Is It a Bad Sign If a Used Car Was Sold at Auction?

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As Jalopnik’s resident car buying expert and professional car shopper, I get emails. Lots of emails. I’ve decided to pick a few questions and try to help out. This week we are discussing used cars that were sold at an auction, price changes based on credit score, and the dilemma between a generous buyback or keeping the car you love.

First up, is it a red flag if a used car was sold at auction?

“I’m currently shopping for a used BMW and I’m noticing that a lot of them were at one store then sent to an auction and picked up by a different store. I’m thinking something must be wrong with the car if the first dealer couldn’t sell it but it’s almost impossible to find a one-owner example. Is it a warning sign if a car was sold at an auction?”

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This is one of those common misconceptions that still persists. Just because a car was sold at an auction does not mean it is problematic. In fact, the vast majority of used cars move through auctions at least once.

There are a number of reasons why a dealer would have a car then send it to the auctions. Often, dealers will send out inexpensive cars to auctions rather than take up space on their lot that could have been occupied with a more attractive sale. Sometimes, good cars just sit for a while and rather than continue to pay for that car to be in the inventory, dealers will take their chances with an auction sale. Local markets and vehicle popularity have a lot to do with which cars will sell fast and which cars may move through the auction channels. In fact, many of your manufacturer certified pre-owned cars have been sold at auction at some point in time.

I would not stress about a car being sold at auction once. That being said, if you see a car with several auction sales that could be a red flag. I was recently shopping for a used M3 and there was a car in the Maryland area being sold at an independent used car lot that did not seem to be the most legit operation.

On the CarFax that M3 was taken in by two of the local BMW dealers then almost immediately tossed to the auctions and had a total of three auction sales on the history. A well sorted E92 M3 is a desirable car, but one that was beat on is going to have a hard time finding the right buyer. Reading between the lines, it seemed like both BMW dealers found something troubling about the car and decided to cut it loose.

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Next up, can a dealer chance the price due to the buyer’s credit score?

“My wife and I recently purchased a vehicle for my mother in law at a dealership. It was a Nissan dealership in SoCal. I saw an advertised price for a used 2017 Nissan Sentra at $12,750. I submitted one of those “click here for today’s pricing” forms and got an email form a sales rep quoting me at $12,650. When we got there and attempted to purchase the car, they said that the price I was quoted was for someone with over 750 credit and they could not sell us the car at that price. They suggested that we for opt for a lease on a 2019 Sentra and they can get us to the monthly payment we needed with rebates. The lease option is not one that my mother in law would be happy with so we opted for the purchase.

After 4+ hours at the dealership, We ended up purchasing the car for $13,400 because that is the price they can sell us that particular car for. Since our hearts were set on that car, and they had already run our credit and shopped our application to various banks (which caused numerous hits to our credit reports), we just had to suck it up and agree to that final price. Although my mother in law is over the moon with the new car, we feel like we got duped by the dealer.

My question is, can a dealership offer special pricing for vehicles based on a person’s credit or is the price that was quoted via email the price that they have to honor?”

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To answer your first question, I covered this topic in greater detail in a previous post but to summarize, an emailed quote is not a contract so the dealer is under no legal obligation to sell you that car for that price. Though not doing so is pretty slimy and I would have taken my business elsewhere.

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As for the credit score thing, this is a bit of a grey area since I don’t have access to the advertisement. If there is some fine print that discloses that said something along the lines of “customers must have a credit score of 750 or higher to qualify for online pricing” the dealer would technically be in the clear. However, if that was never disclosed there could be a case of false advertising and it may warrant a report to the FTC.

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What this situation illustrates once again is that you should always have a loan pre-approval lined up before you go to the dealership. Then when you contact the dealer about their car you request an itemized out the door price and make it clear that you will be using your own financing, which would essentially make this a “cash deal.” Then if the dealer plays games about their pricing over email, you can move on to another lead without wasting hours at the dealership.

Finally, VW is offering a pretty sweet buyback on my Golf R but I’m not sure if I should take it.

“My daily driver is a 2012 Volkswagen Golf R that I purchased with 10,900 miles on the clock in 2013. I was recently informed that my car is a pre-production vehicle that Volkswagen sold as CPO. Now my car is being recalled, Volkswagen is offering to buy back the vehicles impacted by this recall.

Anyway, Volkswagen’s repurchase offer is $18,400, which I was told is based on the NADA Clean Trade-In value with a very generous (low) mileage value. My car currently has just over 96,000 miles, so its NADA Clean Trade-In value is actually around $15,475.

So I need to decide whether to sell the car back to Volkswagen or not. On the one hand, VW is offering $3,000 more than what I could get for the car in the best-case scenario if I were to trade it in. Also, I feel like there will be higher maintenance costs in the near term / a higher probability for reliability issues on a 7 year old Volkswagen than if I purchased something new or slightly used. But on the other hand, I feel like there is some value in having a car that 1) I enjoy driving and 2) is paid off.

Do you have any thoughts? Am I overthinking this and should just take the $3,000+ premium on the car that Volkswagen is offering?”

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The first thing you need to weigh out is if you do keep the car how much longer do you plan on holding onto it? A 2012 Golf R could indeed get problematic in the near future, especially with almost 100,000 miles on it.

The other, perhaps more important factor here is that VW is actually giving you way more than you would have gotten otherwise on a trade in. Dealers almost never pay NADA values for used cars, that is the retail price, dealers buy things for wholesale price, which is going to be quite a bit less than that $15,475. Therefore your actual buyback premium is likely way more than $3,000.

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Unless you really love that car, I would take the buyout and find something else that you enjoy driving.

Got a car buying conundrum that you need some assistance with? Email me at tom.mcparland@jalopnik.com!

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About the author

Tom McParland

Tom is a contributing writer for Jalopnik and runs AutomatchConsulting.com. He saves people money and takes the hassle out of buying or leasing a car. (Facebook.com/AutomatchConsulting)