Is Buying A Repossessed Vehicle Right For You?

by Don Elliott on June 27, 2012

Repossessed vehicles, commonly called repos, are cars and trucks that have been “reacquired” by the bank or finance company because the debtor, the person who took out a loan, was unable to make their payments.

The laws surrounding bank repossession vary from state to state, but in all cases the finance company would much rather the debtor was able to make their payments and pay off the loan in full. When a car is repossessed, the assets of the finance company are tied up in a loan that is not producing a profit. It is also likely that the bank or finance company will loose money when they sell the car to pay off the outstanding debt.

There are several reasons, the good, the bad and the ugly, that repo buyers must consider when determining the used car value of repossessed vehicles:

The Good

  • Banks need to liquidate repos as fast as possible so that they can close out the lien and put their money back to work on a new loan. Most repos are sold through auctions where the highest bidder gets the car. In many cases, cars are sold directly to the public at near wholesale prices.
  • Repos come to market in the condition they were in when repossessed. They may not be as attractive as the reconditioned cars on a car dealer’s lot, but with a little work they can be considered a good used car value.
  • Liens and repossessions don’t appear on the title or vehicle history reports. Banks remove liens when they offer repos for sale, giving the car a clean title.
  • The selling financial institution might offer special financing if you are able to buy the car directly from them.

The Bad

  • Banks and finance companies generally do not spend any money on a repo to get it ready for sale. When they sell cars at auto auctions, they might do some reconditioning and fix safety items, but there may be other repairs and maintenance expense required right away. On all repos, it is a good idea to plan on changing the oil and filter, doing a wheel alignment, replacing the battery and wiper blades, and flushing the coolant. It will also be necessary to visit the automotive locksmith for extra keys and key fobs. The financial institution or auction may be able to refer you to the locksmith that they used to cut keys when the car was repossessed. The cost of these items should be considered when calculating the purchase price.
  • At auction, cash is usually the only way to pay. If financing is required, make the arrangements before going to the auction.
  • Occasionally, banks will use the loan balance as their guide for an asking price. Be sure to do your homework to calculate a fair used car value and avoid overpaying for the car.

The Ugly

  • The debtor whose car has been repossessed has obviously gone through hard times. Some buyers of repos can’t get past the unfortunate history of the previous owner, even though the car represents its own value to the new owner. The past history is a personal consideration when shopping for a repossessed car, truck or motorcycle.


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