What are the ins and outs of buying a repossessed car? Well, if you are the type of person who believes that inanimate objects (houses are a good example here) soak up the vibrations of the people who have been in close contact with them, then maybe you should opt out. There’s naturally a lot of sadness surrounding a car that has been repossessed, and it’s an experience you (as an owner) should do everything in your power to avoid. That being said, buying a repossessed car isn't a bad idea and the auctions can be safe provided you know what you're doing so you don't end up buying a lemon.
With this in mind, if you have decided to buy a repossessed car from an auction, make sure you are not next in line when the finance house’s collection agents make a sweep of your suburb. If you decide against buying from an auction house, remember you can search for new or used models on AutoTrader here, or instead of trying to sell your car at an auction, why not try our Instant Offer tool here?
Related: AutoTrader's Car Buying Glossary of Terms
Set a realistic price ceiling for your car of choice
The best way to avoid this is to set your sights very realistically. Make sure you have a budget ceiling that is well within your means, and then have money set aside in case that “bargain” turns out to bite. Also, factor in the auction house’s commission, which runs between five to six per cent of the agreed “hammer” price, 15 per cent VAT, which goes to the government, and an administration fee for paperwork. And, of course, the cost of any repairs you might have to make to the car.
It is also worth noting that you should have pre-arranged finance when bidding for a car at auction. There is a fee of around R5 000 to register for bidding at an auction, and should your bid be successful and you default on the payment, you will lose that R5 000 “deposit”. Of course, if you successfully buy the car, you get that R5000 refunded.
Related: How repossessed car auctions work
You can’t test drive a car sold at an auction
The biggest disadvantage for the buyer of a repossessed car at auction is that test drives are not allowed. There are good reasons for this, the chief one being that the finance house or bank that provided the original purchase-price funding still owns the car until it is actually sold at auction. So allowing an auction house to provide test drives, with the risk of an accident, is simply feasible.
You buy as-is
You are allowed to view the car you want to bid on one or sometimes two viewing days before the auction and also in the hour or two before the auction starts. You have to make a visual assessment of the car and decide what it is worth to you. For this reason, it is a good idea to take along a knowledgeable car person with you to the viewing days. A second pair of (skilled) eyes is extremely valuable in these scenarios.
Related: AutoTrader's Engines & Body Types Glossary of Terms
Auction houses list faults as far as their inspections can reveal them, and these are generally listed on an information sheet on the windscreen of all cars up for auction, but there are no guarantees. You buy a repossessed car as is, or Voetstoots, as the saying used to go. The exception to this rule is when a car comes with a portion of its warranty and maintenance/service plan still intact. But this has to be honoured by the original manufacturer, or dealer representing that manufacturer. The auction house doesn’t accept responsibility for this.
Check out the history via the VIN number
For this reason, it is a good idea to go as early as possible on the viewing days, make a note of the VIN number (Vehicle Identification Number) and then research that car’s history through its original manufacturer and/or dealer.
Check the maintenance record
It is important to also check the maintenance history of the car via the VIN number. Any major repairs or damage to the car should be noted against the car’s VIN history. Of course, any evidence of unauthorised work having been carried out on the car could very likely invalidate the warranty and maintenance plan.
Factors to consider affecting the price are high mileage and evidence of bodywork damage. This will lower the price appreciably below the stated “trade value”. If there are mechanical faults, these may be listed in good faith by the auction house, but bear in mind that serious faults may surface soon after you have paid for the car.
Related: How much does it cost to fix car-dents?
And now, the good news
This all sounds like a lot of bad news. The good news is that there are some great bargains to be picked up at auction. Generally, auction houses set a reserve price between 15 and 20 per cent lower than the trade value. The auction houses typically list the car’s trade value, as estimated by TransUnion, and in our experience, you can get good cars at considerably less as the finance houses want to recoup the money they have lost from the sale.
In summary
Be realistic if you are buying a car from an auction. Don’t aim for that once-in-a-lifetime bargain because you will be bidding against hundreds of experienced used car dealers. Do your homework independently, and check AutoTrader for the current retail prices of the used car you are aiming for so that you are as prepared as you can be. It is also a good idea to check on parts availability and the comparative cost of parts prices.
And don’t have tunnel vision. Check out competitive prices of cars in a similar category to the one you want.
