By: Gov Auctions | 7 July 2014
Anyone Can Buy Repossessed Cars
It is easier than ever for anyone to purchase a repossessed car. There are numerous benefits to doing this rather than walking down to your local used car dealership. Not only is it easier but it almost always presents a better deal and lower prices. While anyone can purchase a repossessed car there are a few simple strategies that will help you lock in the lowest possible price on reliable used car.
Why Are Repossessed Cars a Popular Choice?
If you have never considered purchasing a repossessed car from a lending institution or at auction and you may be wondering why repossessed cars are a popular choice. There are actually several reasons for this. The most common reason people look at repossessed cars as their best option is because most repossessions will take place within two years of the buyer making the purchase. This is particularly beneficial if you are looking for a low mileage or late-model vehicle. Another reason repossessed cars are a popular choice is because lenders are at a disadvantage. Banks don’t want to keep physical assets on hand because they offer very little value. As a result, they are willing to sell cars for less than what the remaining loan balance is in order to regain liquidity.
The 2 Most Common Places to Find Repossessed Cars
When searching for repossessed cars there are two common places you can find them. They are directly from lending institutions and at repossessed vehicle auctions. While the source of the vehicles, banks and other lending institutions, remains the same the method you used to purchase them can greatly affect the final price you pay.
Buying From Banks
The first option is purchasing them directly from the lending institution that repossessed them. Some banks will actually keep repossessed cars in or near the bank parking lot. Others will house them with the towing company that actually repossessed them. Regardless, most people find this an appealing option because they can negotiate directly with the lending institution. Unfortunately, this will rarely offer the lowest price because the bank knows if you do not buy it from them, the car can still be sent auction later on. As a result, the lending institution has less incentive to negotiate and settle on a price lower than the remaining balance of the outstanding loan.
Buying At Auction
The second option is buying repossessed cars once they are put up for auction. In most cases, lending institution will keep a repossessed car on hand for anywhere from 7 to 60 days. If they do not find a buyer within this window of time they will send the car to auction. Sometimes the auction will be dedicated solely to repossessed cars but sometimes a lane institution will place repossessed cars and a general public auto auction.
5 Steps to Buying a Repossessed Car at the Lowest Possible Price
- Always Choose the Auction Route
Buying a repossessed car at auction is always the best choice because it gives you greater negotiating power with the lending institution. Lending institutions use auto auctions as a last resort. This means they are more interested in regaining liquidity than recouping the entire remaining balance on the loan. In terms of saving money and getting the best possible selection a repossessed car auction will always be better than trying to negotiate directly with banks.
- Always Have Financing Ready
Once you decide to attend an auto auction in search of a repossessed car it is imperative you have financing set up before attending the auction. While some banks and lending institutions are willing to refinance a loan for a repossessed car, your reliance on them to gain financing gives them back their negotiating power. Plus, once you are the highest bidder on the vehicle you are legally obligated to pay for it.
- Don’t Be Intimidated By Reserve Prices
Most repossessed cars will have a set reserve price before the auction begins a reserve price or reserve bid is the lowest amount the lending institution is willing to accept. For example, if the reserve price is $5000 and you are the winning bidder with a bit of $3000 the bank is under no obligation to sell you the vehicle. If they believe they can get more than $3000 for the vehicle they may opt to put it back up for auction. Fortunately, you are under no obligation to pay the reserve price of it is higher than your final bed. At the same time you will have the option to purchase the vehicle for the reserve price if you feel that it is low enough that you will still get a good deal.
- Try to Wait Until the Second pass
If at all possible try to wait until the second pass. At many auctions once a vehicle goes unsold during its first time on the auction block the owner of the vehicle, in this case the lending institution, has an opportunity to put it back on the auction block later in the day. When a car is put back on the block later in the day the reserve bid is lower or eliminate it altogether.
- Negotiate With the Lender If You Don’t Meet the Reserve Bid on the Second pass
Finally, if you are the winning bidder on a vehicle that is gone through the second pass then feel free to negotiate with the lender, even if you don’t meet the reserve bid. The last thing a bank wants to do is take a car home from auction if they have the ability to sell it. By negotiating with the lender on or after the second pass you have all of the negotiating power because banks have everything to lose and you have everything to gain.