If you are interested in buying repossessed cars then it’s good you are reading this article.
It reveals important details you need to know about repossessed cars, including how and where you can buy them.
The details shared in this article are simple and useful… and can help you make better decisions if or when you plan to buy a repossessed car.
What are Repossessed Cars?
Repossessed cars are simply cars that the lenders claim back from the owners, due to debts owed.
In other words, repossession of cars is a process where the auto loan lender takes back ownership of a car if the vehicle owner fails to fulfill the conditions set out in the auto loan agreement.
The repossession or “take back” may be with or without warning from the lender. Or it may be sanctioned by the court.
So, if you fall behind on your auto loan repayments, the lender has the right to take possession of your vehicle.
And, if you are getting an auto loan, make sure you are fully aware of repossession details so you are not taken unawares.
Why Repossessed Cars are Sold
The main reason why such cars are sold is that the lender wants to recoup the losses incurred from giving out the car loan.
The lenders only repossess cars after several missed payments on car loans.
So, it would be correct to state that repossessed cars are resold by the lender to recoup losses from the breach of the auto loan contractual agreement by the car owner.
Types of Car Repossession
There are two main types of car repossession. These are voluntary repossession and involuntary repossession.
1. Voluntary Repossession
A voluntary car repossession occurs when the car owner gives back the vehicle to the lender because he or she can no longer afford to make the monthly payments.
In this type of repossession, you voluntarily send back the vehicle to the lender or dealership before they send the repo team after you.
There are advantages associated with the voluntary surrender of cars to the lender or the repo team. The main advantage is that you will avoid the auto lender’s cost of repossessing the vehicle.
This cost is fees charged by the repo team or towing service when they come knocking at your door to repossess your vehicle.
If you allow the lender to come for your car, the fees associated with this are passed on to you.
Voluntary repossession affects your credit score negatively. However, if you continue to make payments after this incident, then your score may become positive.
Another fact about voluntary repossession is that your loan is not canceled until the lender recoups his money.
If the car is sold after you have returned it, then the proceeds would be used to offset your debt.
However, if the proceed from the sale is less than the amount you owe on your car loan, then the remaining balance would be added to your debt.
For instance, if you own $3000 as a car loan and your car is sold for $2000, you will still own $1000.
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2. Involuntary Repossession or Lenders Only Repossession
This is the common type of car repossession.
It is the exact opposite of voluntary repossession.
Here, the lender comes around to claim or take back the car. This is a common type of car repossession.
The lender may repossess the car without your permission. However, The FTC points out that:
“Once you are in default, the laws of most states permit the creditor to repossess your car at any time, without notice, and to come onto your property to do so.
But when seizing the vehicle, your creditor may not commit a “breach of the peace.”
In some states, that means using physical force, threats of force, or even removing your car from a closed garage without your permission.”
The Selling of Repossessed Cars
The lender or creditor who has repossessed a car may decide to keep it as compensation. Or, he may resell the car to recoup his money. The selling could be in a public or private sale.
However, some states’ laws require that the lender inform you of the place and time of reselling.
The reason for this is so you can have the opportunity to redeem or buy back the car.
Remember, if you participate in the public or private sale, or whether you choose to redeem or buy back the car, you are expected to pay the full amount you owe.
This includes all arrears and repossession costs.
It must be noted that the law requires that the reselling of repossessed cars be done under a “commercially reasonable manner”.
The FTC also explains the following about “commercially reasonable manner”:
“Any resale of a repossessed vehicle must be conducted in a “commercially reasonable manner.” Your creditor doesn’t have to get the highest possible price for the vehicle — or even a good price.
But a resale price that is below fair market value may indicate that the sale was not commercially reasonable. “Commercially reasonable” may depend on the standard sales practices in your area.
A creditor’s failure to resell your car in a commercially reasonable manner may give you a claim against that creditor for damages or a defense against a deficiency judgment.”
The Buying of Repossessed cars
If you are interested in buying a car to get you to work, school, grocery store or just about anywhere, you may want to consider looking through repossessed cars.
As already explained, these are cars that have been seized by lenders or creditors from car loan defaulters or debtors.
There are benefits as well as risks associated with the buying of repossessed cars.
The benefits include:
- There is a high chance that you will get a vehicle at a price that is below the market value.
- You can save a lot of money from your car budget if you buy repossessed cars compared with buying new or used cars from car dealerships.
- You can choose from various car types and models, etc. If you do a thorough search, there is a high chance that you will find the type of car that suits your needs, tastes, and personality.
The risk of buying repossessed cars
The main risk associated with buying repossessed cars is that you buy the vehicle as-is.
Here the lender may sell you a car that is not in great condition, compared to what you will get buying a brand new car.
Tips for buying a repossessed car
Here are quick tips you can apply before you buy a repossessed car. These tips will also help you get a competitive edge when bidding for repossessed cars.
1. Find a Reliable Source
You should look for the best source of reliable repossessed cars. You can find directories that show you the many different vehicles that are being auctioned off every day in your local area.
2. Know a little about Mechanics and Inspection of the Car
You should understand what to look for in a good running vehicle. A good inspection and assessment are necessary so you don’t bid for a car which would cost you more money in the long run.
Just likeknowing the right requirements of driving Uber, for instance, it’s good to know a bit more about a car before you buy it.
3. Have Enough Money To Buy Before Bidding
Of course, you still need money to buy repossessed cars.
If you are short of funds to make a bid, then you should consider contacting a few authorized used car financing companies. Your bank or a credit union may come into the picture if necessary.
Where to Buy Repossessed Vehicles and How to Buy
There are many places to buy repossessed cars.
1. Directly from the Lender
Yes, if you know a lender who has recently repossessed a car from the owner then its best to contact him or her to buy the car.
The lender could be an individual, a credit union, or a bank.
2. Auction Sales
An auction is the public sale of something to the highest bidder. You can participate in auctions where repossessed cars are sold.
There are different types of auctions you can take advantage of. These may include Police repo auctions.
3. Police Repo or Government Auctions
You can check out government auctions where impounded vehicles by the police are often sold to the highest bidder. Private auctioneers also auction police repo vehicles.
These auctions are often open to the general public every month.
You can search online for good information about Police repo auctions.
4. Repo Reseller Services or Companies
You can buy repossessed cars from companies online that specialize in helping lenders get rid of their repossessed car inventory.
If you are taking this route, look for companies that move the inventory from lender to buyer, without taking complete ownership.
You must note that buying from reseller services may increase the price you are targeting to buy.
The reason for the increase in price is that these dealers who buy repo cars may incur extra expenses in the process of and prior transporting and reselling them. These extra costs would inevitably fall on the buyer.
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5. Used Car Dealers
Some used car dealers sell repossessed cars. So, check them out.
Don’t forget though that buying repossessed cars from these dealers could be expensive.
They often clean and fix those cars they bought for reselling. They may add new accessories like mats or tires if needed and make minor repairs as well.
They are concerned about profit even if they won the cars at an auction.
Used car dealers sell these vehicles at the same price they sell the used cars in their garage.
Buying Repossessed cars Online
You can buy repossessed cars from many online sources like craigslist and others. Do a thorough Internet research, bid for the vehicle you like, and pay for it.
So, to buy these cars online, these steps would help you:
* Use the Internet to Research, Bid, and Buy. You can start with a simple Google Search.
* Buy from popular and trusted online auction sites. These include places like:
- Auto Auction Mall
As you can see from reading this article, it’s not that hard to know how and even where to buy repossessed cars.
You can follow the tips shared here to help you when it comes to buying repossessed cars and minimizing losses.