Buying A Repossessed Car From A Dealer
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Many repossessed cars are priced well under fair market value because of the negative stigma associated with the previous owner's circumstances. People who might consider buying a repo car assume that the owner's financial struggles prevented them from properly maintaining the vehicle. In some cases, an owner may have abused the vehicle as a retaliatory tactic against the lender upon learning the financial institution's intention to repossess the car. On the other hand, it is possible to find a repossessed car in excellent condition. Whichever is the case, it is vital to obtain a thorough inspection of the vehicle before purchasing it.
The effort begins with identifying lenders that are selling their repo vehicles directly to the public. Also, keep in mind these vehicles are often not prepped for sale since they have been sitting in lots from the time they were repossessed. They are generally in the "as-is" condition, which means they may have cosmetic or mechanical issues. And the buyer typically will not even get to see the vehicle until their bid is accepted. Before bidding, be aware of the car's general market value based on make, model, year, and mileage.
Repo companies are the middlemen between the lender who has repossessed a vehicle and the buying public. A buyer can find these companies online, do a quick search of their inventory, and place a bid, all in one sitting. So, this route can be very convenient.
From a pricing standpoint, a reseller will typically want more for a vehicle than buying directly from a bank or at an auction because they will be adding their fees to the bottom line. But in most cases, resellers are interested in quick sales and high volume, so the price will still likely be on the low side.
If haggling sounds better than bidding, buying from a used car dealer is the most straightforward way to purchase a repo vehicle. The price tag may be somewhat higher because dealerships have more costs to cover, but there's almost always room for negotiation.
Though the situation is unfortunate, repossessed cars offer an opportunity to those looking to purchase a new vehicle at a hefty discount. However, budget-minded buyers need to be wary of the risks before buying a repossessed car.
On the flip side, a repossessed car may be in good condition, especially if the previous owner bit off more than they could chew with their original purchase and had it repossessed shortly after buying it. In such a case, their misfortune could be to your benefit.
After a car is repossessed, the lender may decide to sell it at auction to the highest bidder. Many car auctions are only open to registered car dealers, though some may be open to the general public.
As a result, repos sold by resellers are likely to be more expensive than those sold directly from a lender or at auction. Fortunately, the trade-off is a vehicle you can be more confident about buying.
Depending on your budget and comfort levels, it might be worth forking over some extra money for the convenience and peace-of-mind in buying from a dealer. Many dealers will work with lenders to help you get a good deal or help finance the sale in-house, in addition to handling the paperwork.
A number of repo cars, including those sold at the auction, end up right back at the dealership. Repossessed cars at a used car dealership may be indistinguishable from other vehicles on the lot. The dealership will clean the car and perform any necessary repairs. They may offer in-house financing and handle all the paperwork, and could even provide a partial warranty.
With that in mind, here's an interesting video recently posted by a car dealer who talks about the business of fixing up and selling repossessed vehicles that offers a useful view of what goes on with repossessed cars that eventually make it back onto the sales lot.
Now this is not meant to be a slam on any dealership selling repossessed vehicles---we all have to make a living--- however, when a car is cosmetically transformed to put its best face forward, it can be misleading if the potential buyer is unaware of its ownership history and what has been done to it.
Buying repossessed cars can be a great way to save money. Buyers can often purchase a vehicle at a cost lower than fair market value. However, buying repo cars can be tricky, especially if you are unfamiliar with the way the repossessed car trade works, or how to find a repossessed car. You should always make sure you're covered with an affordable car insurance policy. We've put together a quick guide to help you find and buy repossessed cars safely and at minimum cost.
The repossessed car meaning is simple; when a buyer fails to make payments or defaults on a vehicle loan or lease, the lender has the authority to take back the car without the need for legal action. Lenders can repossess cars from the registered owners if the registered owners default on car payments. The LA Times reports that, depending on the laws in your state, a payment may need to be late for just a few days in order for a bank to file a levy on a car and send an order to repossess it.
