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We often hear about the great deals people have gotten at car auctions, but few of us really know much about them, much less have attended one. They work like most other auctions: You have an auctioneer and bidders. Sellers of auctioned cars can be anyone from car dealers to car lease companies to credit lenders to law enforcement agencies. The bidders in the auctions are usually car dealers, car collectors, and private individuals. In some cases, private auctions are held just for dealers or collectors who are invited. The person with the highest bid wins the auction for the item being bid on at the time. All bids form a binding agreement. All auction sales are final, unless otherwise stated.

One of the most common types of car auctions are the ones held by car lease companies. Once a car becomes one to five years old, depending on the car model and the lease company, the car lease company will typically stop leasing the car and instead try to sell it. In many cases, the car lease company chooses to auction the car off because it does not specialize in car sales and it is inefficient for the lease company to try to put the car out on a lot and try to sell it themselves. A car lease company's best buyers at these are typically car dealers who do specialize in selling cars. In these cases, the car lease company benefits by getting quick cash for the car and not having to pay for storage, upkeep and sales people. The car dealer benefits by getting a relatively new car that has been well-maintained that it can sell at a decent markup.

However, sometimes it is the car dealers themselves who hold car auctions. This generally occurs when they are running out of space on their sales lots and they want to use that space for cars that sell either more quickly or at a higher profit margin. In these situations, the car dealer will be able to get rid of the car quickly by putting it in an auction and use the cash flow to put more current inventory on the car lot. It is not uncommon for the seller and bidders to all be car dealers.

The most talked about types among the general public are government car auctions. That is because the government regularly seizes vehicles involved in felony offenses. These cars come in more varying conditions than cars from other types of auctions. Many of these cars have been highly customized and tweaked. These are the auctions you hear about where a bidder shows up and puts in a small bid and suddenly finds himself with a new car. While this is not the normal situation anymore, it does still frequently occur.

For a variety of reasons, increasingly larger vehicles are showing up in car auctions. It is not so unexpected to see a large diesel truck or recreational vehicle auctioned off these days. These often provide a much better deal than small cars as there are fewer bidders there for these types of vehicles.

Before you go to a car auction, make sure you find out what the rules are for that auction. Some allow you to inspect the cars before the auction takes place. You should take advantage of this or you will get fleeced because other bidders will have a mechanic look them over in most cases. Other auctions do not allow pre-inspection. Be wary of how much you bid in these auctions as good cars usually aren't put in these types of auctions. Much of the information about various auctions and their rules and schedules is posted on the Internet.

Terry Bolton is an internet publisher of automotive stuff. Read his useful and popular articles about getting used car loans with low interest rates and how to get auto repair help online