Repossessed cars for sale in the UK: Our primer

Repossessed cars for sale in the UK: Our primer

29 August 2022 Concept Car

Looking for an attractive car deal? Repossessed cars seem like a great choice. They are cheap, quite often still fairly young and potentially in great shape. What’s not to like?

Actually, quite a lot. While repossessed cars can indeed save you a lot of money on the initial purchasing price of a vehicle, they are more often than not anything but ideal.

We don’t want to sound overly dramatic. But one thing’s for sure: If you really want to go for a repo car, you need to be well-informed. In this special, we sum up everything you need to know about the topic: From how repossession works to what you should pay attention to. Finally, we’ll talk about alternatives and what to do if you have personally been hit by a repossession.

Ready to turn into a repo expert? Let’s get to it.

But wait … this only happens to the poorest of the poor, right?

You might think that car repossessions occur only under extreme circumstances. Sure, car payments can be pretty high. But you’d assume that dealers try to keep loan payments to a realistic level. So you should theoretically be able to fulfil your commitments at all times.

In reality, they are pretty common. Some US statistics suggest that for every new car that’s sold, one car is repossessed. That’s bad news for sure.

How is this even possible?

A variety of factors contribute to the repo dilemma:

  • Many dealers no longer automatically demand a down payment on a loan. This means that monthly payments will in turn need to be higher.
  • PCP schemes allow almost anyone to get a car – even if you really don’t have the money for it.
  • More and more people get chronically ill or unexpectedly loose their job. This makes it harder for them to still keep up their monthly payments.
  • Experts recommend setting monthly payments pretty high so you can pay off your loan quickly. Technically, this is correct. With a limited budget, however, this approach increases your chances of a default.
  • Technological advances such as satellite tracking have made it easier for repo men and women to find and collect a car.

So are repossessed cars an opportunity or a dilemma?

Well, they’re obviously both.

Let’s focus on the downside for a second. There are certainly plenty of reasons to steer clear of repossessed vehicles. The entire process feels a bit suspicious. Since repos are often sold at a car auction, you will also need to learn how to bid first.

All of this makes buying repossessed cars troubling to say the least.

On the other hand, repo cars really can be a fantastic choice. They can shave  between 25-40% off the price of a comparable new model according to some sources.

In times when every penny counts, that’s nothing to sneeze at. This alone makes it worth your while to investigate the topic a little deeper.

What can cause repossession?

A repossession does not come falling out of thin air. In fact, it is usually very easy to explain. As you’d expect, it all comes down to money.

When you sign your loan contract, you agree to pay off a clearly defined sum every month for a certain period of time. At the end of that term, the loan is paid off. In some cases, that means the vehicle is now yours. In other cases, it means you must now move on to a new contract.

Either way, the lender – which will typically be your dealer or your bank – expects you to make all payments fully and promptly. If you fail to make these payments or if you only pay parts of the agreed-upon sum, you have fallen behind on your commitments.

Should this happen repeatedly, the lender may no longer trust you to repay the loan. If this is the case, she may decide to terminate the contract and take the car back.

This process is referred to as repossession.

Is repossession unfair?

Before taking a look at how repossession is enforced, let’s first shortly deal with the often heard notion that repossession is unfair.

To be absolutely clear, if a lender opts for this step, she is usually in her right. When she agreed to lend you the money, after all, you made a binding promise that you would stick to your pledge. By not paying, you are violating that promise.

On the other hand, many lenders are undeniably taking things too far.

A repossession feels unfair if …

  • … the lender takes legal action after only one or two missed payments.
  • … your financial difficulties are only temporary and could have been fixed pretty quickly.
  • … the lender doesn’t even try to find an alternative solution.
  • … you’ve signalled your willingness to pay by transferring a partial payment.
  • … you’ve spent years paying off the loan and are merely struggling with the very last payments.
  • … the repo company are harassing you and using psychological intimidation to reign you in.

Many people with financial difficulties experience repossession as traumatic. This is neither necessary nor ethical. If you should ever find yourself in such a situation as described above, make sure to get legal assistance. And fight for your right to drive.

5 steps: How is repossession enforced?

If a lender decides to opt for repossession, there is usually very little you can do about it. This is what typically happens:

  1. You are notified about the repossession.
  2. The lender will ask for the return of the vehicle.
  3. If you fail to comply, they will usually send out someone to collect the car.
  4. The car is sold off at an auction. The proceeds are subtracted from your balance. However, any costs incurred through the repossession process are added to your balance. Which means that you will almost certainly still have outstanding debt even after the car has been auctioned off.
  5. If you can not pay off this debt, you will need to negotiate a deal with the lender. There’s a serious risk of bankruptcy if you can’t make it work.

