Everything You Need to Know about Auction Car Insurance

This guide has everything you need to know about auction car insurance. Automobile auctions are popular places to buy and sell cars, but vehicles at auction need some level of coverage. Commercial buyers and dealers will typically have dealer plates and insurance coverage for auction cars, but private buyers may need to purchase insurance binders or auction policies to drive a car home after auction. Read our guide to learn more and get free auction car insurance quotes.

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent Brad Larsen

UPDATED: Apr 15, 2022

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Automobile auctions have become more and more popular venues for buying and selling used cars. Several factors have contributed to this increased interest in car auctions. First, new car prices have increased dramatically over the past 15 to 20 years. Second, as the prices of new cars have increased, the value of used vehicles has kept pace.

Whether you’re insuring a used car or a brand new vehicle, you’ll find the best available insurance rates online by putting your ZIP in the FREE box on this page!

The last point has to do with the useful life of an automobile. A generation ago, a car would not have been expected to last more than a few years before it would have to be scrapped, or at the very least, undergo major mechanical work. Today’s cars are built to last. Most require little maintenance to get through the first 100,000 or so miles!

Auction Insurance

The rules governing car insurance requirements for vehicles purchased at auction vary from region to region and from state to state. While basic liability coverage is required by every state and the District of Columbia, each state differs as to what specifically is required for a newly purchased vehicle before it can legally be driven off the auctioneer’s lot.

Auto dealers have blanket insurance policies that cover vehicles they own while on display, or while being driven by company employees or by potential customers. A dealer may transport a vehicle using specially registered license plates, knowing that should an accident occur; the dealer is protected by insurance.

Once a vehicle is sold however, the responsibility to legally register and insure the vehicle falls upon the new owner. Often, depending on the state, temporary plates and binder insurance coverage can be issued. This gives the new owner a number of days to secure a permanent policy and to apply for and receive regular license plates and registration tags. Some states require license plates to be issued before a vehicle may legally be driven on public thoroughfares.

Binder auto insurance coverage is still the fastest way to insure a vehicle while the formal policy application is improved or denied and the actual insurance policy is drawn up and delivered to the insured.

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Binder Insurance

Most every insurance agency will offer its customers virtually immediate insurance coverage. This is especially true in the age of the Internet and instant communications. By definition, binder car insurance is immediate auto coverage. This coverage can be in written or oral form.

An insurance binder, during its brief term, gives a customer the same rights and benefits as a standard policy. If for some reason the policy application is denied, coverage will cease when the binder period ends. By convention, binders are usually written for a period of ten days.

Auction Policies

Having discussed binder insurance coverage, it should be noted that there are no other special forms of car insurance written for buyers of vehicles at auction. If insurance is required to get a car off the lot, a binder policy will suffice.

As many shoppers at car auctions are also dealers, they will have commercial dealer plates and insurance coverage through their dealerships, which will allow them to transport their purchases and to drive and store them until they are resold.

If you purchase a car at auction, and you are not a dealer, you should check on your state’s accepted practices and procedures before you attend the auction. Some states will allow a purchaser to drive a vehicle directly home from an auction without plates, as long as the driver has the bill of sale and other auction paperwork in his possession.

However, it is never a good idea to drive a car without coverage. Even on the short trip from auction house to home, you could be involved in an auto accident for which you are liable. While that practice may be allowed in some areas of the country, you would still have to properly register and insure a vehicle you purchased from a private individual before driving it home.

According to Gov-auctions.com, a website providing consumers with information about car auctions, some auctions will ask for proof of car insurance before you take possession of your new car, others will not.

In general, car auctions that immediately sign over the vehicle title and registration will also require you to have binder auto coverage. A salvage auction, on the other hand, may allow you to drive the car home without insurance coverage, but it’s still not a good idea.

Car Auctions

The average motor vehicle in the U. S., under normal conditions, can be expected to last eight or ten years or even more. This means that a car may be sold a number of times during its life, under a variety of different circumstances.

In 2012, car buyers looking for deals are very likely to consider shopping at one of many different vehicle auctions.

Popular cable TV shows feature high-end car auction events sponsored by well-known companies like Barrett-Jackson. However, these events, while open to the public, are usually reserved for wealthy vintage car collectors who can afford to bid hundreds of thousands of dollars at the drop of a hat.

For the rest of us, there are two main types of auctions, according to sources at Popular Mechanics, government auctions and public auctions. They point out that another reason for the rise in popularity of auctions is the tight credit market. At auctions, consumers can shop for cheap cars using cash. Popular Mechanics warns that while great car deals can often be found at auctions, there are many pitfalls that savvy consumers will want to avoid.

Government auctions used to provide more bargains than they do today. Old government agency cars, worn out police cruisers or taxicabs can sometimes fetch higher than average prices at today’s auctions.

Police auctions are often advertised online as great opportunities to buy luxury cars that have been impounded during criminal investigations. They are most often just average vehicles that have been abandoned on city streets or left to rust in public lots.

Public auctions used to be better places to buy cars too, but have become crowded, and in many cases, they are overly competitive. However, there are still bargains to be found at bank repossession sales and dealer auction events as well as other public forums. When purchasing a car from an auction, it is best to follow the old precept caveat emptor, or buyer beware.

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Buying a Car at Auction

Popular Mechanics gives its readers a number of tips to keep in mind when considering buying a car at auction. Cars that are bought in this manner do not come with a warranty. Auctioned vehicles are sold in “as is” condition. There are no test drives or mechanics’ reviews.

There are no returns or rebates when you buy a car at auction.

Popular Mechanics recommends that you be honest with yourself about what you may be buying and the downside of buying a car at auction. A small purchase price now could mean large repair bills in the future.

The only thing you can do at an auction is visually inspect a vehicle for a few minutes. Let your eyes be your guide. If the car doesn’t look right, don’t bid on it. Look for signs of hasty repairs or extensive bodywork, and don’t believe everything you see. Cars may look okay on the exterior, but may be hiding serious problems under the hood.

Small dents and dings in vehicles at government auctions may be minor problems, as the cars may still be reasonably sound. The same small issues with cars at public auctions can be signs of much bigger problems.

Shoppers should check the VIN number on any vehicle they are considering. Make sure the number on the windshield matches the number on the door or in the trunk. If the numbers don’t match, it could mean that the car may have been rebuilt following a major accident. If you can, pull the dipstick and check to see if the crankcase oil is clean and clear.

As for bidding at an auction, you should know the values of the cars you’re bidding on before the auction starts. Smart auction shoppers watch other bidders and avoid getting caught up in a bidding war for a car that may not be worth the price of admission.

Avoid Catastrophic Wrecks

The Insurance Information Institute advises consumers to beware of buying flood-damaged vehicles. Following the summer hurricane season, insurance adjusters wrote off many vehicles from flood-ravaged areas of the south.

These vehicles can then be sold as salvage to northern auction houses who often try to resell them to unsuspecting buyers, without providing proper documentation of their origins.

Another useful informational website is sponsored by the NICB, National Insurance Crime Bureau. The NICB hosts VIN check, a site, which allows potential buyers to check VIN numbers of used vehicles in order to uncover potential fraud and whether the vehicle may have been stolen or simply recovered from a watery grave.

Shop wisely and use all the available tools at your disposal and you may be able to score a great deal at a car auction. Just remember to have your agent’s number handy if you do!

Find immediate binder insurance coverage for your newly purchased automobile by filling in your ZIP in the FREE tool on this page!

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