With yearly repossession rates at 65% compared to yearly new car sales. This means that for every 2.4 cars sold, 1 existing vehicle on the road will be repossessed each year.
If You have driven past a Repo Depot or read about a police auction in the local paper, you might have wondered about buying a repo car. After all, these are cars that have been repossessed by a bank, leasing company, or lender when the original owner started missing payments. Surely you could get an amazing deal.
In fact, buying a repo can save you big bucks—between 25%and 40% off the cost of a similar used car. But keep in mind that you could find yourself with a big fat lemon on your hands. You might not even be able to drive it off the lot. The key is to keep in mind that when you are buying arepo, its buyer beware.
The biggest problem with buying a repo is getting a handle on what shape the car is really in. When you buy a used car, you can always geta mechanic to check the car out for you, but not with repos. This is disconcerting, because the type of person who defaults on his or her carpayments is not necessarily the type who makes sure that all the scheduled car maintenance is done on time.
Of course, the unknown condition of the cars is one reason why they are so cheap. For instance, someone sells a motorcycle that was worth$6,000 for just $1,500 because it had a blown engine. But the buyer only had to pay another $1,000 to fix it.
There are several websites that specialize in selling repossessed cars. Many such online dealers offer reports and warranties to help defray some of the risk. For instance, Repo.com provides an 88-point report outlining the vehicles deficiencies and offers a 30-day warranty on components like the engine and transmission. You can extend that warranty up to two years for an additional $670 fee.
Another way to buy repo vehicles is through auctions. For Example, someone buys a Ford Explorer this way themselves. While you cannot get the cars checked out by a mechanic before the sale, you can kick the tires yourself. Before the auction takes place, you wander over to the Explorer you are interested in and started it to hear the engine sound. You would also check the oil, the transmission, the tire rod and looked under the hood. You like what you saw, so when the SUV came on the block, you start bidding. You got it for a couple of thousand dollars less than you would have paid to buy a similar SUV used.
When buying a repo, some suggests sticking to vehicles that are less than 18 months old. The newer the car, the fewer problems it will have. As well, there is a large supply of lease returns for three- to four-year-old vehicles that people can buy on the cheap. Repossession can be an advantage when there is not a large supply of similar cars on the market.
While the deals are still out there, the repo business is getting smaller. An increasing number of car dealers are buying up repo cars,and the auction sites are starting to host dealer-only auctions. Thus, many of the best cars are snapped up by the dealers, leaving the leftovers for the public.
You can find a great deal on a repo if you know your way around a car, and you are willing to take a chance. But you will probably only save a few thousand dollars. If the prospect of coming home with a lemon is enough to keep you up at night, you might want to just stick to the used carlot.