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8 Things to Know about Buying Repossessed Cars

Resources to Find Your Next Deal

Published March 28, 2018

Purchasing repossessed cars is a spectacular way to save a buck, as buyers can reliably find vehicles at a lower cost than the fair market value. With that said, buying repossessed cars can prove to be challenging if you don’t know what you’re doing.

That’s why we put together a comprehensive guide for you that will protect you while purchasing your next repo.

Use Caution

Caution tape

The biggest aspect of purchasing repossessed cars is that you use extreme caution. Lenders repossess vehicles when the car payments have been defaulted on. Sometimes this is just a few days after the payment is missed and other times its months later. Most lenders are going to work with the owner in an attempt to get paid because they rely on the interest to make profits.

What does this mean for you? By the time the car is repossessed, the owner has probably already missed several months of payment. Whether it’s because they lost their job, have gotten involved with an addiction or are going through a costly divorce, one thing is for sure: they have a lack of money.

Being in dire straits for any amount of time means that this car was most likely not maintained or cared for properly. Considering the vehicle probably had no oil changes, new tires or fluid checks, it might be on its last leg. Either way, lack of maintenance leads to a shorter lifespan on your vehicle.

In addition, there are some owners who will take the time to trash the vehicle once they receive notice of the repossession. This could mean shredded upholstery, slashed tires, or even something as diabolical as sugar in the gas tank.

We’ll discuss in detail later how to prevent some of these things from affecting you. In the meantime, it’s important that you are walking into this process with complete caution. Not every good deal is as good as it seems.

Buy Repossessed Cars From a Lender

cars in a lot

Talk to your local bank or credit union about the repo file. Sometimes, banks will allow their members to view the repossessed cars and trucks. Many times, the lender is just hoping to recoup their losses, so you can often get great deals through this avenue.

The other upside to this is that it’s easier to get the financing you need if you already have a relationship with that bank. Another upside to this is that most banks and credit unions won’t bother with a vehicle that has been trashed. Most vehicles in poor condition will go straight to the auction.

Ask the lender how the vehicle was repossessed. If you can find cars that were voluntarily turned in, you have a better chance that the car remains in good shape.

The downside to purchasing a vehicle this way is that the lender won’t invest anything in cleaning up the car. They are only concerned with getting their money back as quickly as possible.

To purchase a repossessed car this way, you’ll need to make a bid on something you’ve seen from the list. Know the NADA Guide’s lowest value and bid accordingly. The bank will then either refuse your offer outright or wait to hear if other offers come through. This could take several weeks, so be patient.

If you turn in the highest bid, you’ll have the chance to look at the vehicle before signing anything. Bring someone that can do a quick inspection for you to be safe.

If your bank chooses to sell the repossessed cars for a fixed price, you’ll benefit from low prices. Just keep in mind that there is no bargaining in this situation.

Use a Repo Reseller Service

Car being towed sign

There are numerous companies online which help lenders sell off their repossessed vehicle inventory. You’ll want to find a company that moves inventory from the lender to the buyer while never taking ownership. This saves expenses and keeps the cost down for the buyer.

The main advantage of this service is that many of them have a standard for the condition of cars they sell. They might even detail them prior to the sale which is an added bonus. Another perk is that they want to move the inventory quickly since they don’t own it. They would rather have a small markup on each then worry about making large profits. They focus more on volume, so you’re going to find a nice deal.

To keep yourself safe during this process, you’ll want to locate the make and model you desire and make sure it’s being sold by a reputable service. Don’t deal with anyone that charges a viewing fee or any other payments prior to seeing the car.

Start the bidding process at just over the minimum. Then, take the time to inspect it before making a final purchase. If you are purchasing out of state, you might consider hiring an independent inspector to check over the vehicle before the sale is complete.

Buy at a Lender Auction or Police Repo

With the number of car auctions filled with repossessed cars being held in this country, this market is limitless. The problem here is that most of the auctions are held primarily for dealers so you’ll need to find one that is open to the public.

