AAAuto
CONTENTS
Introduction
Chapter 1 Tips From the Pros
Section 1.1 Legally Buy Salvage Vehicles for Pennies on the Dollar
Section 1.2 Advanced Tips to Get Salvage Vehicles Cheap
Section 1.3 Common Pitfalls That Leave Buyers in a BAD Place
Section 1.4 Advanced Buying Tips and Guide
Section 1.5 Tips on the Buying Process
Section 1.6 Avoid Bidding Wars
Chapter 2 Frequently Asked Questions
Chapter 3 About Salvage Auctions
Section 3.1 Salvage Auction Overview
Section 3.2 Deposit, Fees, and Relisting
Section 3.3 Bidding
Section 3.4 Salvage Auction Disclaimers
Chapter 4 About Titles
Section 4.1 Title Overview
Section 4.2 Clean and Salvage Titles
Section 4.3 How to Revive a Salvage Vehicle to Street Legal
Section 4.4 Registration/ Documentation
Chapter 5 Doing Your Homework
Section 5.1 Research
Section 5.2 Inspection
Section 5.3 Searching for a Specific Vehicle
Section 5.4 The Auction Vehicle Page
Chapter 6 After the Sale
Section 6.1 Post Sale
Section 6.2 Flipping Vehicles
Section 6.3 Transporting Vehicles
Chapter 7 When Things Go South
Section 7.1 The Perfect Storm
Section 7.2 Disputes and Obamacare
Chapter 8 Brokers
Section 8.1 Choosing a Broker
Section 8.2 About Us
Introduction
I’ve been around cars and motorcycles most of my life.
30 years ago I started fixing cars for friends and locals
and eventually opened a shop in Homewood, California,
specializing in Subarus and Vw’s.
During the next 12 years of running the shop, I also got a California
Dealers License and Brake and Lamp Inspector’s license. That’s when I began
buying salvage cars and rebuilding them. Pretty soon afterwards I realized I enjoyed
rebuilding my own cars better than fixing other people’s cars. So I closed the shop to
concentrate all my attention on buying and rebuilding.
For the twenty years that followed I was a salvage auction buyer. I found good deals
on cars, motorcycles, and travel trailers and fixed them up for a profit. This was a very
satisfying way to make a living. I got to be my own boss, I got to choose the type of
vehicle, the type of repair, the costs involved, and I was 100% in control. If I did a
good job I’d pat myself on the back. If not, I had no one else to blame.
But I didn’t have anyone around to help me either. And that’s one of the reasons I
decided to become a broker. I’m one of the most experienced out there, and am
well qualified to help you buy cars from salvage auctions. I don’t want you making
the same mistakes that I’ve made in the past. It’s very important to know about the
potential pitfalls in this business. I can help lower your risk and teach you the “tricks of
the trade”. It’s your hard earned money you’re investing and I don’t want you to lose it!
But don’t worry - major problems are rare. They’re normally caused by lack of
knowledge on the part of the bidder. These salvage and clean title vehicles can be
great deals, and you can save thousands of dollars on many of them. But you have
to know what you’re doing. That’s my job and I’m here to help.
Larry Hall
TIPS FROM THE
PROS
Chapter 1
SECTION 1.1 LEGALLY BUY SALVAGE VEHICLES FOR PENNIES ON THE
DOLLAR
Insurance companies are sending vehicles to salvage auctions in
record numbers. With the new auction broker programs, the general
public can now bid at salvage auctions and buy vehicles for pennies
on the dollar.
Most states require a dealer’s license to bid at a salvage auction.
Hiring a salvage auction dealer-broker allows you to bid just like a
dealer. AAAuto.com and A&A Truckee Tahoe have sold over 4000
cars as a salvage auctiondealer-broker. With our e-Book, website
(www.aaauto.com), and tutorials we will teach you how tobecome
an informed bidder. Buying from a salvage auction can be risky if you
do not know what youare doing. We will teach you how to lower your
risks and purchase a vehicle for pennies on the dollar.
SECTION 1.2 ADVANCED TIPS TO GET SALVAGE VEHICLES CHEAP (And
the 3 Things you Must Avoid)
TIPS
1. A salvage vehicle with a “Theft Recovery” designation can be
one of the best deals on a salvage title car with little or no damage.
Insurance companies don’t want to take a chance on a car that
has been stolen, and not knowing what happened to it, would just as
soon send it to auction. A thorough pre-bid inspection will give you a
good idea on the cars condition.
2. Many individuals and companies that do well flipping salvage
vehicles are in the niche markets. This includes boats, motorcycles,
RV’s, ATV’s, snowmobiles, tractor trailers, and travel trailers.
3. To get the cheapest price on a car, you may have to bid on a
few cars to win one at the right price. Most professional bidders only
win one out of three or four cars that they bid on. Every car sold at
auction is not a great deal. There are bidders that will overpay on a
car and there’s nothing you can do about it. You just go on to the
next car. If you win every car that you bid on, you’re probably paying
too much.
4. An excellent website for obtaining used car parts is car-parts.com.
It is a huge group of dismantlers all over the U.S., and has a great
search engine.
5. If you have a transporter picking up the car, you might offer him
an extra $20 to walk around the car and check for new damage or
missing parts. Once the car leaves the auction parking lot, all bets
are off. I have seen parts stolen off cars and new damage done to
the car inside the yard after the sale. If you are not there to catch it
when they bring the car out to load, and the car leaves the parking
lot, your’re out of luck.
AVOID
1. A vehicle that shows up either on a history report or the auction’s
vehicle page as being resold multiple times should send up red
flags. Uninformed bidders that don’t inspect the car or know what
they’re doing may end up with a piece of junk and send it right back
to auction. Also, some cars may have hidden damage or internal
problems that aren’t immediately noticeable.
2. A vehicle with a salvage title sold by an insurance company can
often be safer than a clean title vehicle sold by a body/repair shop or
individual. The insurance companies present the cars pretty honestly.
Some of the worst fraudulent cars I have seen have been sold by
shops and individuals.
3. Beware of getting into a bidding war on the Virtual Live Auctions.
It’s easy to get caught up in the excitement of the auction, and you
can end up over-paying for the car. That doesn’t happen with a
Preliminary or Proxy bid. These bad issues are rare, but always do your
homework.
