Regardless of its age or mileage, a car has a value. A car bought using cash from a bank or building society loan is yours from the start.
The money is not secured on the car. Such cars remain the property of the lender until the loan is paid off or the contract successfully concluded.
Things are more complicated for a car bought on finance. How to avoid depreciation: Carbuyer's top tips. If you borrow money from the bank to buy a car, that bank will want you to eventually pay it back, with the addition of whatever interest it has imposed.
If you fail to pay that money back, the bank may enter into legal proceedings to reclaim its money via whatever means necessary. This can mean bailiffs arriving and and removing property of equivalent value, including the car and other items that, when combined, will match the amount owed. If you fail to keep up payments, the finance company will take possession of the car first, before taking steps to recover further money owed.
This information can be accessed by anyone and is something that you should always check for before buying a new car — especially in a private sale. Our guide explains how to access this information by performing a HPI check. A HPI check will confirm whether this is the case — or at the very least provide contact details so you can check with the finance company. There have been cases where a glitch in the system indicates a car with a clean record still has outstanding finance recorded against it.
If the car fails to reach this reserve at auction, it may not sell the first time around. It can sometimes make sense to sell it at a slight loss, then at least everything is over and done with and the company no longer has to worry about the car not selling and losing further value through ongoing depreciation. If a buyer has defaulted on payments for a car, it stands to reason that money might not have been spent elsewhere, either. Main-dealer maintenance, for example, is the first thing likely to fall by the wayside.
Most states enforce a day grace period, however, before allowing lenders to repo autos. Also, most lenders would rather not take the car back because they depend on the interest paid on the loan to make a profit.
They may work with customers for months trying to keep the loan going before the go so far as to repossess the vehicle. That means that by the time the repo man shows up to take the car, the owner has probably already skipped a few months of payments.
Many people who receive a notice of repossession from a lender use that opportunity to trash the car, shred upholstery, tamper with the engine, etc. Others may have been in dire financial straits for some time and have lacked the cash to keep up with basic maintenance on the vehicle since the time of purchase.
There may have been no oil changes, fluid checks, new tires, etc. Any or all of these conditions take their toll on the vehicle. For this reason, no matter which route you take to find and buy repo cars, it is crucial that you inspect the vehicles thoroughly before purchase. There is usually no test drive, warranty or guarantee on a repossessed auto and often no returns either. That means once you sign and pay, it's yours, running or not. Sometimes your bank or credit union will allow you to look at their repo file, which lists all the cars and trucks they have repossessed and would like to sell.
Often the lender just wants to recoup their losses, so you can get very good deals this way. Sometimes you can even get financing for the car directly from the lender that owns it. The downsides to this method are that banks usually do not bother with the expense of cleaning up or repairing the vehicles before reselling them. They want to get their money back quickly and move on with the business of banking. So you may have your work cut out for you to get your new repo car road-ready after you buy it.
To purchase a repo this way, simply make a bid on the car you like from the repo list. The bank may refuse your offer or wait to hear other offers from dealers and other buyers. This part of the process may take a few weeks. If your bid is the best the lender can find, you will usually have a chance to look the car over before paying and signing the paperwork. Make sure to bring a mechanically inclined friend with you when you make the final inspection if you don't know much about cars. These days, you can find many companies online that specialize in helping lenders get rid of their repossessed car inventory.
Brandon Macomb, who has worked in repossession sales since , says to look for companies that move the inventory from lender to buyer, without taking ownership.
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