There comes a time when the prices for used cars at the auto auctions go the way of an exuberant bubble.

A small army of consumers get their tax refunds. The car lots wake up from their winter slumber, and values for vehicles go the netheregions of the human imagination.

I sell cars during this time, not buy them. In the last three months of every year I will usually buy a lot to avoid the tax time market prices. Sometimes as many as 12 vehicles in a day. But when tax season comes, I buy a chosen few and sell them by the dozen.

Then, after the buying frenzy begins to ever slowly ebb, there will be a welcome break in those hedonistic valuations. Where instead of winding up $1000 to $1500 behind the selling price, I wind up second to another bidder. Almost always to a guy who has been buying cars for a long time. Today was that day.

My first second was this 1991 Acura Integra. Now a lot of you folks will quickly realize that this vehicle is old enough to buy itself a drink, and you would be right. But age in a rust free climate that offers smooth roads is not that big of a deal.

The exterior? $260 paint job. The interior was presentable. A/C was fine. However the clutch was not shifting right, the big fartcan back muffler was a bit of a negative ding, and the hatch area had barely no semblance of the ultra-thin Acura fabric. The odometer showed 164k miles… which was probably inaccurate. I only bid up to $700 and watched a wholesaler outbid me at $750.

These sell quite well once they’re cleaned up. But I’m sure this one would have needed to be shucked to a paint shop, a mechanic shop, and an upholstery shop between the auction and the retail lot. Such time issues have a big hidden cost in our business and if you find another nasty surprise in that process, you can wind up ‘polishing a turd’. So this one simply went down the pipe.

Then we have the most heavily depreciate midsized car of the modern day. A Mitsubishi Galant. This 2009 model had 123,791 miles, and although the trunklid mentioned an ES trim level, apparently an ES in the rental happy Galant world only means alloy wheels as an option.

These lower trim vehicles usually sit at my lot for a bit. Cloth interiors. More than 120k… but an 09 model. I stopped bidding at $4900 for the sole reason that I usually can’t get the same margins with a higher cost vehicle with lower feature content. The final bid was $5000, and given that I already have several Tauruses and 3.5 Liter Intrepids that fit this bill at a far lower acquisiton cost, I can’t say I regret this decision.

Now this one was a gritting of the teeth moment. A 2007 GMC Canyon Work Truck with 111k and nothing too special about it. Except for the automatic. Late model, compact, automatic pickups are insanely easy to finance and this one had the added benefit of some paint transfer on the fenders that a less experienced buyer would falsely see as a permanent issue.

I bid up to $4500, and a friend of mine who buys up trucks was standing near me and bid $4600. I had to invoke King’s Rule and give him the favor of bowing out. In exchange for him looking out for me during the next go around. Hopefully that happens and I don’t wind up in a dogfight.

Finally we had the transportation equivalent of dog food go through the block. A 1999 Saturn SL. Based out. 5-speed. Perfect 35+ highway miles per gallon transportation for those folks who subscribe to the common practices of penny pinching and personal parsimony. I always have several of these on the road. Although the 5-speed is often a more challenging sale here in the Atlanta ex-urbs.

I showed a fist and held the bid at $1000. Waited for a few seconds. Then. Damn! Someone jumped in and I bid it up two more times before letting it go to some other nearby shadow for $1500. Typically I try to keep my costs under $2000 for a stickshift equipped basic vehicle, and this one would have likely cut it close once you added the buyers fee and the need for new rubber all the way around.

There was a ton of other stuff today. Fewer buyers came to the sale. But those who did show up bid all the money in the world. So if you’re in the market for a 1999 Lexus LS400 in clean condition and only 117k miles, you are looking at nearly $8000. Wholesale. If that sounds insane to you, just think about the financing terms that will be applied towards that vehicle. I’m seeing $1500 down. $80 a week for at least 36 months. Maybe even 48 months.

What percentage of new cars sold this year in the United States have European badges?

3%… 5% maybe? Not even close! Through September 2012 it stands at approximately 9.5%

The recent successes of VW, Audi and BMW/Mini are quite noteworthy. 10 years ago, European marketshare in the U.S. was only at 7.1%.

However this isn’t the entire story. Used European vehicles are often considered to be pricey to fix and expensive to own. At a recent sale in Atlanta this week the percentage of Euro vehicles was nowhere near 7%, or 9%.

It was over 23%.

VW 1.8 Liter engine with sludge issues? Present.

Audi in need of ride suspension elimination kit? Yeps!

Volvo with transmission issues. Audi with transmission issues. Saab with transmission issues. You.. bet… cha!

Out of 113 vehicles sold during the run, 27 of them were European… and metro-Atlanta tends not to be nearly as popular with European models as the folks up in the Northeast.  This auction may have been little more than a statistical quirk. But it was quite amusing to see.

There were also a few other surprises.

This 2002 Ford Focus SE wagon with 28,000 miles

And this 2004 Jaguar XJ8 with 181,000 miles.

Sold for nearly the same price. the Focus sold for $4600 (plus auction fee) while the Jag with the Tony the Tiger imprint on the steering wheel sold for all of $4800 (plus fee). No announcements for either of the two.

My beloved Tauruses continue to do well. A 2002 SES model with cloth and 79,000 miles sold for $3500, which happened to be the exact same price I sold a 2001 model with leather and 95,000 miles not too long ago.