SECTION 1.3 COMMON PITFALLS THAT LEAVE BUYERS IN A BAD PLACE
1. You don’t inspect the car.
2. You assume the information on the auctions vehicle page is
complete and correct.
3. You don’t know what “Run and Drive” means.
4. You assume that if you or the auction makes a mistake that the
auction will work with you.
5. You assume that the car is so cheap that you can’t lose.
SECTION 1.4 ADVANCED BUYING TIPS AND GUIDE
10 Step Advanced Copart Salvage Vehicle Buying Guide
20 years worth of advanced tips that can help you succeed and
save your hide
1. There are tips to choosing and inspector. Call two or three and
see if they sound professional. Ask them how much they charge and
what is their experience? A former body shop or mechanical shop
owner would be good. Ask them if they are just going to answer your
questions on the phone or write you a report with pictures. Most of
them don’t do that, but it’s lets them know you want a good thorough
inspection.
You should write your questions down so you don’t forget them. Once
he hangs up- he’s gone. Also you could ask if you can email him your
questions so he can go over them at the car BEFORE he calls you.
2. Do not rely on just the vehicle pictures and damage description.
Always inspect the car yourself, or hire an inspector. Remember,
even if the auction discloses the car incorrectly, they will defer to their
legal mumbo jumbo …..” information is for convenience only…”.
Literally telling you not to rely on the information on their website.
3. If you really, really want to win a specific car, you are better off
doing a Preliminary bid. With this type of bid you do not risk the
chance of a technical problem occurring during the virtual live
auction.
If your internet went down, or you have a computer glitch, you
wouldn’t even get a shot at the car. This won’t happen with a
Preliminary Bid.
4. Be proactive on you transportation especially if the auction is a
long ways away. Unless you are going to do a long haul yourself,
you should be ready to pull the trigger on your transporting as soon
as you win the vehicle. If you are putting your transport bid out on
the web with Uship.com, then you should do it 5-7 days before the
auction. That way you will get a lot of hits on the proposal, and
hopefully get a cheap one. Your goal is to find a driver that is taking
a route near your pick up and delivery points, and doesn’t have to
drive far off his route. You can also search Google like “Auto Transport
from Northern California to Southern California”.
5. There are certain damage types that can be super risky. One
is “Undercarriage”. This could run from minor scratches to holes in
the engine or trans, or even a bent frame and damage steering/
suspension components. “Previous Repair” should also send up
red flags. The repair could be major or minor or incorrectly done.
Sometimes insurance companies will reject the repair. “Mechanical
Damage” is a nebulous term and could be anything. Although
“Flood” or “Water” damage can be an easy and profitable fix (see
below), electrical problems can start occurring from corrosion many
months down the road. Buying cars with these damage types can
still be acceptable, but only if you know the exact damage from a
thorough pre-bid inspection.
6. “Flood” or “Water Damage” vehicles can be a good buy, but
only under certain conditions. Normally repairing these cars does
not take a lot of technical skills or knowledge. I have seen RV’s with
just a wet carpet sell for dirt cheap under “Water Damage”. But for
most cars you first need to check how high the water got inside the
car. Check for the water line in the passenger front foot well. If it’s
just a few inches above the floor you’re probably OK. What you don’t
want is water up in the dash. Pass on any vehicle that has a high
water line, especially salt water. The electrical nightmare could go
on for years. Check the engine and trans for oil for water. Use ACF 50
spray on all electrical connections. If the electrical and mechanical
systems look OK, then your main challenge is to clean and “sterilize”
the car. Pull the seats out, remove the carpet and carpet backing.
Pressure wash the carpet and replace the carpet backing.
Sometimes on these flood cars the auction will leave the windows up
and the whole inside of the car will be fogged up with moisture. It’s
more than likely these cars will have bacteria or fungus growing and
will smell. The trick to fix this is, after you have pulled the seats and
carpet/carpet backing out, you can tape a small ozone generator in
one of the windows and run it for an hour or so. You can also run the
heater or AC with this to clean everything in the dash vents.
7. When inspecting a “Run and Drive” car, before starting the engine,
turn the key to “ON” and check for all dash lights. I have seen
fraudulent sellers remove the dash light bulbs to cover a problem
up. I had a missing “Check Engine” dash bulb that was pulled out
and was told the car wouldn’t smog because of it. I replaced the
bulb and sure enough there were codes that had to be repaired.
Also had a bidder that found out the rear curtain airbags had blown.
The seller had cut the bags out and replaced the covers and pulled
the “Air Bag” bulb out of the dash. So make sure the “Check Engine”,
“Air Bag”, “Anti Lock Brake”, “Alternator”, “Oil Pressure”, and any other
dash lights come on in the key “Start” position, then go off when the
engine starts.
8. The “Run and Drive” designation has burned more bidders that
any other term. Run and Drive sounds like you can get in the car and
drive it home. That’s what it sounds like, but that’s not what it means.
“Run and Drive” means that the auction say when the car arrived at
the auction yard it would start, idle, and pull forward a few feet under
it’s own power. Now this doesn’t mean that engine doesn’t sound
like a bucket of bolts, is puking oil, and has a rod knock. The engine
is garbage, but it starts and idles, so it’s “Run and Drive”. And just
because the transmission goes into gear and the car moves forward,
doesn’t guarantee the transmission is good. And to top it off the
auction will not guarantee that the engine will even start when you
come to pick it up. This should tell you how important it is to inspect
a “Run and Drive” vehicle, as you can ask the auction to bring the
keys out and start the engine.
9. Never bid on a vehicle with a “Future” sale date. The auctions
should not even allow this. Your money could be tied up for months
and there is no way to get out of the bid. .
10. Study the information on the broker’s web site carefully. We have
audio tutorials, videos, and documents that are worth gold to the
prospective bidder. This is the type of venue where one mistake can
cost you thousands of dollars. Do your homework. These night mare
issues are rare, but always do your homework.
SECTION 1.5 TIPS ON THE BUYING PROCESS
About The Buying Process What You Can And Can’t Find Out About
The Vehicle
Obviously, the best way to find out information on the vehicle, at least
the condition, is to go and inspect it, or hire an inspector.
