One of the hardest questions I have to answer: “When is it cheapest to buy at the auctions?” I often find good deals even in the most competitive times of the year. But if we’re really talking about ‘averages’, as in lowest residual values for used cars, I’d say that the period between late September and mid-November is the cheapest time at the auctions. No spending holidays for consumers. No tax refunds for the public to use as down payments. Even the weather’s a pain since fewer customers visit the lots when the cool season starts. Plus, most used car dealers buy with floorplans (a finance company’s money) which often have nasty clauses that exact fees within 30 to 90 days. So what should you do if the retail deal isn’t for you? To paraphrase baseball Hall of Famer Wee Willie Keeler, in order to find a good deal in this business you have to, “Hit em’ where they ain’t.”
The best deals in this business usually come when competition is constrained on several fronts. For example, I bought a mid-level 2004 Dodge Grand Caravan SE this past Thursday for $2200. The 101,000 miles on it kept the vehicle out of reach for all those dealers who depend on finance companies that have cutoff’s at the 80k or 100k mark. It was also bought at a public auction where dealers are fewer, and the opportunity to collude is greater.
The minivan in question also had a ‘check engine’ light which warded off those who justifiably are concerned about the possibility of replacing a Chrysler transmission. A simple diagnostic tool informed me of the vehicle’s need for a $15 thermostat. Before the sale started the battery was dead. I used my own mobile charger to jump it since the auctions rarely supply enough of these things. Finally, the vehicle was being sold ‘AS/IS’ which means that there was no guarantee regarding the vehicle’s powertrain at all.
In a crowd of about 100, the field essentially shrank down to 2. The auctioneer let the bottom fall out (lowered the price considerably to encourage more bidding) and seven bids later it was mine. Of course now I’ve got to sell the damn thing. But it’s far easier to sell a vehicle at two-third’s of average wholesale than to bid it up and hope for some finance fodder to come your way.
17 Comments on “Hammer Time: Hit ‘em Where They Ain’t...”
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The sept-nov time line makes sense. With new car sales waaaay down right now, what has that done to used car and truck prices. I have several ideas that counterdict each other. I can tell you really enjoy your work, keep writing.
Ouch $2200. We have a 2004 Dodge Grand Caravan SXT with 67k miles on it. I told my wife a few weeks ago with Chrysler going under we were keeping the van until it dies cause its not worth crap now. With that kind of depreciation (BTW I bought mine used before the Chysler death watches started!) we will definitely have to keep it until the wheels fall off. Been a good van so far though, can’t complain.
Steven- I always like reading your Hammer Time posts. What type of dealer are you? I see that you have a lot of stories about cars under 5 grand.
You made the right moves buying this van. You found a vehicle with obvious defects that you knew were easy to fix.
You sized up the crowd and held your bid for a car that couldn’t get a opening bid so that the auctioneer had to drop way down to get any bids.
You picked a vehicle with over 100k on it which a lot of people will not touch even though many cars today go to near 200k with out big repair bills. If the van lasted until 200K that would only be 2 cents/mile. If it doesn’t the price is low enough that the loss is small after its scrap value.
And you picked a good time to buy in mid winter. Spring is the worst time to buy used cars at auction in my opinion.
I think you will make a nice gain on this van.
My dad retired from a Lincoln/Mercury dealership after 32 years, and another thing to point out is that September is usually when the next model year’s cars come into the showroom that you can actually drive home. SO now that 2004 would be 5 years old, as compared to 4 (2009 models in 2008) lowering the price a bit more. You know, had you bought the 2004 back in September of LAST year.
I bought an identical van (there are a million out there) retail for $4K in the fall. It had 101K miles, but I bought it from a family that had taken great care of it (dealer service records) and kept it in the garage.
For a consumer like me, it was worth paying up a bit for the reassurance the car had been taken care of. Still cheap as hell compared to new, and it hasn’t given us trouble yet.
mfgreen40: The prices for older used cars is hitting the roof. In certain instances, I am actually wholesaling cars for more money that I can get for them retail. A lot of the rip-off used car ‘buy here / pay here’ dealerships and the seasonal visitors during tax season bid most of the auction vehicles up to ridiculous levels. Quick example, 2001 Ford Escort ZX2 with 90k miles sold for $3700 wholesale. That’s about a $2000 premium to what it would usually go for in the September to November time frame.
moawdtsi: I wouldn’t sweat it. Until hybrids and plug-in’s change the economics of ownership, there really is no reason to sell what you have. In fact, a lot of what’s being made now is made out of cheaper materials and lower standards… especially Chryslers.
97escort: Yep, I have someone coming this afternoon. If I don’t get my price, we’ll just be taking it to Florida for a Disney Cruise.
