Used Car Dealership Markup vs Buying a Salvage Car

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If you’re looking for an inexpensive car in good condition, there are a couple of options to try. One way is buying a salvage car from an online auto auction, another is purchasing a used car from a dealership. 

Depending on what you’re looking for, there are benefits to both options. In this article, we’ll discuss the pros and cons of both options to help you find the best deal. 

Selection of vehicles

Every year in the US millions of vehicles are deemed a total loss by insurance companies. Those vehicles get a salvage title and then arrive at the auction yard. For a long time, buying a salvage vehicle directly from an auto auction was a privilege available only to dealers. Now, anyone can access online auctions and buy vehicles without a dealer’s license right from IAA or Copart.

Dealers buy cars not only from auctions but also from private sellers and wholesalers. Big dealerships can offer a good selection of cars, however, auctions tend to have more options due to partnerships with big insurance companies. 

Service fees and margin

Auto auctions and dealerships both have commissions for their services. Dealerships have an objective to sell a car with a profit margin that usually makes up 20-25% of a car’s cost. Sometimes, this margin can be as high as 50% depending on the repair and transportation costs that dealers spent before selling the car. 

Online auctions usually charge about 5-10% of a vehicle’s price. Some of them apply a documentation fee that covers the title transfer and mailing. Also, big auction yards such as IAA and Copart charge their own fees. Still, the total sum of auction fees typically won’t exceed a dealer’s 20% margin. 

Price and condition

Before putting a car up for sale, dealerships spend funds on its inspection, repair, and delivery, while auctions sell what they get from insurance companies. However, sometimes you can find a car in perfect condition through an auction that was repossessed by an insurance company for non-payment. And this is when buying from an auction is far more profitable than working with a dealership. 

The final price of a car sold from an auction can vary depending on the bids of other buyers. However, there’s a big chance that a car from an auction will cost much less than at a dealership. 

Conclusion

If you’re not a risk-taker who is ready to pay extra money for a repaired used car, try searching for a reliable dealership. But if you want to save big and feel like customizing a car, then see what auto auctions can offer. Whatever you choose, don’t forget to run a VIN check with ClearVin and feel safe! 

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