A history report can give you good information. Things to look for
would be multiple owners or multiple sales over a short period of
time. This would send up a red flag. Also odometer readings during
previous smog check, especially on a vehicle with “Odometer Not
Actual” or “Exceeds Limits”. The history reports may also indicate
previous accidents. Also, if the vehicle was registered in a state that
has heavy salt corrosion, that might be a factor.
It would be nice if you could find out the name of the previous
owner from the auction, but you can’t. They will not give you that
information.
If the vehicle has an unusual title, as a Bill of Acquisition, Lien Papers,
Application for Duplicate Title, Non Rebuildable, Export Only, Title of
Destruction, or just Bill of Sale, you should probably talk to your DMV
or local auction title clerk to confirm that the title will be accepted in
your state.
SECTION 1.6 AVOID BIDDING WARS
How To Avoid Overpaying For Your Vehicle During The Auction Bidding
Wars
The best way to avoid over paying for a car at auction is to do your
homework and find out what the car is worth, then stick to your guns.
It is human nature to get caught up in a bidding war, but there are
ways to prevent it.
The auctions want you on a true live auction or a virtual live auction.
It is a fact that people pay more for vehicles at this type of venue.
Emotions are running high, people are nervous and rushed, and they
don’t want to lose the car, for maybe just another $50. There is buyer
remorse after pulling out and the other bidder wins the vehicle for
just $50 more. But you have to remember that the other bidder was
ready to take you to the moon, and was willing to overpay for the
vehicle. It is also a bad feeling to win the car and suddenly realize
that you over paid for it.
The auctions DO NOT want you to bid on a Proxy or Preliminary Bid.
There is no chance that you will get in a bidding war, and people
tend to pay less for the vehicles on these types of bids. But the
auctions HAVE to offer these bids. There are simply too many people
that are too busy or can’t stop what they’re doing and sit in front of a
computer for a couple of hours waiting for their car to come up. As
long as you understand how the Preliminary Bid works, it’s actually a
better way to bid.
FREQUENTLY ASKED
QUESTIONS (FAQ)
Chapter 2
FREQUENTLY ASKED QUESTIONS (FAQ)
What if the auction does not disclose the car correctly?
This is probably the number one issue with salvage auctions and can
cause “sour grapes” with uninformed bidders. Auctions will tell you
that the information is for “convenience only” but if you fight them,
will lose - I guarantee it! This normally only happens when the bidder
is negligent and doesn’t inspect the car, then blames the auction
instead of taking responsibility for inspecting the vehicle before
bidding on it.
Does “Run and Drive Verification” guarantee the engine and trans
are good?
No, this designation is the second most misunderstood issue.
Generally this term just means that the auction says the vehicle would
start and idle, and pull forward a few feet under it’s own power when
it arrived at the auction. The engine could have a rod knock, ready to
seize up in a few minutes, but starts and and idles, so is designated
“Run and Drive”. Most auctions will not even guarantee the engine
will start when the vehicle is picked up. Again, this is why inspection is
so important. Many auctions will allow the engine to be started during
inspection to listen to it run.
Are there only salvage title cars?
No, there are also many cars with clean titles available at salvage
auctions.
How can I inspect the car or before bidding it?
Most auctions have specific inspection days of the week. You can
call the auction to find out which days they allow inspection.
What if the auction is too far away?
This is when you want to hire an inspector.
What is the refundable deposit for?
At most auctions, if you win a vehicle and do not pay for it you must
pay a Relist Fee. This protects the broker or auction from having to
take the Relist fee out of their own pocket.
Can I drive a salvage titled car on the highway?
Yes, but the car may have to pass inspections before it can be
registered. Remember, these vehicles are not guaranteed to
pass smog or safety inspections. While most of the can pass the
inspections, the bidder is responsible for any repairs.
Do I do the bidding or does the Broker do the bidding?
This varies with the different auctions. With a Copart certified Broker,
you do the bidding with your own bidder number.
Do I bid on the computer or go to the physical live auction?
Again, this varies with the auction. Some auctions have both venues.
Copart has bidding only on the web, with no physical live auction.
IAA has both.
Is proxy bidding allowed or must I sit through the whole auction?
Most auctions allow both ways of bidding.
Can I return the car if it is not what I expected?
No, absolutely not. These vehicles are AS IS WHERE IS. Once you win it,
it’s yours and cannot be returned for ANY reason.
Can I finance a salvage titled vehicle?
No, most banks will not finance a vehicles with a salvage title.
Can I drive the car out of the auction yard?
No, the cars should be transported. You can rent a car trailer or dolly
and transport the vehicle yourself, or hire a transporter.
Is buying a car from a salvage auction safe?
It can be, but you should always do your homework and inspect the
car or hire an inspector before bidding on the car.
What if there is a lien on the vehicle?
The auctions clear the liens before sale.
Can I get insurance for a salvage titled vehicle?
Yes
Should I run a history check on the vehicle?
Yes, it’s a good idea. Sometimes they will provide useful information
and sometimes, not. They are good for previous accidents/repairs
and odometer readings as well as the number of owners.
Does the seller or auction guarantee the vehicle will pass smog?
No, that is the responsibility of the buyer, including any repairs that
must be done to make vehicle pass smog or safety inspections. This
includes clean titles.
What restrictions are placed on a salvage title vehicle?
Depending on the state, you may have to get safety inspections
done before registering the car. Also, banks do not normally loan
money on salvage title vehicles. Other than that the salvage title
vehicles are treated the same as vehicles with a clean/unbranded title.
ABOUT SALVAGE
AUCTIONS
Chapter 3
SECTION 3.1 SALVAGE AUCTION OVERVIEW
Years ago the general rule of thumb was that if the repairs to a
damaged vehicle were 80% or more of the wholesale value, then
the insurance company would total the car(salvage title) and send it
to auction. This is not true anymore. In fact this is not even close.