TEW: I primarily work the impound lots as an auctioneer during the afternoons. In the mornings I buy vehicles and retail them at a place that’s about three miles away from my home. I have a part-time helper who also gets a commission since I really hate spending time. Unless I need to fix something, collect money, or transport vehicles, I generally will not be there.
Everything I sold used to be north of five grand. But over the course of time, my sales have largely reflected the economics of the times. In October 2007, 15 out of 16 vehicles I sold were $3500 or less. Since then my ‘$5000 or less’ market has stayed right around 90%. Since Otober 2008 I also self-finance and that’s been going very well… for now.
SexCPotatoes: Good point. There is depreciation due to that issue. I still think that vehicles that are conservatively driven and well maintained are often not highly valued. A lot of folks simply buy with their eyes…. or buy based on the brand.
From my perspective, a car represents a ‘baseball team’ and the owner is the ‘pitcher’. One bad pitcher can singlehandedly destroy even the best teams in the league.
SherbornSean: I always tell people, “Your footwear is going to have a greater impact on your life than the car that you drive.” Dealers used to provide records for vehicles but with today’s privacy concerns, many of them do not. I often have to track down maintenance histories by calling dealerships and independent garages in order to get that information.
Since retiring I’m picking up a little car jockey work from some of the small dealers.Its dealers only at the car auctions I,ve been to so far, strictly enforced I’m learning a few things though.
Thanks for all the inside stuff Steven,and thank you TTAC for allowing Mr Lang to enlighten us all.
“From my perspective, a car represents a ‘baseball team’ and the owner is the ‘pitcher’. One bad pitcher can singlehandedly destroy even the best teams in the league.”
I like that analogy.
I think this underscores a bigger, more fundamental trend in the automobile purchasing arena. That is: I definitely believe we are in a mindshift where an increasing number of erstwhile new car buyers are saying “screw you, depreciation”, and recognizing what a good deal a used or CPO’d car can be.
In particular I think this is going to slaughter the luxury brands. Combined with the excellent CPO warranty you can get, the savings are outrageous right now. Case in point, I have a friend who swore he’d never buy used…until he came across a CPO’d 2007 BMW X3 for close to $15,000 off sticker. That, along with only 8,000 miles and the CPO warranty made it a no-brainer for him. He was completely prepared to buy a new one, but the discount was shockingly good.
Take a look at 2007 Audi A8s. Used and CPOd that can be found for $35,000 – $40,000 with less than 30,000 miles. Deal of the century, however, goes to the VW Phaeton. I just had a lead on one in Virginia – a 2005 W12 with under 26,000 miles and a CPO warranty for $32,000. This car was close to $112,000 new.
The deals to be had are fantastic and the savings are immense. In all but a few cases I have to wonder if I will ever want to buy new again (lest I come into a large sum of money). Some patience and willingness to compromise on things like color can yield massive savings.
One thing I’ve found…there’s an auction house just up the road a mile or two from me – in the Pacific Northwest – and I see a strong correlation of prices and attendance with weather. Go on a chilly, damp day to get the lowest price.
A friend of mine was a pro auctioneer – farms etc. – in Idaho for a few years but quit. He said his biggest problem was not being able to guarantee nice weather on auction day.
I do a lot of buying at auto auctions. Weather? I sit at my desk and click!
fincar1: “A friend of mine was a pro auctioneer – farms etc. … He said his biggest problem was not being able to guarantee nice weather on auction day.”
I’m not disputing this but the funny thing is I’ve heard just the opposite: that farm auctioneers like rainy days because farmers can’t work in the field so they go to the auction. Maybe Idahoans have better sense about coming in out of the rain.
I like to go to collectible and antique car auctions. Yesterday I was at the Leake auction in Oklahoma City. In such sales the cars aren’t commodity transportation but I suppose Steven Lang’s guidance on savvy buying still applies.
Thankfully, the bids were shown on TV displays. I think auctioneers don’t realize their patter can be unintelligible even though (or maybe because) it’s amplified to ear-damaging volume. Having two rings going makes it really bad. You’d think if they want to encourage bidding they’d call the bids out clearly.
In my business, rainy days virtually guarantee higher attendance. I have yet to see a bad day weather-wise that turned out to be a bad day at the block.
The online side of the business has gathered strength for nearly a decade now. I saw a LONG time ago that the market for auctioneers would be ever smaller as time wore on. That’s why I branched out to the dealer side of the business.
A knowledgeable dealer will usually make more money than an exceptional auctioneer. But the auctioneer usually has shorter hours and a lot less stress.
Mr. Lang,
I rarely post in reply to Hammer time articles – mainly I just don’t have much to say about them. I really enjoy them though.
LOL! Thanks! I think… I hope…
Steven- I love these articles. They are right up my alley. I just picked up a one owner 81,000 mile 1991 sentra se-r for $1750. It is going to make a good, fun, and thrifty daily driver for me.