Selling your car at auction vs to a dealer

Auction is rarely the cheaper way to sell a late-model car, and it’s only quick if the car sells the first time. The NSW Government tells buyers that cars sold at auction are often sold below market value. The auction house’s fees then come out of that price, and a car that misses its reserve is passed in unsold.

A direct offer from a licensed dealer works the other way round: you know the number before you commit. Below is how an auction sale works, what it can cost, who bids, and how to decide which route suits your car.

How does selling a car at auction work?

An auction house sells your car on your behalf. You still own it until it sells, and the price is whatever the highest bidder pays, provided bidding reaches your reserve. In that sense it’s closer to consignment than to an outright sale, which our guide to consignment vs selling your car outright explains.

Every house runs its own process, but the steps usually look like this:

1. Appraisal. You send the car’s details, or take it in, and the house tells you what it thinks the car might fetch. That figure is an estimate, not an offer.
2. Seller agreement. You sign up to the house’s terms and fees, and agree a reserve price.
3. Delivery. The car goes to the auction yard, where it’s often cleaned, photographed and given a condition report.
4. Sale. It goes under the hammer in a live sale, an online sale or both. Depending on the sale, bidders can be members of the public, licensed dealers or both.
5. Result. If bidding reaches your reserve, the car is sold. If it doesn’t, the car is passed in.
6. Settlement. The buyer pays the auction house, and the house pays you what’s left after its fees.

What does it cost, and what happens if the car is passed in?

Each auction house sets its own seller charges. Commission on the sale price is often one of them, but it may not be the whole bill. Depending on the house, charges can also include an entry or listing fee, a condition report, photos, cleaning, storage and transport. Fees differ between houses and change over time, so we don’t quote figures here. Ask for the seller’s fee schedule in writing and read it before you agree to anything.

The reserve is the lowest price you’ll accept. Set it too high and the car is likely to be passed in. Set it too low and it may sell for less than a dealer would have paid you. A passed-in car hasn’t sold, but you may already have paid to enter it. The house may then offer to negotiate with the top bidder or to run the car again at a later sale. Ask what each option costs before sale day, not after.

Ask too whether the car needs a safety inspection, such as a pink slip, roadworthy or safety certificate, before it can be sold. The rules differ by state and can depend on who buys the car, so find out who books and pays for any inspection before you sign.

Work out what would reach your account

Fill this in from the auction house’s appraisal and fee schedule. The bottom line is the figure to compare with a firm offer.

Who bids at a car auction, and what do they pay?

The NSW Government’s guide to where to buy a vehicle is written for buyers, and it says cars sold at auction are often sold below market value. Bidders often can’t take the car for a test drive, and the viewing time before a sale can be short. A bidder who can’t drive your car has to allow for whatever they might find later.

Many bidders are buying to resell. A dealer who buys your car at auction still has to cover reconditioning, transport and holding costs, plus a margin, when the car goes back on sale. A member of the public is there hoping to pay less than they would on a dealer’s yard. Neither is likely to pay you a retail price.

Auctions also sit close to the rest of the wholesale trade. Sellers on the Whirlpool forums report that after they accepted an instant online offer from a big listings site, an auction house inspected the car, and the offer could be revised after that. That’s what users say, not a policy we’ve confirmed, but it shows how closely online offers, dealer bidding and auctions are linked. Our guide to dealer bidding platforms looks at that side of the market.

How long does an auction sale take?

Longer than the sale day suggests. The time goes on steps you don’t control:

• Getting an appraisal and signing the seller agreement.
• Getting the car to the yard, by driving it in or paying for transport, unless the house collects it.
• Waiting for a suitable sale, or for an online listing to close.
• A second run, if the car is passed in the first time.
• The buyer paying the auction house, then the house paying you.

The car leaves your hands on the day it goes to the yard, so you’re without it before you’ve been paid. Ask who insures it while it’s on their premises.

Finance can add time too. A buyer expects a car with no money owing, so your loan has to be paid out as part of the sale. Ask the house exactly how it handles a payout, and whether it will deal with your lender at all. Our guide to how long it takes to sell a car compares timelines across every method.

Do consumer guarantees apply to cars sold at auction?

Mostly not. The ACCC’s page on new and second-hand cars says: “Most consumer guarantees and state and territory laws don’t apply to second-hand cars bought through private or auction sales.”

For you as the seller, that matters at the price end. Bidders know they carry more of the risk, and a careful bidder allows for it in what they’re willing to pay.

It doesn’t mean you can stay quiet about problems. Tell the auction house about known faults, past accident damage or a write-off history, so the condition report is accurate. A report that turns out to be wrong is a dispute you don’t want after the sale.

Selling to a licensed dealer works differently. The ACCC says consumer guarantees apply to second-hand cars bought from a licensed dealer, so the dealer takes on the legal duties to the next buyer, not you.

What should you ask an auction house before you sign?

Get these answers in writing:

• What’s the full seller fee schedule, including anything charged if the car doesn’t sell?
• Who sets the reserve, and can I change it before the sale?
• Is the sale open to the public, limited to the trade, or both?
• How does the car get to the yard, and who pays for that?
• Who insures the car while it’s on your yard?
• If it’s passed in, what are my options, and what does each one cost?
• Can I withdraw the car, and on what terms?
• How long does the buyer have to pay, and when does my money arrive?
• How do you handle finance owing on the car?
• Does the car need a safety inspection before it’s sold, and who arranges and pays for it?

Auction vs a direct dealer offer: how do they compare?

Here’s how an auction sale lines up against selling to us.

With finance, settlement with us usually takes 2 to 3 business days. If you owe more than the car sells for, that negative equity has to be covered before settlement. Our page on selling a car under finance walks through it.

When does auction make sense?

Auction can be the right call when:

• Your car is outside what direct buyers want. Much older, very high kilometres, damaged or unregistered cars may find a bidder at auction when a dealer can’t help.
• You have no deadline. You can wait for a sale date, and for a second run if the car is passed in.
• You can do without the car. It sits on the yard until it sells, and you’ll need another way to get around.
• You’re happy for the room to set the price. Your reserve is the floor, but you accept whatever bidding reaches above it.
• The car is rare or collectible. Competitive bidding between keen buyers may work in your favour.

A direct offer usually suits better when:

• Your car is 2021 or newer with 100,000 km or less.
• There’s finance owing and you want someone else to deal with the lender.
• You want to know the number before you commit to anything.
• You’d rather keep driving the car until the money is in your account.
• You don’t want fees coming out of your price.

If your car is older than 2021 or has more than 100,000 km, send it through to us anyway before you pay any auction entry fee. We’ll tell you straight away if we can help.

Get a firm number before you book a sale

Whichever way you lean, a firm offer gives you a figure to measure an auction against. Get one first, fill in the worksheet above, and compare the two bottom lines.

We’re Sell Your Car Australia (Autohaus Australia Pty Ltd, NSW licensed motor dealer MD 077404). The business is run by a valuer who has priced cars since 1992 and supplies dealerships nationwide. You get a genuine offer by phone, not an online estimate. If you accept, we pay a deposit, often the same day, then inspect the car at a time and place that suits you and pay the balance into your bank account. We collect the car, anywhere in Australia, only after you confirm the funds have cleared. As Spiros put it: “I was paid before Autohaus took possession of my car, which from my experience normally doesn’t happen.” If timing matters most, our page on how to sell your car fast sets out each step.

We buy cars, utes, SUVs and 4WDs 2021 or newer with 100,000 km or less. Start with a free valuation, with no obligation and no fees taken out of the offer, or call 1800 73 55 73.