You may have heard the timeless axiom that the minute you drive a brand-new car out of the dealership parking lot, it loses fifty percent of its retail value. If you have, then believing yourself to be a well-informed consumer, you aptly go out and buy your next car from a used car dealership or from a private seller, with the expectation that you can haggle, bargain, and negotiate your way to a great deal on a good car.
That’s all well and good. But did you know that there is an entire untapped market of cars in excellent condition being sold for literally pennies on the dollar? This market is known as repossessed car auctions.
Repossessed car auctions are where the true bargains can be found. Literally every used car dealership or every private owner looking to recover the most money possible from the sale of their car uses the Kelly Blue Book to determine their cars’ retail value and prices their car accordingly.
Repossessed cars are a whole different case altogether. These cars are not sold with a profit-motive through the commercial retail market with a profit-motive. They are actually being resold through government-facilitated auctions through which the intent is to recover as much money as possible in order to unload the car, which is a liability to the government agency or financial institution that is holding it in their inventory.
How do cars end up in a repossessed car auction? Here are some of the many ways:
- Owners don’t payments for their cars so the car gets repossessed.
- The IRS can seize your car due for failure to pay your income taxes.
- Law-enforcement agencies can seize your assets if you become incarcerated.
- The property in the estate of a deceased person can be sold through auctions.
Cars are sold cheaply through auctions because the objective is to unload the seized inventory from the agency that has acquired it The government by law must dispose of these assets by way of public auction to the highest bidder. In some cases the proceeds of the auction will go to the beneficiary of the auction, who is oftentimes the lien holder. In other cases, the proceeds will go to the trust fund established on behalf of the estate of the car’s previous owner. In some other cases, the government will use the proceeds from the auction to satisfy its own claims against the previous owner of the car, such as unpaid property taxes or civil litigation fees.
Some people may have the stereotypical impression that cars sold through auctions are beat-up or somehow in less-than-good condition. That is not necessarily the case. If the car was owned and maintained by a wealthy person who kept his or her car in mint condition but passes away, or gets convicted of a crime and sent to prison, or failed to pay his or her taxes, then this car will be seized. On the other hand, a repossessed car could have been owned by a person who simply did not have the money to maintain his car properly, or whose car got into a minor accident. At a repossessed car auction, you will find all kinds of cars from compact cars to exotic luxury cars to race cars.
If auctions are the best places to find cars at bargain prices, then why doesn’t everybody shop for their cars at auctions instead of going to dealerships? The answer is that it is a matter of perception as well as lack-of-information or being “in-the-know”. Auctions are rarely ever commercially publicized, especially government auctions. Government auctions are however publicized in newspapers in the legal notices section. Also, as mentioned above, people do tend to have misconceptions about seized or repossessed cars as being “tainted”, or in “sub-prime condition”, or “beat-up” inventory that is not worth spending the money on. They would much rather pay thousands of dollars on flashy new cars that are heavily advertised by commercial dealerships.
Are the cars that you find at repossessed car auctions offered with any type of warranty? Unless the car comes with a transferable warranty that has not been voided, or unless you are able to buy your own warranty, the answer is no. Cars sold at auctions are typically sold “as-is”. But then again, so are cars sold through newspaper listings by private individuals and even by dealerships. But before you attend an auction, you should find out whether you will have an opportunity to inspect the car before you bid on it. Even if your intention is to buy repossessed cars that are in need of repair, with the intention of fixing them up and reselling them, you should still take into consideration whether you will have a chance to inspect the car before you buy it.