An online car auction is a website where dealers buy and sell used cars to each other by bidding. It is also called a wholesale car auction, because the buyers are dealers and not the public. A dealer uses it to sell the old cars it takes in part-exchange.
A dealer does not keep every old car it takes in. Its showroom is meant for the cars it sells to the public. For instance, a dealer in Indore takes in a seven-year-old sedan as part of a customer's new-car purchase. The dealer lists the sedan on the auction. The listing has photos and an inspection report that lists every scratch and the condition of the tyres. Dealers in other cities bid for a few hours. The highest bid, ₹3,10,000, wins. The winning dealer pays through the auction, and collects the car.
A dealer prefers an auction to selling the car slowly from its own yard for three reasons. The sale ends in hours, not weeks. The dealer does not bargain with the public. And the auction collects the money from the buyer, so the seller does not have to chase a payment. The auction company earns a fee for each sale, from the seller, the buyer or both.
Two kinds of data help the bidders. Automotive market data tells them what similar cars have sold for recently. Good photos, often made with AI car photography, tell them what the car looks like.
A dealer buys many cars and waits to sell them, so it often borrows against the cars it holds. The loan that pays for the cars on a dealer's floor is called floor plan financing. Some auction companies also offer such loans to the dealers who use them.
The best-known online auctions of this kind started in the United States and serve American dealers mainly. In India, a listed company that runs car websites also runs an auction exchange for used vehicles, and Indian dealers use it too. Some of the engineering for all of them is done in India.
An auction is different from a used car marketplace, where the public browses and buys. An auction is for dealers only. Cars that an insurer has written off are sold in a separate salvage car auction.