It isn’t hard to understand why this process is stressful and painful for those affected. Repo men can be very rude and aggressive and they will go as far as they can to secure what they consider the property of the lender.

Then again, they can’t just do anything they like.

Repo men: What is allowed, what isn’t?

It can sometimes seem as though repo men are allowed to do just about anything to get your car. Certainly, many of them are taking things to the limit. As an American attorney writes on his website:

“Problems sometimes occur when repo men attempt to repossess a vehicle. There have been many cases of injuries, accidental kidnappings, and deaths associated with repossessions gone wrong.”

Needless to say, outright violence is never allowed and this almost never happens in the UK.

As Finder writes:

“Repo agents are legally allowed to take back the car, but there are restrictions on how far they can go. They can’t clamp or tow your vehicle if it’s inside a locked garage for instance. However, they can put a clamp on your car or tow it away if it’s parked in your driveway or in a public place like a road or car park – or even if it’s left in an unlocked garage.”

Unfriendly encounters are probably unavoidable, so it helps to brace yourself and seek assistance from family or friends if you are experiencing psychological pressure.

Can you turn things around?

Cher once sang: “If I could turn back time …” Just like her, it would sometimes be wonderful if we could simply hit the reset button and start afresh. In practise, this usually isn’t possible, however.

Once a lender has repossessed your car, it is very unlikely that you’ll ever get it back. If you couldn’t keep up with loan repayments earlier on, why should you be able to do so now?

On the other hand, if you are confident you can pay off your debt and want to get your car back, you will need to act fast.

To do this, you will need to transfer all missed payments and negotiate a deal.  Alternatively, in some cases, you can pay off half of the agreed-upon loan sum and terminate the deal. The great benefit of the latter option is that it will not damage your credit score.

Whatever your strategy, make sure to be quick about it. Lenders are usually unforgiving and hold very little interest in helping you once things have gone sour.

What are the repercussions?

If you can’t turn back time, then it’s important to be aware of the consequences. A repossession is one of the most financially damaging things that can happen to you:

  • You’ll lose your car. If you need the vehicle for your job, this may lead to unemployment.
  • All previous payments you’ve made are null and void.
  • You will still need to cover the costs incurred by the repossession and pay back any outstanding debt.
  • Your credit score is sure to take a tumble. You’ll suffer from the consequences for up to seven years.
  • This will, for example, make it a lot harder to apply for a loan in the future.
  • If push comes to shove, you may have to file for insolvency.

We’ll talk about some of this in a bit more detail towards the end of the article.

To steer clear off the worst effects, some experts will occasionally recommend a ‘voluntary repossession’. What are they talking about?

Does it make sense to apply for a repossession yourself?

A voluntary repossession sounds like a great idea on paper. Instead of having to go through the tormenting encounters and psychological torture of the repo business, you simply admit you can’t pay back the loan and return the car yourself.

Although there are quite a few proponents of this approach, it is not quite as attractive in practise.

The pros of voluntary repossession …

… are scant:

A less stressful and easier procedure. You simply drive your car to the lender and return the keys.
In a voluntary repossession, the lender won’t have to pay for a repo agent to collect the car. This is not the case with a voluntary repossession.
Since the overall cost is lower with this technique, you hold a chance that the damage to your credit score will be lower.

On the other hand, these benefits are not quite as impressive compared to the cons:

  • You still lose the car.
  • The car will be auctioned off and probably fetch a poor price. So it is more than likely that you will still have to pay off some debt even after the car has been sold.
  • The damage to your credit score is going to be immense either way. A voluntary repossession does appear differently in the report than a forced one. If a potential future lender reads the report in detail, this may matter to them. If they don’t, there may not be a difference.

Voluntary repossession may seem like a more pleasant experience. In fact, it probably is. But underneath it all, it is still a huge problem and should not be taken lightheartedly.

Can I still get car credit?

Let there be no doubt about it: A repossession will hit your credit score hard. So if you’ve had to default on your car loan once, does that mean you’ll never be able to buy a car again?

We can relate to this fear. And indeed, some lenders refuse to work with anyone with a sub-optimal credit score or who’s ever been unable to keep up their loan payments.

Still, there is no reason to despair. There are plenty of dealers out there more than willing to provide credit to those with financial issues. Needless to say, these loans are higher risk and therefore tend to be more expensive. But if done right, they can be just as safe and efficient as a ‘regular’ one.

At Concept Car Credit, bad credit car loans are one of our specialities. You can use our online car loan calculator to work out the best financing plan for you. And together with you, we’ll find the perfect combination of monthly payments and total term of the loan.

If you’re interested in finding a solution that meets your needs, contact us now – either through our easy contact form our by giving us a call.