Register before the auction and take a look through their inventory. This will give you a chance to see the stock ahead of time so you can determine your highest bids. Some auctions will require you to have a loan or cash in hand when you win, so find that out before you go.

When bidding at an auction, you’ll want to be careful not to get caught up in the excitement and inadvertently pay more than what the car is worth. Something else to be aware of is that many cars at auctions tend to be dirty or in need of repair. Whatever you purchase is your responsibility. That means if you get down the road and find out there is an issue, you own it.

Some auctions can also be quite difficult to win. Many experts believe that there is rigging which occurs in favor of used car dealers. There are even some auctions that will agree upon sale prices with the dealer before beginning. As long as they win the bid, they will get to purchase the vehicle at their set price.

Do Your Research

researching on the internet

With the Internet at your fingertips, there is no reason not to do your homework first. There are plenty of tools and services available to you so you can get the best buy. This is also true if you are looking to purchase a plane, RV or boat.

Use the Internet to research other aspects of your purchase as well like car insurance. When conducting your research online, be wary of any site that wants you to pay money up front. No matter where you are purchasing from, you’ll want the chance to do an inspection prior to turning over the payment.

Check the Used Car Dealer

Used Car Dealer

If you don’t want the hassle of trying to find your own repossessed cars, you could always touch base with a used car dealer. They will often clean the car, add in some new accessories like mats or tires if needed and make minor repairs as well. Some of them even offer a 30-day warranty or in-house financing.

Keep in mind that this convenience will cost you. Just because the dealer found a car at an auction doesn’t mean they are less concerned with the profit. They still had to pay to transport the vehicle, detail it and title it. All these costs are going to show up on the price tag.

When all is said and done, most car dealers are going to sell the repossessed cars for around the same price as a used vehicle, unless you are a top-notch negotiator. With that in mind, it’s possible to get a small price break on a repossessed car from a dealer, if you know how to work it.

Do an Inspection

Inspecting cars

No matter where you choose to purchase your repo car from, it’s important that you inspect it. This is rule number one when it comes to getting the best deal. It doesn’t matter how little you spend if the car is a piece of junk; you’ve basically thrown your cash down the drain.

Most likely, you won’t be able to take a test drive and there will be no warranties. In addition, you can’t just return the vehicle if you don’t like it. Once you’ve signed for the car, it’s yours no matter what the condition.

If you are going to an auction, many of them will allow customers the chance to inspect vehicles prior to bidding. If you aren’t sure what to look for during this time, we highly recommend taking someone who does.

In addition, you’ll want to utilize the Internet during the inspection process to research the price range of the models you’ve chosen. You need to get these cars at a lower rate because of the risk involved, so don’t be concerned when your low bids aren’t accepted. There will be something else worth buying in the future.

Check Documentation

There is a special challenge you will face when purchasing a repo vehicle. Because they come in many conditions, it’s often hard to find a good one. With that in mind, documentation shouldn’t be something you struggle with.

Many cars have documentation that is worse than the condition of the car; that’s a BIG red flag. Be willing to walk away from any car deal that has no title, because you could face serious issues down the road proving ownership and licensing it properly.

Sometimes, sellers will try to tell the buyer that the title is in transit, but that is a sign something isn’t right. There’s no reason that the repo company or bank should be missing the title. Do yourself a favor and search for another vehicle.

Final Takeaway

If you have some time to spare and you are looking for a rock-bottom price on a vehicle, then repossessed cars might be the way to go. The key is to take your time, do your research and know what you are getting into. Once you purchase that vehicle, all of its problems will become yours.

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Brian Jones
About Brian Jones

I am an ASE Certified Master Tech, but spend more time with my awesome family now than I do on cars. In my spare time, you'll still find me playing with tools, cars and many other "manly" gadgets.

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