How to Buy a Repo Car

Jessica Shea Choksey | Oct 08, 2020

Repossessed vehicles, also known as repo cars, are those lenders have taken back from the registered owners. When car owners fail to make their payments on a vehicle, the lender hires a repossession company to reclaim it, sometimes without the owner's knowledge. Repossession usually occurs after an owner has missed monthly payments for an extended period and cannot resolve the problem with the lender.

How to Buy a Repo Car

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. 

If you want to buy a repo car, there are a few primary sources for such vehicles. These include lenders, auctions, repo companies, and used car dealers.

Lender Purchase

Some banks will make their repossessed vehicles directly available to the public. For them, this is the fastest way to get their money back on a loan that has gone bad. In this case, they accept closed offers for a period and sell the vehicle to the highest bidder. 

Using the lender as a source, you can potentially get an excellent deal if the bank is in a hurry to unload their repo inventory. However, this approach requires some research on the buyer's part. 

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.

If your bid is accepted, be sure to request to see the vehicle before signing the purchase paperwork. And if the opportunity to mechanically inspect the car is available, bring a mechanic with you.

Vehicle Auction

Auctions are a good way to find the vehicle you want at the price you are willing to pay. Having lots of choices is probably the biggest benefit of auctions. You also get an opportunity to look at the vehicles before deciding on which ones to bid. And of course, there is always the possibility that you can acquire a car you want at a great price. 

But competition auctions can be stiff since bidders can include used car dealers, even at auctions that don't require a dealer license. A well-attended auction could have hundreds of buyers present. And there is usually a registration fee to participate.

For auctions, it is necessary to have cash on hand or pre-approved financing in place. And since everything is sold "as-is," having a certified mechanic along with you will help to ensure your purchase has no significant issues.

Repo Company

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.

Also, unlike banks and credit unions, repo resellers may take the time to clean up the vehicle and ensure that it is in proper working condition. And they may allow you to drive the car before purchasing. 

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.

Used Car Lot

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.

Unlike with an auction, the dealership will most likely have cleaned the car and made certain mechanical repairs. The dealer may also include a short warranty, handle the titling and registration paperwork, and offer to finance the car. It is a one-stop-shop that is more familiar to consumers than any other.

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