How to buy repossessed cars from banks

When a financial institution takes back or repossesses a car, what happens to the car? Since lenders aren’t in the car-selling business, they may just want to get rid of the car—and fast. Whether you’re a bargain hunter or would-be car flipper, if you’re looking to save some money you may want to know how to buy repo cars.

IS BUYING A REPOSSESSED CAR WORTH THE SAVINGS?

Similar to buying a used car at an auction—which is where many repossessed cars end up—buying a repo car can be a bargain.

However, keep in mind that lenders are required to sell repossessed cars in a “commercially reasonable manner.” That means the lender has to sell the car at fair market value for your area and adhere to standard sales practices, such as methods, manner, time, place, and terms of the sale.

So while you can save money by learning how to buy repo cars, it comes down to who you buy the repossessed car from and how motivated they are to sell it.

WHERE CAN YOU BUY A REPOSSESSED CAR?

From lenders

Some banks and credit unions sell repossessed cars directly to the public a couple of times a year. You can find these listings in some local newspapers, on bank or credit union websites, and on third-party websites such as repofinder.com.

The lender will list the cars available and basic details, including the year, make, model, mileage, and the date to submit a bid. There’s no bargaining, and it can take several weeks to find out if your bid was accepted. However, many of the lenders selling these cars also offer financing to help complete the deal, which does allow some negotiation as far as the loan terms.

Cars are sold in “as is” condition without warranties, so any cosmetic or mechanical repairs will be left to the buyer. Bids are submitted without getting a chance to inspect the car first. If your bid is accepted, however, you’ll get a chance to see the car before signing the purchase paperwork.

From an auction

As mentioned before, most repossessed cars end up at auctions, especially if the car was damaged or neglected and the lender doesn’t want to deal with any repairs.

Auctions have a number of cars for sale, which means plenty of choices on hand. Additionally, if you go to a live auction, you may be able to see the vehicle before bidding on it. Plus, you’ll at least know whether or not the car is cleaned up and has cosmetic repairs. On the other hand, live auctions usually require cash on hand or a letter of pre-approval for a loan from a lender. No on-site financing is available.

Online auctions operate slightly differently and it may be possible to apply for financing, provided you have good credit.

From the repo company

In many cases, the lender leaves the sales to the repo company. The process is fairly similar to lender sales, with online descriptions and a blind bid process. The repo company will also include any fees accrued from storing and preparing the car for resale.

From a used car dealership

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.

On the other hand, the sales price will likely be higher, since the dealership needs to recoup its costs. But there’s always the opportunity to negotiate at a used car dealership.

CAN YOU GET A LOAN FOR A REPOSSESSED CAR?

If you’re buying directly from the lender or a dealership, you can get a traditional auto loan. The process would be the same as for any new or used car purchase.

If you’re buying from a repo company or at an auction, you can apply for a personal loan to buy the car.

WHAT ARE THE PROS AND CONS OF BUYING A REPOSSESSED CAR?

Ultimately, a repo car could be less expensive than a used car purchased from a dealer or private seller, especially if the lender is just hoping to recoup its losses.

However, repo cars are often sold “as-is.” This means you may be buying a car that wasn’t maintained or cared for by the previous owner, was intentionally trashed or damaged by the previous owner, or has been sitting in a repossession yard for a while collecting dust, bird droppings, and who knows what else.

So if you want to buy a repo car, consider proceeding with caution.