state "salvage- repaired" letting other potential buyers know the state of your vehicle (in case you had major repair work). Other states may have less stringent rules and may make the resell of these cheap vehicles much more feasible (think ebay!)

Also remember to research the amount of actual money needed at each individual auction. At the private auction, $200 in cash is deposited by each successfully winning bidder. The balance is due in 3 days in the form of a cashiers check. If you don't pay you lose your deposit and future bidding privileges. At the city auction the price is due in full in cash immediately after your winning bid. You then have 5 days to remove your vehicle.

Keeping these ideas in mind the next time you are car shopping could save you some big money! Good luck and Happy Bidding!