Whether you want to purchase repo cars for your own use or sell them quickly to someone else to make a profit, buying a repossessed car is not only a chance to get a good car at a cheap price but also a smart investment. One of the main reasons repo cars are a good financial choice is because they can be purchased for below market value. This means you can make a profit on one when you sell it, even if it needs a little work or you want to drive it yourself for awhile.
Why Repo Cars Are So Cheap
When an owner cannot pay back an auto loan, the lender takes back the car and is then stuck with both the vehicle and the bad debt. Selling or auctioning off the car lets them get both off their books. When the lender sells the car, they want to get back the remaining loan balance and any transport or storage fees incurred, but they know they can’t always do that. They are willing to take lower offers or auction off the cars to the highest bidder even if that price is well below the car’s value. If there are not many bidders interested in a vehicle, it can end of going for a fraction of what it would cost at a dealership or through a private party.
Getting the Best Price on a Repo Auto
Some lenders sell their own repossessed cars. They typically have a set price in mind, but you may be able to negotiate it lower if they really want to sell it quickly. Sometimes lenders who usually send their cars to auction will sell it first if someone is interested, saving the lender the auctioneer’s commission and allowing you to avoid having other bidders increase the price.
Some dealers will go to auctions and purchase a car for you, adding a set fee or commission on top of the bidding price. While their increased knowledge and expertise is very valuable, the fee increases your cost for the car. This can be the way to go if you are more concerned about getting a quality car in good condition rather than the cheapest price.
The best way to spend less is to go to the auction yourself and pick the right cars to bid on. Since multiple bidders can drive up the winning bid, choose ones other people are not very interested in. Cars in bad condition and that need a lot of work will not be popular, but you should avoid them too. A good investment needs to be in good condition, so you want to pick cars that need only cosmetic touch-ups or minor repairs you can handle on your own or get fixed cheaply.
There are others that may be less popular but be really great cars. Since most of the other bidders will be dealers, they are looking for vehicles that they can sell quickly and easily for a profit. They will typically bid less for cars that have unusual paint jobs or features, so you can buy one for less and then get it re-painted or redone and still have a significantly lower cost. Or keep it as it is. When you sell it, you may find it is easier to sell than you thought. Selling one car to one person is a lot different than dealers who are trying to sell a lot of cars to several different people.
Profiting from Your Investment
Before you buy a repossessed car, you should determine its value. At auction, keep your bidding price under the wholesale or trade-in value. That lets you sell it at private-party value to someone else and make money even after subtracting any auction fees or other expenses you had getting the car ready to sell. If you got a really great price, you can make more money or you can drive the vehicle for awhile and still make a nice profit, even though it has gone down in value with the additional age and mileage.
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