Insurance companies are in the business of risk management. It they
OK a shop to repair a vehicle, they still have some liability for the
repair. If the shop forgets to tighten the wheel lug nuts on the car and
the wheels fall off and cause an accident, the insurance company
is going to be sued. Putting a salvage title on a vehicle exempts the
insurance company from any liability. With the absurd price of body
repairs nowdays, it doesn’t make sense for the insurance companies
to repair the cars even with moderate damage. They just don’t want
the liability, and it’s easier to just to pay of the insured and send the
car to the auction with a salvage title. That’s good news for us. Now
you can find cars that have salvage titles with little or no damage.
I have bought many “Theft Recovery” salvage cars that had no
damage and nothing wrong with them. With the salvage title I was
able to buy it cheap.
In the past, salvage auctions only sold to professionals- dealers,
dismantlers, body shops, and exporters. Only in the last few years
have these auctions sold to the general public. In a few states the
general public can bid directly at salvage auctions. Most states
require a broker. And in some states the bidder must be a dismantler
and own a junk yard in that state.
And some states are simply out of control- California (liberal antibusiness). We can’t bid there and we are a California dealer!
There are big differences in Dealer Auctions and Salvage Auctions.
1. Dealer auctions have arbitration departments, Salvage auctions
do not.
2. Dealer auctions do not allow the general public to bid and do not
have broker programs.
3. Dealer auctions have return programs and short term warranties.
Salvage auction are only AS IS WHERE IS
4. Dealer auctions require a dealer’s license only. Salvage auctions
will allow body shops, repair shops, some businesses, and as
mentioned before, the general public.
5. Dealer auctions get their inventory mostly from other dealers,
wholesalers, and fleet- lease companies. Salvage auctions used
to get their inventory almost exclusively from insurance companies.
But now they have more resources including auto dealers, general
public, and rebuilders.
SECTION 3.2 DEPOSIT, FEES, AND RELISTING
Most auction broker programs will require a refundable deposit. This
is required to protect the broker from auction relist fees if the bidder
wins a vehicle and doesn’t pay for it. The broker does not want to
take these fees out of his own pocket. Relist fees can either be a
percentage of the bid or a flat fee.
Be aware of both the auction fees and the broker fees. You will need
to pencil these fees into your bid amount. The fees can be fairly high
and the only saving grace is that everybody pays the auction fees.
The people you are bidding against also have to pencil those fees
into their bids.
After winning, you must pick up the vehicle within a certain number
of days or the auction will start charging you storage fees. It’s a good
idea to be proactive on your transportation.
SECTION 3.3 BIDDING
There are three ways of bidding.
1. Live Auction is where you are at the auction location and bidding
in person. Some auctions like Copart no longer have live auction
bidding.
2. Virtual live auction bidding is done on your computer and has the
sound and feel of a real live auction. You should always test out a
virtual live auction page long before you start bidding. Get on some
auctions that are running to make sure you understand how they
work. There is a learning curve to doing it properly. You need the item
number (run number) to find out what lane it is in, and about what
time it will come up.
3. Preliminary bidder is a form of proxy bidding where you can place
your bid without sitting through the auction waiting for you vehicle
to come up. Preliminary bidding is a great way to bid, but you must
understand how it works. We’ll use Copart’s preliminary bid as an
example.
To place a bid is very simple. You can place a preliminary bid up to
an hour before the auction starts.
Go to the vehicle page (page w/ pics of your car) and where it says
“Bid Now” put your MAXIMUM bid amount in the box. Then confirm.
Putting your MAXIMUM bid amount is critically important. If you don’t
put you maximum amount in, then you may lose the vehicle for
less than you were willing to pay for it. You may win the car for less
than your maximum amount as the computer is bidding for you
incrementally.
Here’s how it works.
One hour before the auction starts, Preliminary Bidding ends.
Whoever has the highest bid has won the right for the computer to
take your bid to the auction and bid for you AUTOMATICALLY and
INCREMENTLY, just like you were on the virtual live auction clicking your
mouse button to raise the bid. The computer will keep bidding until
you either win the car or it goes over your maximum bid. This is great
for people who may not be able to sit in front of a computer for a
couple of hours during the auction. People traditionally pay more
for a vehicle on a live type auction format as you get the human
emotion factor involved. The auctions would rather not offer proxy
or preliminary bidding for this reason, but they had to for reasons of
practicality.
Additional Preliminary Bid Notes- The vehicle page will show a current
bid. This bid is NOT the high bid.
It is one increment over the last bidder’s high bid. It is hiding the
current bidders high bid. Let’s say the current bid show $500. But the
current bidder has a max (hidden) of $1000. If you bid at $1500 then
the current bid will show $1050 (one increment over the last bidders
high bid). And it will now be hiding your max bid of $1500. It is a
little confusing and took me a while to learn. But most importantly
you must also realize that once you are the current Preliminary high
bidder, you cannot raise the bid, you cannot lower the bid, and you
cannot retract the bid. The only way you can get out of that bid is
someone else out bids you.
TYPES OF WINNING BIDS
There are three types of winning bids which are listed on the vehicle
pages.
1. Pure Sale- Highest bid wins… period. No minimum.
2. On Approval- Seller has 24 hours to approve or reject or go into
counter bidding. Counter bidding is just like old fashion dickering or
bargaining.
3. On Minumum- The seller has a minimum price that must be reached.
NEVER, NEVER place a Preliminary bid on a car listed as “Future” sale
or with no sale date. I have seen bidder’s money tied up for over 6
months and there is no way to get out of the bid.
ON APPROVAL AND ON MINIMUM NOTES
Many people believe that a Pure Sale is the only honest auction.
There can be a lot of questionable things that can happen on bids
with Minimum or Approval. A shill can certainly work these as there is
no punishment for running a vehicle multiple times. And a shill can
certainly run up the bid and then quickly drop out. But this is a fact of
life if you decide to buy at auction.
I cannot explain why so many cars are won at the bidder’s maximum
bid. Just don’t know. But the bottom line is if you do your homework
and know what that car is worth to you, then just stick to your guns,
and if you don’t win it, go on to the next car.
SECTION 3.4 SALVAGE AUCTION DISCLAIMERS
You must realize that besides the salvage auction disclaimer of AS
IS WHERE IS, the auctions will be culpable for NOTHING. I have seen
many events over the years that you would just shake your head at.
Their terms and conditions can be over 20 pages in length, and their
high priced lawyers are paid to fight you on any dispute. You just
don’t want to go there.