Sometimes your bank or credit union will allow you to look at their repo file, which lists all the cars and trucks they have repossessed and would like to sell. Often the lender just wants to recoup their losses, so you can get very good deals this way. Sometimes you can even get financing for the car directly from the lender that owns it.
To buy bank repos this way, simply make a bid on the car you like from the repossession list. Make sure you know the vehicle's NADA Guide low value. The bank may refuse your offer or wait to hear other offers from dealers and other buyers. This part of the process may take a few weeks.
These days, you can find many companies online that specialize in helping lenders get rid of their repossessed car inventory. Brandon Macomb, who has worked in repossession sales since 2003, says to look for companies that move the inventory from lender to buyer, without taking ownership. Dealers who buy repo cars and transport them prior to reselling them incur extra expenses, which will inevitably fall on the buyer.
To buy a repossessed car from this kind of seller, locate the vehicle make and model you would like online, from a service you trust. Macomb advises that you avoid resellers who charge viewing fees and other upfront payments before you see the car. Make a bid at or over the minimum bid.
The types of car auctions in the market are virtually limitless, with most selling to used car dealers, not individual buyers. They include government auctions, which offer impounded cars from the police lot, along with repossessed and confiscated vehicles.
There are several websites that specialize in selling repossessed cars, such as Repo.com and RepoDepo.ca. Marvin Bowman of Burnaby, B.C.-based Repo.com says his company gets about 200 repo cars a month. Many such online dealers offer reports and warranties to help defray some of the risk. For instance, Repo.com provides an 88-point report outlining the vehicles deficiencies, and offers a 30-day warranty on components like the engine and transmission. You can extend that warranty up to two years for an additional $670 fee.
While the deals are still out there, the repo business is getting smaller. An increasing number of car dealers are buying up repo cars, and the auction sites are starting to host dealer-only auctions. Thus, many of the best cars are snapped up by the dealers, leaving the leftovers for the general public.
Darren and Courtney Johnson sit on the back of a truck outside their home in Center Hill, Fla. Three weeks after they bought a used SUV and took it home, they were told by a dealership manager that they needed to return and sign a new contract with different terms. Things went downhill from there. Octavio Jones for NPR hide caption
"I received a phone call from the finance manager of the dealership," Darren Johnson says. The manager told them the financing for the car had fallen through and if the couple wanted to keep it, they had to come back and sign a contract with different terms.
Documents from a later arbitration case show that the dealership wouldn't return their calls. And it didn't pay off the loan on their trade-in vehicle. So the Johnsons were stuck paying the loan, with no car, for nearly a year. They eventually used a chunk of their small retirement savings to pay the loan back.
The company also said "the communication in this situation around the trade-in ... was hindered by the impacts of the Covid-19 pandemic." The dealership did not explain how the pandemic stopped it from returning the Johnsons' car, which the dealership sold in October of 2019.
The Johnsons bought a car from Greenway Hyundai Orlando in Orlando, Fla. The dealership told them they needed to sign two other deals after their initial purchase. After the Johnsons refused to sign the third contract, the dealership repossessed the car. Octavio Jones for NPR hide caption
In 2015, a new state law in Maryland went into effect. It says dealers have just four days to cancel a sale or it becomes final. And dealers are banned from selling trade-in vehicles until the sale is final. So if need be, the car buyer can get their trade-in back.
Kaitlyn Arland is an Army service member stationed at Fort Riley in Kansas. When she bought a car two years ago, she says the salesman didn't say anything about the sale not being final as she drove away. But then she received a call from the dealership. Arin Yoon for NPR hide caption
This was about a year ago. Flynt had bought a used Chevrolet Camaro from an AutoNation dealership outside Cleveland. But then he says he got tangled up in a yo-yo sale situation. The dealer was trying to get him to bring the car back. Flynt said he would, but then he didn't. And the dealer reported the car stolen. Flynt says when he got pulled over he showed the police the paperwork indicating he had bought the car legally. 59ce067264