Buying a repossessed car: What to watch out for

Let’s now turn the tables for a moment and imagine that you’re looking to buy a repossessed car. Is this a good idea?

The answer is not clear-cut. Certainly, as we’ve already pointed out, there are risks to this. Just to give you an idea: As you can imagine, most people faced by a repossession are not in a happy state of mind. Some of them react with depression, others with aggression. As a result, many drivers vandalise their repossessed car before the repo agents can lay their hands on them.

On the other hand, the days of extraordinary deals are long over. If you plan on getting a repo car almost for free, think again. There is a reserve price for every item on an auction. If the highest bid does not exceed this, the car won’t be sold. More often than not, the reserve price is pretty high. If you add the auction costs to it, it may simply not be worth it.

That said, you can still find some pretty sweet repo deals. Just make sure to take our points of notice into consideration.

There should be no outstanding finance on the car.

This heading may be a little misleading. Of course, every repo car still has outstanding finance on it. What you need to be absolutely sure about is that you won’t be responsible for paying it off.

To be on the safe side, you should opt for a car history check with one of the many UK service providers in this field. These usually cost between 10 to 30 Pounds. Don’t hesitate to invest that amount.

Repossessed cars may not be the best

This is almost too obvious to even deserve a mention. But we’ll address it anyway: if someone can’t afford to pay the loan instalments for their car, they usually won’t be able to provide proper maintenance either.

This means that many repo cars are not in a great state. They need not be total wrecks, either. In fact, since many repossessed models tend to be quite young, they may outwardly look excellent.

Just be sure to thoroughly check what’s underneath the hood, if you do get the opportunity. Since this may not always be possible, you need to be aware that you could end up with a lemon.

Make sure you know the maintenance history

There are thankfully a few things you can do to improve your chances of that not happening. One of them is going for that vehicle history check we already mentioned.

Make sure this check includes a seamless maintenance history, including the MOTs. These will give you valuable insights on the condition of the car and potential issues.

Carbuyer recommends:

“If you’re looking at an ex-repossession that’s for sale, don’t even consider buying unless its maintenance history can be confirmed as sufficient.”

Don’t buy a car that’s older than 18 months?

This suggestion is certainly up for debate. For one, cars last a very long time these days. 200,000 miles are by no means uncommon. And if you treat your vehicle well, you can easily expect it to last for 15-20 years or more.

Secondly, not all repo cars are total disasters. You really can find great deals and not all of them have to be as good as new.

The main issue with a repo car is the risk you’re taking when buying one. This is mainly because you usually won’t be able to have it tested as thoroughly as you could with a regular used car. Auction sites will typically not allow this, which means you’ll have to buy as seen.

Especially if your budget is very small, this is a dangerous strategy. Just imagine buying a car and then still having to perform expensive repairs before you can even think about driving it!

This is why many recommend going down a safer road.

As we’ve said several times before, repossessed vehicles can be great. But if you want to minimise your risk, you should trade in potential financial gain in favour of more security.

There are a few ways of doing this. One thing is to avoid buying directly from the lender. Yes, you can get excellent prices this way. And in some cases, you can even get the financing required to buy the car in the first place.

But lenders like banks or credit unions have very little love for cars. They won’t repair them or try to clean them up. These cars accordingly look pretty run down and may require an overhaul. As with an auction, it’s very unlikely you’ll be able to test or inspect the car prior to committing to the purchase.

All of this makes buying from the lender a bad idea in our eyes.

Instead, think about a repo reseller service. These, as Autotrader explain, “move the inventory from lender to buyer, without taking ownership” and often “keep up a standard for the condition of the cars.”

Of course, you can also buy repo cars from dealers. After all, many dealers use auctions to snap up lucrative car deals and will also lay their hands on repo cars.

In both cases, you will have to crunch some numbers to determine if things are still worth it. The safer the deal, the more expensive it obviously gets. And thus, you may, in some cases, end up paying more than you should for your car.

Alternatives to repossessed cars

The great thing is that you may not need to take all this risk on board. After all, there are plenty of alternatives to repo cars, some of which can offer you great deals as well:

  • Ex-fleet vehicles & ex-rentals can be a somewhat boring, but financially attractive alternative. These cars can be very cheap. And they tend to be in a great condition.
  • Used cars and specialised dealers: If car finance is an issue, you can get great offers with dealers who specialise in loans for people with bad credit.
  • Leasing: Leasing may be an expensive option overall. But it is quite attractive in terms of the monthly rate payments. If you can get a leasing deal, it may be worth your consideration.

These options are often as attractive as a repo car, but come without the latter’s disadvantages and risks. This is why we generally recommend against buying one and opting for a safer bet instead.

If you are adamant about going repo, then you should now at least have everything you need to know to take the best possible decision.

29 August 2022 Concept Car