I have seen auctions cancel a sale after the car was paid for and
the tow truck was on the way to pick it up.
I have seen the auction yard give the wrong vehicle to the transporter, then blame the driver for accepting it and then charge for the
return.
I have seen auctions lose titles and not take responsibility for the loss.
I have seen auctions improperly disclose title type and odometer
type and not take responsibility. These are federal crimes.
I have seen auctions bring out cars to the parking lot with new damage and/or missing parts, and say nothing. These things happen very,
very rarely. But this should drive the point home of doing your inspections, research, history reports, etc., before bidding on a vehicle. Do
not rely on the auctions.
ABOUT TITLES
Chapter 4
SECTION 4.1 TITLE OVERVIEW
If you are buying through a broker you can normally not pick up the
title when you pick up the car.
This is because you bought the car through a dealer/broker and they
have to re-assign the title to you.
This can take about 2 weeks to get the title.
The individual states are independent of one another when it comes
to vehicle paperwork. This includes titles, registration, smog, safety
inspections, notaries, re-assignments, and sales tax. The bidder/buyer
is ultimately responsible for following the vehicle code in his or her
own state. If you have a question about a title type you can consult
the web, or your local DMV, or auction title clerks in your state.
Here are some examples:
Washington state does not have a salvage title. They have a rebuilt
bill of sale which many states do not recognize. So now you have
a vehicle that you can’t get title on. There are ways of procuring a
title bond, but it’s a real long drawn out process. We do not bid in
Washington state.
Florida has a “Title of Destruction”. These vehicles can never go on
the road again and are to be only cut up for parts. The problem is
they only allow one reassignment. The auction reassigns the title to
the broker, but the broker cannot reassign the title to anyone else.
Won’t work.
California has an “Export Only” title/stamp. I have had bidders that
really didn’t believe that they could only export the vehicle. Believe it.
Nevada will not recognize a California application for duplicate title.
We learned this the hard way.
Most of the time simple clean and salvage titles do not create
problems between the states. Just be very careful if you see some
weird title designation and confirm that it will fly in your state.
SECTION 4.2 CLEAN AND SALVAGE TITLES
A clean title is a normal title that has not been branded as salvage,
junk, non-rebuildable, flood, etc.
Years ago most all vehicles that were sold at salvage auctions were
all totaled, salvage titled vehicles.
That’s not true anymore. Today, there are many clean titled vehicles
available with or without damage at salvage auctions. With that
said, you must remember that a clean title does not mean that the
vehicle has never been in an accident. It is always recommended
you do a history report on the vehicle.
A salvage titled vehicle may have little or no damage. A theft
recovery vehicle is a good example.
Now days with body repair being outrageously expensive and
insurance companies being very risk oriented, it is more convenient
and less risky for the insurance companies to put a salvage brand
on a car and send it off to auction, than it is to fix or rebuild it. They
pay off the insured, get their money from the auction, and most
importantly have no liability on the vehicle. When an insurance OK’s
the repair of the vehicle, they still carry the liability, including the
repair of that vehicle.
Whether a vehicle has a clean or salvage title and is being sold at a
salvage auction, they are all still AS IS WHERE IS. That is why they are
cheap. Your challenge is to lower your risk before bidding and buying
a vehicle at a salvage auction.
SECTION 4.3 HOW TO REVIVE A SALVAGE VEHICLE TO STREET LEGAL
Obviously you will first have to do any repairs on the vehicle. You also
want to check all of the safety issues including brakes, lights, fluids,
tires and pressure, etc. Don’t forget insurance.
Most vehicles will need a smog. Salvage title vehicles may need
safety inspections.
Your first test drive should be short at moderate speeds. Don’t just
head out to Grandma’s and jump on the freeway. Start the car and
let it idle for a while to make sure it doesn’t get hot.
At slow speeds take your hands quickly off the steering wheel to see if
it tracks straight, or pulls to the side. It may need an alignment. Check
tire wear.
Try to get a trip permit at your local DMV so you can drive to any
inspections that are needed to get your registration. Most salvage
auctions remove the license plates so the vehicle cannot be driven
without a trip permit.
SECTION 4.4 REGISTRATION/ DOCUMENTATION
They say you can’t fight city hall. The individual state Departments of Motor
Vehicles are some of the most out of control giant bureaucracies in the
United States. If a bureaucracy does not grow it will wither and die. It is a
great form a revenue for the states and has a lot of power. California is so
out of control that we had to stop selling to California residents.
One tip is to not let the DMV counter people intimidate you. Many of
these people are jerks wanting to pull a power trip on you. I can’t count
the number of misinformed DMV counter people I have had run into over
the years. Many of these counter people simply do not know the laws
concerning auctions and salvage vehicles. You pretty much have to play
their game, and whenever given the chance, vote these big government
bureaucrats out of office. Many title services will not do salvage titles, but
doesn’t mean you can’t ask. AAA Auto Club has title services and there
are many title services listed on the web and in the phonebook. DMV will
normally verify the VIN number for fee. There are verifiers that will come to
house for a fee.
If you need a smog and a brake and lamp inspection, try to find a shop
that does both and it will save you time. When you go in to the DMV
offices always ask for a temporary permit or trip permit if you need one.
Electronic titling is becoming more popular, but still has a way to go and
will not work with salvage titles.
DOING YOUR
HOMEWORK
Chapter 5
SECTION 5.1 RESEARCH
99.9% of the bidders that have ended up with a nightmare vehicle
have rushed to bid at the last minute without knowing what they were
doing. They have done no research, no inspection, and no studying.
They should have passed on the car, but didn’t, and now it’s too late.
You must be proactive and do your homework when bidding on
salvage vehicles. Waiting to the last minute increases your risk of
ending up with a piece of junk.
Research that can help you:
1. Run a CarFax or AutoCheck history report.
2. Always inspect the car or hire an inspector
3. Watch some live auctions to see what similar cars sell for
4. Check Craigslist, Auto Trader, Cars.com, eBay to see similar cars
and condition/prices
5. Find Blue Book private party value as a starting point
6. Always print and study the vehicle page (auctions page w/ car info
and pics) carefully.
7. If you have any doubt about the title type being good in your
state, call either the auction yard and ask to talk to a title clerk, or call
your local DMV.
