Can you get a good deal at a government seized auto auction?

For years we have seen countless TV ads and even received mailings telling of fortunes that could easily be made buying cars and other expensive items for pennies on the dollar at local government seized auto auctions.  According to the ads and mailings the government needs to sell cars and luxury items, including million dollar homes, at a fraction of the retail value.  Sounds really enticing, doesn’t it?  Can this be true?

Well, it depends.  First are you a government or government qualified non for profit?  If so you are entitled to first dibs on these and other items and you may qualify for a 25 to 50% discount depending on your status and use.  For instance if you are a organization that helps handicapped or blind people and you are chartered by your state government you most likely qualify.  The catch is that these items are not for resale and must be used in the nature of the business.  That would rule out the Ferraris and such. 

Secondly, are you very powerfully and politically connected?  Are you going to add to the local economy job and tax base or put major property back on the tax roles and make it useful.  If so, you may be able to get some great deals on state owned properties that are no longer needed.  The problem here is you will sign a contract with what will be done with the property in question and the local politicians will hold you to it. 

Thirdly, the government is not stupid.  They want the maximum return on their items.  The more they get the more they can do with it.  They have superiors who watch the books and each item and where and how it is disposed of.  All hot item cars like Mercedes, Ferraris and other high dollar exotics are sold through agents at either nationwide wholesale auto auctions, public auctions or even on Ebay.  The wholesale only auctions are not open to the public and are for auto dealers only.  Each state has their own separate rules governing wholesale auto auctions, but they all generally run the same.  The car has a set minimum or reserve and will only sell above this minimum.  Public auctions tend to get a lot of the stuff no one else wants.  And you many times are buying items similar to foreclosures on the courthouse steps – site unseen and history unknown.  If there are liens, levies, unpaid taxes, etc… on these items and you are the winning bidder you become responsible for them.  That means a great deal could be the complete opposite a few days later when you find there is a $100,000 IRS tax lien on that house you bid $25,000 for. 

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Upon perusing most public auctions most of the items are not great exotic cars and such.  I just saw one that had a bunch of broken down police cruisers and engine lots, a 30 year old Coast Guard boat in terrible condition and bulk lots of used fisherman’s outfits.  There were no exotic cars to be found except for a bidder that drove up in one.  Public auctions are like any flea market.  You are looking for a diamond in the rough or maybe even a needle in a haystack.  Also if you look around, there are hundreds of bidders at these auctions, maybe even thousands.  So if there is something of value there like a seized Corvette or other fast car, don’t be surprised when it goes for more than a new one.  Yes, the bidding frenzy almost always happens and the government highly advertises any of its auctions to get as many bidders as possible and they hire professional auctioneering companies that are experts at getting high numbers of bidders and also getting high bids. 

It is possible that maybe everyone goes to lunch and maybe that Rolls Royce Phaeton everyone is drooling over will somehow go through at a low price, but the odds of that happening are worse than you winning the Powerball lottery – and those odds are horrible.  Take it from me, I have a dealer license and have been to MANY of these sales and auctions and yes, I did get some decent deals, but never on an exotic car.  The deals I got were on cars priced under $3,000 and the prices were no different than at a local wholesale auction.  There were no sweet deels as mentioned in the TV ads or mailings.  I had one friend that bought a house on 1 acre of property for $17,000.  Later the retail value was determined to be around $65,000.  One week later he received paperwork notifying him that there was a lien on the property for $60,000 and some change.  In the end he lost money on that one and vowed to never do that again.

The sad reality is that for most people there is no deal whatsoever to be had by these ads you see on TV for government seized vehicles.  Just look at it this way – if they were so good, why doesn’t everybody take advantage of it?  Because it isn’t what those ads on TV and mailing make it out to be.  What’s worse is that some even charge money (around $40 or more) to send you information on the auctions.  You can get all that information for free.  Just look up the U.S. Marshall’s website and IRS tax seized property page.  Keep in mind, you must pay cash for your bid and at most auctions you have to put down 10% or more of your bid price just to be able to bid.