Then there was the big kahuna. In this case it was a 2006 Land Rover Range Rover HSE (try to say that ten times really fast.) Two dealers got in a dogfight at around 18 grand and the final tally was $24,200. It had 109,754 miles and I hope the groom of this beastly bride will enjoy being married to it for quite a while. Either that or the Landy had a built in distillery in the back.

I managed to come in second a lot… which is fine. For the last couple of months I have been busy buying up whatever seems to be in decent in full knowledge that when tax season comes around, prices will go up, and quality will go way, way down.

One other thing. Convertibles. Why do some folks feel the need to trade-in their convertible during the mid to late fall? Dealers have to sit on that opportunity in most areas of the country which means the price you get will border on bupkis.

Observe…

2002 Jaguar XKR, no defect announcements, 106k, – $9800

2001 Saab 9-3 SE, Frame Damage, Non-visible, 128k – $2700

2001 Volvo C70 HT, (Tranny Needs Service, Prior Fleet, Frame Damage, Title Branded, Miles Exempt… but looked nice!), 109k- $1900

The last one sold to a guy know who liquidates vehicles at a public auction north of Atlanta. A couple of weeks ago he told me he sold 15 out of 20 at a nearby public sale, and I don’t doubt it. Every dealer has a niche. Although I never would have the stomach for something like that.

This auto auction was ground zero for the falling of the Euro… car. And guess who eventually pays for the bailout? On the cheap of course.

This market has ceased to make sense. 

$7300 (plus auction fee) for a 2003 Honda Accord EX coupe with 220k and a bad rear bumper.

$8800 (plus auction fee) for a 2003 Chevy Tahoe with 102k and scrapes along the side.

$23,800 (plus auction fee) for a 2003 Corvette Z06 with 16k and some really crappy plastic add-on’s.

Keep in mind that last price was well over two grand higher than on Ebay. Same miles. No Wal-Mart quality chrome add-on’s. No interior detail needed.

What the hell has happened to the car market?

Well I’ll tell you. The first two sold to a Middle East exporter who will no doubt roll back the miles in their time honored tradition. A lot of salvage cars also head over there (the United Arab Emirates in particular) where thousands of immigrants spend their days using the finest hammers and blunt tools to bend these vehicles back into shape.

I once saw a neat video about how all this is done. Courtesy of a million plus vehicle a year salvage auction company. The video highlighted dozens of East Asians and Africans pounding out old metal and switching out the electrics. Parts would already be put in the shipping containers along with the carcass of a vehicle and sent to rebuilders a half world away.

It was interesting. Especially to the auction’s investors. Junk cars do make money and do employ an awful lot of people the world over.  However getting that video for public consumption in North America was somewhere between verboten and fugheedaboutit! I never managed to get that video for TTAC.

I don’t know who bought the Corvette. The dealer may have already had a member of the general public wanting to buy the car for him, which is as common as kudzu these days.

At this particular sale I always see non-dealers walking around the cars. Dealer sales are in name only these days. Nearly everyone buys vehicles for the public. However this is the only sale I’ve been at where the public is literally swarming around the vehicles before the sale. As a guy who has to spend $10k+ every year as a dealer for the right to sell ‘cars’ of all things… I don’t see why we even bother with dealer licenses.

This business is not rocket science in theory. But it IS challenging in practice. The ‘education’ comes from losing money on cars you should have never bought in the first place. Most members of the public are clueless when it comes to these things, and when I see a piece of junk sold at the public auctions, it’s often times an individual with no experience bidding on it.

I believe in free markets though. At least when it comes to buying cars. So you want to buy at an auction? Go for it. 

Just remember that auto auctions are a lot like Wall Street. You will always be the last one to know when you have bought the wrong thing.

The BMW Z3. In my mind this model is the only convertible of the late-90’s that made the 2nd gen MX-5 seem… a bit plain. Even with a near 10k premium when it was released, this car was quite a hot commodity for those willing to pay for the privelege.

But what if we could turn back time just a bit? What if right now I could get you a forest green 1997 BMW Z3 with the 1.9L four cylinder, all the options and only 21,000 miles on it? Would you be willing to pay.. say… $10,000+? Well guess what…

Someone did just that. Even though that was about two to three grand more than what Ed would have paid, I still think it was a reasonable proposition. A third of the price for 85+% of it’s lifecycle is the exact type of bargain I would usually seek if I were an owner instead of the dealer. .

Unfortunately the guy selling it will likely want at least 12 grand for it on Ebay. Throw in the auction fee and transport… and $10,500 will be the amount he has in it even before changing the four rotting tires and giving it a tune-up.

Today’s buys included the following…

2010 Toyota Prius 50k (Frame Damage) :  $17,300

2009 Dodge Caliber SXT (92k, Auto, Alloy) $ 7,500

2003 Infiniti FX35 123k (Leather, 4WD):      $12,300

1998 Lexus LS400 165k (White, Fleet)       $ 6,600

1998 Volvo S70 (5-speed, Base, White)     $1,515

1997 Lincoln Town Car 59k (INOP, Needs Paint)            $ 700

I’ll leave it up to the Best & Brightest to figure out which one of these six I bought. I’ll give you a hint. It wasn’t a home run by any means. Given that there were 95 dealers looking at the exact same vehicles at the same time, the opportunity for a grand slam today just wasn’t there.