8. Has the car been at auction recently? Or had multiple recent
owners?
9. Choose your damage and title type. If you want to steal a car, it
can’t be in perfect condition. Some damage types are easy and
cheap to repair. On some salvage title types like Theft Recovery, the
vehicle can have no damage at all, but be cheap because of the
salvage title.
Trying to figure out how much you should bid on a vehicle can be
challenging. There is no Blue Book on salvage vehicles. I have had
people tell me that you can just take a percentage of the wholesale
or retail value and come up with a figure. Maybe as a starting point,
but don’t believe this as there are just too many variables to consider.
One way to estimate the value of the car, although very time
consuming, is to watch similar vehicles sell on the virtual live
auctions. This can take a lot of time but you can get some good
numbers.
Another way to estimate the value of the car is to start with the
private party Blue Book value. This value is normally about halfway
between retail and wholesale price. Probably use the condition,
Excellent/Fair/Poor, with the condition of the repaired car.
Then start deducting for:
1. Title type ( deduct 20-30% or more for salvage)
2. Damage and repair costs ( do not rely on auctions full retail
insurance repair costs, )
3. Negative history report
4. Recently sold at auctions
5. Multiple owners
6. Do not believe ACV (actual cash value) on auction site. This is high
retail.
Again, do not minimize the importance of good research. It will pay
off many times over in the end.
SECTION 5.2 INSPECTION
Inspection is absolutely the most important thing for buying a vehicle at a
salvage auction.
This cannot be emphasized enough. Again, we had one bidder lose
$19,000 because he did notinspect the car.
It is always better if you go and inspect the car yourself. If you can bring a
mechanic or a body man with you, even better. But if not, as long as you
are vigilant and take your time and check the car out carefully, you can
inspect the car.
Always check with the specific yard to see what days and times they allow
inspections; and if you need to be a member or broker member to get in
the yard. Many auctions have a free/basic membership. Try to inspect the
car as early as possible. You may have to do some research on additional
parts or repairs after you inspect the car.
Also, if you can go to the yard when the car is being picked up, you can
look the car over before it leaves the parking lot. You want to make sure
that there are no missing parts that might have been taken off the car since
the time you inspected it. This includes additional damage that might have
occurred since you inspected it. I once bought a truck at auction, and
when they brought it out to the parking lot the whole side was newly crushed
in by the forklift. Luckily I was there and went to the office
and re-negotiated the deal with the general manager. Had I not been
there, or had a transporter pick it up, the auction would have done nothing.
I have mentioned to some of my bidders that they might be able to give
the driver $20 to do a quick walk around the car before leaving the yard.
Not sure if this works.
Hiring an inspector is important if the vehicle is too far away. You
probably can’t take a day off of work and drive 1000 miles for $75.
The inspectors are independent. They don’t work for the broker or the
auction. You can find the inspectors on the auctions website, normally
on their vehicle page. Obviously, it will only list the inspectors that
service that particular yard where your vehicle is located. Call two or
three of them, and see if they sound good to you. I tell my bidders to
ask them three questions:
1. How much do you charge?
2. What is your experience? The best inspectors are mechanics or
body men. If they owned a body shop or repair shop- great!
3. Are you going to just walk around the car and answer my questions
or take pictures and write me a full blown report? Now, almost no
inspectors do this, although there are a few. But by asking this you let
him know you want him to do a good and thorough job.
4. Always write your questions down before you get your call from the
inspector. After the call is over they are probably gone. On one car I
forgot to ask an important question, and by the time I called him back
he was down the road having lunch and wouldn’t go back to the yard.
You get one shot.
5. I don’t know if this works with the inspectors, but it’s a great idea. Ask
the inspector if you can email your questions to him before he goes
out to the yard. That way he can pre-inspect the car before he calls
you.
SOME INSPECTION TIPS
1. If the car is listed as “Run and Drive” and they bring the keys out to
start the car, ask first to just turn the key to “On” but don’t start the car.
Then check to make sure that all of the dash lights come on.
This includes- Check Engine, Alternator, Air Bag, Anti-Lock Brakes, Oil
Pressure, etc. Then when it starts make sure these lights go off. I have
seen where the seller has disconnected the dash light bulbs, if you
can believe that!
2. If car has damage in front and the radiator has been pushed back,
make sure it did not bend the crank pulley or harmonic balancer. This
could ruin the engine.
3. Measure the distance from the front wheels to the rear wheels
comparing side to side. You can also measure diagonally to see if the
car is “diamond”.
4. Never buy a car with damage to the “A” pillar. This is where the front
door bolt to the car. This is strongest point of the car and takes an
absurd amount of time to repair. The car dash must be removed.
5. On “Flood Damaged” cars make sure you have access to an ozone
generator.
6. Check for even tire wear
7. With the car running, check the AC, heater/defroster, blinkers,
headlights, turn signals, interior lights, brake lights, power steering, brake
pedal firmness, emergency brake, horn, radio/CD, etc,
8. Check coolant (before start), brake fluid, power steering fluid, trans
fluid, and engine oil.
9. With car running shift through all transmission gears.
SECTION 5.3 SEARCHING FOR A SPECIFIC VEHICLE
Most all auctions have great search engines with many search
options. Of course it is always better if you search and find a vehicle
close to you. The transportation will be cheaper and you can go and
inspect the car yourself.
If you can’t find a vehicle near you then you will have to expand your
search area. Expand the search distance, vehicle year, model and
manufacturer type, etc., will give you more choices.
It is better to have some patience and try to find a vehicle near you.
Buying a vehicle a long distance away will have its challenges. You
will have to hire an inspector and set up or get bids for transportation
days ahead of the auction date. You do not want to wait until the
last minute to bid on a vehicle that is a long distance away from you.
Do some homework on the specific vehicle you are looking for. There
are many reviews of different make, model, and year vehicles. Some
of these cars get terrible reviews and this should be considered.
You should stay away from low production cars, unless you are
looking for a classic that you intend to restore. Parts may be difficult
to find and may be ridiculously expensive if you do find them.
Car-parts.com is a good place to find used parts.
