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Should independent dealers purchase from salvage auto auctions?

Salvage auto auction inventory

For some independent auto dealers, the prospect of purchasing inventory from salvage auto auctions can be worrisome. Will every vehicle be wrecked, damaged or inoperable? How long will it take to recondition the vehicles and get them lot-ready? Will floorplan financing (also known as “floor plan financing”) be a viable option outside of a traditional physical auction?

The good news is that, just like a traditional auction, salvage auctions are tremendous places to find great auto inventory for your dealership. You just need to know where to look.

There are a few great options that operate local auctions nationwide. One is Insurance Auto Auctions (IAA), a digital marketplace with over 210 facilities across the United States, Canada, and the United Kingdom that provides buyers with a wide variety of inventory and bidding and buying channels alike. Additionally, Copart operates over 200 locations in 11 different countries, with over 175,000 vehicles total up for auction daily.

Let’s talk a bit more about IAA and Copart’s salvage auctions specifically, and see what they look like.

Where is the inventory sourced from, and what kinds of vehicles are available?

Salvage auto inventory comes from a wide range of sources, and includes practically any kind of vehicle you could imagine. For example, IAA offers a healthy mix of dealer trade-ins, fleet-leased vehicles, recovered theft, collision-damaged units, and total loss vehicles. Copart’s salvage selection ranges from cars with relatively minor damage to vehicles needing more significant repairs to get lot-ready, as well as a selection of clean title units.

These vehicles come from a variety of sellers. Copart has over 140 exclusive national agreements from suppliers worldwide, including dealers, dismantlers, insurance companies, financial institutions, fleet operators like rental car companies, and charities.

What buyers shop at salvage auto auctions?

For IAA, buyers at auction tend to fit into one of four categories.

Auto dealers

Independent auto dealers can find great inventory options at salvage auctions. Salvage is a particularly good option for dealers who have the ability to recondition vehicles on site to get them lot-ready, or for dealers who have a good relationship with an independent shop that can get the work done well and quickly.

Auto rebuilders

If a vehicle is more heavily damaged, it may not be worth the investment for a typical dealer. But a specialist in reconstruction and vehicle rehab can be better suited to prepare a vehicle for its next life stage, whether that’s selling to an independent dealer or directly to an end customer.

Dismantlers and recyclers

As we’ve discussed, many of the vehicles sold at salvage auto auctions are in relatively good condition—or just good condition altogether. But obviously that is not always the case. That doesn’t mean the vehicles that come through in a bit worse condition won’t sell, though—for dismantlers and recyclers, a vehicle might be worth it for the value of its remaining parts, or even simply for scrap metal.

DIYers and auto enthusiasts

Finally, individuals looking for a specific vehicle or a rebuild challenge can find both selection and value at a salvage auction. Many auctions only admit licensed dealers, but through IAA individual buyers can register to purchase at auctions that are open to the public. Some states don’t permit public buying—in those, you can find a broker to purchase on your behalf.

Are vehicles from salvage auctions a good value for dealers?

As with anything, whether or not independent auto dealers can find the deals that they want depends on a lot of factors—but yes, a salvage auction is a great source of inventory for dealers. Just like any whole car auction, the market value of each vehicle is determined on the day of the auction, as buyers bid and compete with each other. But the variety of available units provides an opportunity to expand a dealership’s inventory, and smart bidding provides an opportunity for tremendous ROI.

Plenty of the available vehicles can be easily reconditioned to a buy-and-drive standard—which means that if your dealership is positioned to fix minor damage, you can acquire a vehicle at a lower price point that you can still move with a rapid turn time.

Are clean and clear title vehicles available at salvage auctions?

Yes, you can find clean title vehicles at salvage auctions, although they are not in the majority. Copart notes that “some consumers” sell clean title vehicles through them, and in the past up to 20% of the vehicles sold through IAA were clear or clean title vehicles. This will always fluctuate, though, and if you are looking specifically for this kind of inventory, there are other inventory sources you might pursue first.

How does a dealer pay for vehicles at a salvage auction?

There are a number of options available, just like any auto auction. For Copart members, payment options include wire transfers, credit/debit cards, and Western Union & MoneyGram. Many salvage auto auctions also allow purchasing dealers to use third-party lines of credit like floorplan financing.

Don’t overlook salvage as an auto inventory source

While every auto dealer has their own go-to sources for inventory, it can be useful to change things up to provide your customers with more variety. If you know where to look, you can find tremendous value at salvage auction sales. Don’t write them off!

Disclaimer: Use of auction sources is subject to third-party agreements. AFC does not guarantee the ability to use any auctions and examples are for illustrative purposes only. Dealers should consult their own advisors to make independent business decisions regarding inventory sources.