6 Ways to Buy Repossessed Cars
Updated on July 22, 2024 / 4 min read
Auto lenders repossess cars when their owners delay making scheduled payments or miss out on multiple installments. The lenders then sell these seized vehicles to recover some of their money. Buyers should proceed with caution and look into the top ways to buy repossessed cars. This is because repossessed vehicles may be sold in the condition their previous owners left them in, meaning the responsibility for repairs and maintenance sometimes falls on the buyers.
1. Banks and auto lenders
Repossessed cars are intrinsically less expensive than brand-new ones. About twice a year, banks and credit unions sell repossessed cars directly to buyers. Local newspapers, specific third-party websites, or bank or credit union websites typically list repossessed cars. On such listings, lenders put up basic details of each repossessed vehicle, including the model name, mileage, year of manufacture, and the date to submit bids. Lenders selling cars also typically provide financing to make purchasing easier for buyers. When that happens, buyers can negotiate the loan terms, like the interest rates and repayment schedules.
Buyers should know that lenders sell the car without any warranties or upgrades. Additionally, buyers are meant to submit their bids without physically inspecting the vehicle. They can inspect the vehicle only after their bid is accepted and before signing any paperwork.
2. Online auction websites
Certain online service providers or auction companies specialize in assisting banks and other lenders get rid of repossessed car stock. The auction companies usually transfer inventory from a lender to a buyer without interfering too much. Repossessed car auction companies take the initiative to ensure that the vehicles can run well before putting them up for sale.
While the additional expenses of moving repossessed cars from lenders to buyers will ultimately fall on the latter, this option is still a promising and cost-effective alternative for people to find cheap vehicles. Since repossessed car auction companies do not own the vehicles, they do not impose large price margins on them. Plus, they do not have large profit margins to meet; auction companies already receive their commissions from lenders, so they price the vehicle reasonably. For buyers, this is a winning option for purchasing affordable cars.
3. Local car auctions
Physical auctions are just as effective as online ones. They offer a wide variety of vehicle choices for buyers. More importantly, prospective buyers actually get to see a vehicle before bidding for it. Upon viewing the vehicle, buyers can verify if it has undergone cleaning and cosmetic repairs.
The only downside of local car auctions is that they require buyers to have cash on hand or a letter of pre-approval from lenders for loans. Unlike online auctions, online bank sites, or lender portals, these auctions do not offer buyers a range of financing options.
4. Repo companies
While buyers may have heard of used car dealerships, repo dealers are likely to be fairly unknown, as they acquire repossessed vehicles from lenders before selling them to buyers. Repo dealers usually clean up the car and make a few upgrades, such as adding new tires and doing engine and body repairs. Unlike the case with online car auctions, buyers can get warranties and mechanical support from repo car dealers. For buyers, buying bank-owned cars from repo car dealers is a very streamlined and quick purchase alternative. Also, the condition of the repossessed vehicle is much better than that of normal used cars, and buyers can get it at a discounted rate.
5. Government agencies
Police and government agencies also sell repossessed cars to prospective buyers. Arguably, the biggest advantage of this option is that the vehicle prices are incredibly low because of the complete lack of intermediary services involved. These agencies accept bids from the general public. Buyers have to be careful not to get carried away and bid large amounts of money for a vehicle they are looking to possess through government or police-organized auctions.
The disadvantage of this option is that when government agencies look to sell the vehicles, they often find them in a state of disrepair or rusty. The cars may have broken wheels, interior features that do not function, or major engine issues. Still, these issues are relatively fine, especially when buyers compare the huge discounts they get for these vehicles.
6. Salvage yards
Junkyards and occasionally salvage yards are unexpected places to find repossessed cars. These places typically provide the best prices for repossessed and used cars, as they obtain the vehicles at extremely low prices. Some of the other places to buy cheap repossessed cars for sale include public notices and advertisements and used car dealerships.
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