New Or Used? : Try To Hit Em' Where They Ain't

Hi Steve,

I have been trying to find a Lexus GX470 for several months now. Either a 2012 or a 2013.

What I have found is that these vehicles simply don’t exist here in Tennessee.

I have gone through every Lexus dealer in the state, along with a few others that are out of state. I can’t find a GX anywhere.

So I thought that maybe I should try to look at a Toyota Sequoia, or maybe even a Toyota Tundra instead. I have found a few of these vehicles at the dealerships, but the prices are stupid high, and I just can’t justify paying what they want me to pay.

I am a cash customer, and I don’t think I’m too picky when it comes to cars. What I wanted to ask you is whether you can actually find a good deal on a late model GX at the auctions.

Steve Says:

No.

As of today there isn’t a single 2012 or 2013 Lexus GX that is listed for sale at the dealer auctions, and there are several reasons for that.

First, no new car dealership is going to get rid of a popular car that they can sell for a very stiff price premium.

That Lexus GX470 that goes off-lease is going to be looked at online by every Lexus dealer in the region before it ever winds up at the auction. If that popular SUV is even in lousy shape, they will still buy it.

When it comes to the most popular vehicles, those new car dealerships are in the pole position to make a strong profit thanks to CPO programs, today’s lenient sub-prime financing policies, and the salient fact that nearly everyone looking for a late model Lexus will shop the dealer first.

And it gets even worse for the cash customer. Certain vehicles, such as that Lexus GX and the Toyota Land Cruiser, are extremely popular overseas. Even if that off-lease vehicle looks like it got into a fight, and lost, any new car franchisee who has decent relations with wholesalers will make arrangements to flip that vehicle in very short order and get it sold to an exporter.

So the question now becomes, “Are there other avenues to buy a popular late model vehicle at the auctions?”

The answer is, yes. There are three opportunities.

The first are repossessions. Toyota Motor Credit and other financial institutions that specialize in primarily serving one manufacturer tend to give new car dealers the priority. They will even have “closed auctions” where only new car dealers for that particular brand will be allowed to bid on those vehicles. However, large independent banks such as Citibank Financial and Capital One offer their repossessions to all dealers at the auctions, and this is also true for many smaller banks and finance companies as well.

Second are traded-in vehicles. You are not likely to find many late models traded-in these days. But sometimes you get lucky and either find that needle in the haystack. That needle you find though is usually not a popular one. You are far more likely to find a tough to sell vehicle in this situation, but there will be some breathing room over the wholesale versus the retail price.

Finally, you have wrecked vehicles. Virtually every vehicle that is totaled out and has some value to it will wind up at a salvage auction. Exporters tend to be a very strong presence at these sales because the cost for overseas labor is a very small fraction of what it is here in the United States. These vehicles will be purchased, put in containers with whatever parts are needed to semi-accurately repair these vehicles, and they will be sent abroad where less costly labor will help put the vehicle back together. The North American market has become a hotbed for this type of activity thanks to the high content (features and options) of vehicles available here versus those vehicles in developing markets.

The key to getting a good deal at the auctions is to, “Hit em’ where they ain’t”. A high end Lexus or Toyota SUV is not where you’ll find that opportunity. Unpopular vehicles though can often have a healthy 20% to 35 % discount from the retail environment, but that’s not taking into account transport, reconditioning costs, and the substantial overhead of actually operating a car dealership.

So you want a good cheap vehicle at an auction? Go for an unpopular and well-made one. Think less about a loaded Toyota Sienna or Honda Odyssey, and more about a Mazda 5 or Nissan Quest. The Mazda 3 is super-expensive. A Dodge Dart? Not so much. Hope this helps.

Steve Lang can always be contacted at steve.lang@thetruthaboutcars.com