One of the biggest problems that is often overlooked when making an auto purchase at an auction is how to get financing. While several options exist, it is important to have a plan before you start bidding. In order to give you a better idea of what option best suits your needs, it is important to understand the pros and cons of each method.
Finance Options for Auto Purchase At Auctions.
The most obvious option is simply to save up enough money to pay for your auto purchase yourself. While this may seem like a daunting or near impossible task, it is important to keep in mind that at an auto auction, you can walk away savings thousands of dollars, often up to 80% off of the retail price of the automobile. The advantages of this method is that everything is paid for right away and you never have to worry about paying off any loans. However, it is important to keep in mind that auctions will almost never accept personal checks. This means that you either need to bring enough cash to pay for whatever you purchase, which could be more than you are comfortable carrying around, or bring enough for the deposit. If you only bring enough for a deposit, you often only have 24-48 hours to finish paying the total. When you finally make the final payment, it will need to be in cash or a certified check. The largest drawback is that simple fact that not everyone has enough money on-hand to purchase a vehicle, even at a steep discount.
Affiliated/Sponsored Lending Services
Many auto auctions now have a lender, or multiple lenders, that help sponsor the event. These lenders will allow you to get approved for a purchase up to a certain amount before you actually make a bid. This way you know how much credit you have available to you at the auction. The first benefit of this tactic is that you never have to handle the money. The lenders will pay the auction house directly. The second benefit is that you will know before you bid, whether or not you will have financing. The third benefit is that these lenders understand auto auctions and are more willing to work with you. The first drawback is that you may not be able to find out if you qualify for the financing until you show up to the auction. The second drawback is that the interest rates are often a little higher than they would be under normal circumstances.
Having a Line of Credit Before the Auction
If your credit is high enough and have been with a particular lending institution for some time, they may be willing to advance you a line of credit before you attend the auction. The first advantage of this method is that you know that you will have the money you need before you show up for the auction. The second advantage is that you will have time to shop around for the best interest rate before you borrow. The first drawback of this method is that you still need to have the cash needed to make the deposit on your winning purchase. The second drawback is that this method is very hard to make happen. Most lending institutions want to know what vehicle you are purchasing before they lend you money, which simply isn’t possible in an auction environment.