How Dealers Get Their Used Car Inventory

There are generally two ways dealers get used car inventory - through auctions and trade-ins.

Auctions

There are two types of auctions where dealers bid for used cars. One is a closed "dealer only" auction run by the manufacturer. These are only open to franchised dealers associated with the manufacturer.

Vehicles sold through this type of auction are called "program" cars and are usually late-model vehicles that were returned from a lease or were bought back by the factory for any number of reasons including finance repossessions.

Program cars are usually high quality and have been maintained well as part of a lease program. Many end up as certified used vehicles.

Vehicles that fail to sell at a closed dealer auction will usually be sent to an open auction where any licensed car dealer can bid on them. There's a wide variety of vehicles sold at open auctions, ranging from your late-model - low mileage cars, to ones that are about to fall apart with 300,000 miles.

Dealers use these open auctions to both buy and sell used vehicles.

Trade-Ins

The other way dealers get their used car inventory is through trade-ins. Most new vehicle buyers trade-in their old cars, so dealers always have a consistent flow of inventory.

Dealers will usually buy just about any trade-in. The ones they don't think they can sell on their lots, they sell at open auctions. The ones they keep, they will usually recondition before putting them up for sale.

Before buying a used car from a dealer, always ask for the car's history in writing. Most dealers will comply, but if they don't - that's a big red flag.

Another tip: Don't sign a "power of attorney" form. That will only enable the dealer to process the title papers without showing you the actual certificate of title.

Regardless of the source, you should always have the car inspected by an independent mechanic before purchasing - especially if it was originally purchased through an open auction.