SECTION 5.4 THE AUCTION VEHICLE PAGE
Just a few notes on this critically important page. Again, this is the
page on the auctions website that gives the details and pictures of
the vehicle.
Always print this page out. It has the lot number, VIN number, item
number, and information on the car.
If you go to the yard to inspect the car, you should take a copy
with you and write all the notes from your inspection on the page.
Everything is in one place.
There is critical information that I have seen bidders miss and it has
cost them thousands of dollars.
Some of the important info includes:
1. Estimated Retail- This is high book and doesn’t mean much
2. Estimated Repair Cost- This comes from a body shop estimate for the insurance company. This is usually very very high.
3. Title State/Type- This is obviously critical. A (P) means title pending and takes longer to obtain.
4. Odometer- Make sure you see if it’s Actual or Not Actual (people often miss this)
5. Primary/Secondary Damage- This is the one you don’t want to believe. This is why you go and inspect the car.
6. VIN- Compare this with the VIN number on the car.
7. Sale Date- If this has no sale date or says “Future”, DO NOT PRELIMINARY BID WITHOUT A SALE DATE. I have seen cars sit around for 6 months to a year. Your money will be tied up that long.
8. Item # - This is the vehicles run number and tells you what lane it is
in for the Virtual Live Auction.
9. Bid Status- Watch out for cars that have come back to auction multiple times. Could be a lemon.
AFTER THE SALE
Chapter 6
SECTION 6.1 POST SALE
On most broker programs you cannot pick up the title when you pick
up the car. Since the car was sold through the broker/dealer, they
must reassign the title to your name. This normally takes a couple of
weeks. Once you receive the title you need to go to your local DMV
and start the paperwork, whether the car is running or not. This may
include Release of Liability, paying sales tax and fees, and getting a
trip permit.
Of course the repairs and inspections are your responsibility. These
vehicles have no guarantee of passing smog or safety inspections.
You should go through the car and inspect or replace all of the fluids,
check the brakes, and check all of the lights and accessories and
check the tire pressure. Order a owner’s manual if missing.
Although after the fact, some repair shops do pre-purchase or
general inspections.
Banks will not usually loan on salvage title cars. Insurance should not
be a problem.
SECTION 6.2 FLIPPING VEHICLES
So you want to flip a few vehicles and put a little cash in your pocket.
There are a few things to know if this is where you’re going.
Having a dealer’s license gives a business some distinct advantages.
A dealer does not have to re-register or re-title a sold vehicle. A
dealer does not pay all DMV fees or sales tax. The dealer can collect
all of this from the buyer. A dealer can keep a vehicle in inventory
without accruing any penalties for as long as he wants.
When a person wants to buy and sell a car, he must first re-title the
car, re-register the car, pay sales tax on the car, and pay any DMV
fees due or renewable. It can take more than 3 weeks to re-title a
car.
Of course the states have different laws on this. Some say six cars a
year, or whatever. You can check.
I believe states that limit a person from buying and selling cars is
wrong. They get their fees and all their money on EVERY transaction.
And for the government, it’s really all about money and taxes.
I have seen people do well in fixing and selling salvage cars. The
people that stick around seem to be in the niche markets. This might
be boats, motorcycles, tractor trailers, ATV’s, RV’s, or classic or exotic
cars. They know the market and seem to do well. You probably won’t
do well trying to flip Toyota Corollas.
SECTION 6.3 TRANSPORTING VEHICLES
Your vehicle should never be driven from the auction yard. You
probably don’t have any paperwork to drive the car legally on the
highway. This might include ownership papers, registration, tags,
license plates, insurance, etc. Many salvage auctions remove the
license plates from the vehicle. If you were pulled over driving the
car without the proper papers, you could go to jail for a stolen car.
But more importantly no serious inspection or safety inspection has
been done on the vehicle. Important things to be checked are the
brakes, fluids, tire pressure, loose hoses and wires, turn signals, brake
lights, head lights, emergency flashers, horn, steering linkage, wheel
alignment, etc.
You can transport the vehicle yourself or hire a transporter. I have
seen tow dollies and tow hitches used, but in California the tires of an
unregistered vehicle are not suppose to touch the road, although I
have never seen this enforced. Remember if you go to the yard for
the transport, either doing it yourself or hiring a transporter, always
check the car over for any new damage or missing parts before the
vehicle leaves the parking lot.
Normally local tow companies are fine for short tows under 100 miles.
For longer tows you should use long haul transporters. One place
to try is Uship.com. This is where you can put your transport job out
for bidding on the web. There are a few tips for this. First, don’t wait
until the last minute or after you have won the car to get your tow
estimate going. No one is going to see it, and you may have to
accept an expensive bid. You should get your tow job out 5-7 days
before the auction. That will be enough time for a lot of transporters
and owner-operators to view it. You’re looking for someone who is
already going to be driving that route and doesn’t have to drive a
long distance to pick up or deliver your car. Then they can give you
a reasonable or cheap bid. Make sure you give them reasonable
windows of time to pick up and deliver the car. That way you will get
more bids. Maybe two or three day window to pick up the car, and a
four or five day window to deliver it.
You can also Google auto transport between major cities. There are
companies that run some routes two or three times a week. Years
ago I found one that ran twice a week from Southern California to
Northern California.
If you live in a small town, it is sometimes better to have the car
delivered to a nearby major city. Then you might figure a way to
get it to your place. Sometimes the most expensive part of the
job is delivering out to small towns or rural areas as that becomes
a dedicated trip. Many exporters will also handle the domestic
transport. But you may save money hiring your own transporter.
WHEN THINGS GO
SOUTH
Chapter 7
SECTION 7.1 THE PERFECT STORM
About eight years ago we had a bidder involved in the perfect storm.
He lived in Los Angeles and bid and won a Cadillac Escalade in
Houston Texas. Not only did he do everything wrong, the car was, in
my opinion, a fraudulent car. He lost $19, 000 on the car.
The car looked great on paper (the vehicle page) and was listed as
Run and Drive/Clean Title/Low Mileage/ and the body looked perfect
in the pictures. He paid $39,000 for the car. He did not study the
information on our website and did not have the car inspected.
When he got the car to Los Angeles he found out the frame was
severely bent, the engine had a rod knock, and the steering column
was bent so bad you couldn’t turn the steering wheel.
After a long battle with the auction, he finally gave up and sent
the car back to auction and got $20,000 for it, and lost $19,000.
Of course the auction then changed the disclosure to show all the
problems with the car. In their opinion these additional problems
could have happened after the car was sold and transported to Los
Angeles. The auction said the disclosure indicated true information
on the car, but didn’t list any additional damage. The auction took
the seller’s description of the vehicle without checking it.
The perfect bidder and the perfect car created this Perfect Storm.
Here are the mistakes the bidder made:
1. The obvious one, he didn’t have the car inspected. An inspector
would have told him he shouldn’t buy this car for any amount of
money.
2. The bidder assumed a Clean Title meant the car had not been in
an accident. This is totally wrong. The car was not repaired through
an insurance company and therefore no Salvage Title was issued.
Either the owners paid cash to have it repaired, or a body shop
bought it and repaired it. The car still had a Clean Title. Again, a car
with a Clean Title does not guarantee that the car has not been in an
accident or a severe accident.
3. The bidder did not study any information before bidding
and assumed that “Run and Drive” meant that the engine and
transmission were good. As explained in the previous articles this is
not true. The engine started and idled, but had a severe rod knock,
and was garbage. Again, an inspection would have discovered this.
An additional tip on inspections and AS IS WHERE IS. As soon as the
vehicle leaves the auction parking lot all bets are off. But, if it is still
in the auction parking lot, after they bring it out with the forklift, you
still have some options. If you are transporting the vehicle yourself,
you want to check over the car before it leaves the parking lot. Or, if
you hire a transporter, you could possibly pay him some additional
money to do a quick check and call you before he leaves the
parking lot. You could then speak to the general manager and tell
him he has a problem.
We had one bidder that bought a BMW and went to transport the
vehicle himself. When they brought the car out to the parking lot it
was missing the center console, front bumper, grille and headlights.
A couple of thousand dollars in parts. The bidder went to the office
and told the manager that these parts were on the car when he
inspected it AND he had the pictures to prove it. The auction had to
offer him his money back or make a deal with him. Had the car left
the parking lot he would have been out of luck.
DON’T GET CAUGHT IN THE PERFECT STORM !!!
SECTION 7.2 DISPUTES AND OBAMACARE
Unfortunately the younger generation, including Millennials, have
been brought up in a big government, take- no- responsibility
environment. Many believe that they don’t make mistakes- it’s
always someone else’s fault, and the government will pull them
out of this mess. I will get daddy’s lawyers right on this. Bidding on a
salvage auction is definitely not a good venue for these people. In
fact, it’s on the opposite side of the spectrum. This is bloody knuckles
hard core capitalistic business and you don’t want to learn that the
hard way. Long gone are the days when men shook on the deal.
Again, salvage auctions are not for everybody.
Most of the really bad problems that occur are caused by a bidder
that has no idea what they are doing and don’t inspect the vehicle.
That’s not to say that the auctions don’t create their own set of
problems.
The problem with the uninformed bidder is that they simply cannot
comprehend the risky subtleties of buying from a salvage auction.
There is no consumer protection. That’s why they’re called Salvage
Auctions. They don’t believe AS IS WHERE IS means just that. They
don’t know or believe that the auctions are culpable for NOTHING.
They don’t believe that they have agreed to the auctions terms and
conditions which include legal mumbo jumbo as…”this information
is for convenience only…”
The worst bidders don’t believe that they need to inspect the car. I
have had two instances where bidders have told me they inspected
the car, but something didn’t sound right. I continued to asked them
about the inspection until they told me they inspected the car on
the web site! They thought that inspecting the car meant looking at
the pictures on the vehicle page…… I don’t think so!
But let’s not absolve the auctions of all responsibility. There have been
many instances where the auction did make an unquestionable
error…… not even close. And here is where things start to get ugly.
They will tell you that the broker and the bidder are the only ones
responsible, and that they take no responsibility for anything. You will
hit that wall again and again, and the auction will not budge. I have
seen auction vice presidents fight over a $200 error….. and they
made the mistake!
Insurance companies are the only ones that can tell an auction
what to do. When they say “jump”, the auction says “how high”?
Independent buyers, sellers, and brokers carry zero weight with the
auctions.
If you threaten to sue an auction, they will laugh at you and tell you
their lawyers are bored and need the work. Even if you made it to
court, it could be years down the road. Remember normal dealer
auctions have arbitration departments, salvage auctions don’t know
the meaning of the word. We have also learned the hard way with
the bidders. We now have a binding arbitration clause so disgruntled
bidders cannot threaten us with high priced lawyers. Binding
arbitration is the best way to go for all concerned parties. This has
been part of the learning process.
This is why salvage auctions are not for everybody. I will guarantee
that if you buy enough cars from a salvage auction that eventually
you will lose on one. Professional bidders that buy twenty cars a week
don’t care if two of them are bad or junk. They’ll write those two off on
the other eighteen. If you only buy one or two cars, you have nothing
to write off.
The bottom line is if you do your homework and inspect the car, it is
rare that the deal will go South on you.
BROKERS
Chapter 8
SECTION 8.1 CHOOSING A BROKER
There are a few things to consider when choosing a broker.
1. Do they bid in the state where the vehicles are located?
2. Do they have any restrictions on title types?
3. What are their fees?
4. Do they do the bidding or do you do the bidding?
5. Is their website educational?
6. Customer Support-- Can you easily connect with a real person who
will answer your questions?
Copart has the best broker program in that you do the actual
bidding. At other auctions the broker does the bidding. This is not
good, as you may never find out how much the broker paid for the
car. On Copart’s Broker program, you are in complete control with
your own bidder number.
ABOUT US
A&A Truckee Tahoe is a certified California dealer, and has been in
business over 30 years. We have been rebuilding and selling cars
employing only ASE certified master mechanics for over 30 years.
We are one of the original Copart Brokers and also broker and buy
from many different auctions.
Our primary goal as a broker for new bidders is to educate them
as to the risks and responsibilities of buying vehicles from a salvage
auction. We stick to the truth, and all accounts and events can be
documented and verified.
We hope you will be able to get a great deal on a great car.
Thanks,
LD Hall