Published: March 9, 2021 | Updated: April 10, 2021 | Posted by: Venus Zoleta | Car Insurance
Thinking of buying a used car? Consider buying a repo, also known as a bank repossessed car. Somebody else’s loss could be your gain—this is how repossession works. That’s why you should also consider the pros and cons of buying a repossessed car before spending more on a new vehicle.
Banks take back cars from people who fail to repay their car loans and then put the repossessed vehicles on sale. So be careful when shopping for repossessed cars for sale. Here are the benefits and drawbacks of buying a repo car.
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With the car price increasing in the Philippines due to a lot of economic reasons, cheaper options such as repossessed cars have become a more attractive option for budget-conscious car buyers.
A repo car purchase can save you between 20% to 40% off the cost of a brand-new car. For example, a repossessed 2016 Toyota Vios (1.3J M/T) sold by a bank can cost up to PHP 447,000, while a new unit usually costs PHP 668,000. Of course, the car’s value has depreciated over time, but the PHP 200,000+ savings is too hard to pass up for someone who’s just after a decent car working with a limited budget.
Banks sell repossessed vehicles for much less than their worth. Some banks like Maybank even offer occasional promo prices. Banks aren’t looking to make a profit from selling repos. They need to dispose of these second-hand cars as soon as possible to reduce the costs of storing and maintaining the vehicles.
Repo cars are up for sale not because their condition is deteriorating, but rather the former owners could not keep up with their loan repayments. That’s why you’re more likely to find pre-owned cars that are only a few years old with lower mileage in bank repossessions than those sold by private sellers. Most banks sell 2016 and 2017 models, and some even having 2018 models for sale.
Unlike privately sold used cars, repossessed cars are less likely to be involved in an accident, crime, or flooding. Also, a five-year-old repossessed car or newer may still have its manufacturer’s warranty. That’s one less thing to worry about.
If you’re looking for more arguments for your pros and cons of buying a repossessed car list, chalk this one up under pros. You are more likely to score great cars for a bargain prices when you use a smart strategy and you do your homework. Here’s an example of a smart strategy:
Research the market value of the make and model you’re looking for and compare used car prices diligently. If a bank’s selling price is too steep, wait for the right timing before you bid. Banks slash the prices of repossessed cars for sale if nobody bids on them. Make an offer only when the prices have lowered significantly.
Another thing to note when you’re considering the pros and cons of buying a repossessed car is that you don’t have to worry about the legitimacy of the repo cars for sale.
Buying a repossessed car from a bank assures you of a legal and secured transaction, as you’re dealing with a reputable financial institution. On the other hand, buying a second-hand car from a private seller can be prone to fraud since you’re dealing with a stranger.
Banks that offer repossessed cars for sale in the Philippines include the following:
Depending on the bank, you can either pay cash upfront or get an auto loan to purchase a repossessed car. The advantage of full cash payment is that you won’t be paying interest over time, while an auto loan is easier on the pocket because of the monthly installments.
Unlike in buying a brand-new car, a repossessed car purchase involves less paperwork. Banks just want to sell their repo units right away.
Since this is a pros and cons of buying a repossessed car list, we can’t ignore the drawback column. For one, repossessed cars are essentially pre-owned units, so their quality depends on the driving and maintenance habits of the previous owner.
If the former owner has been in a tough financial situation (which is why the loan on the car defaulted), chances are the car may not be maintained enough.
Because banks sell repo cars on an “as is where is” basis, the buyer takes on the risks (including any hidden defects) on the quality of the purchased car. That means when you purchase a repossessed car and spot damage later, you can’t sue the bank for that.
When purchasing a used or repo car, make sure to avail auto insurance to avoid future headaches in the future.
For you to not regret your repossessed car purchase, you’ll have to put in a lot of hard work into the entire buying process. Expect to send a lot of bids to various banks on repossessed cars. Banks may reject your bid or offer if it’s below the floor price, which is the minimum amount that banks set for each repo car for sale.
Because banks store repossessed cars in huge warehouses, these vehicles tend to be covered in thick layers of dust and gunk. It’s not that huge of a downside but it’s also an important thing to note so you don’t get your hopes up. If you scored a repo car for a fair price, what’s a few bucks more to pay for a quick car wash session?
Another disadvantage to add to your pros and cons of buying a repossessed car list is the fact that you can’t test drive the vehicle before purchasing it. That means you won’t be able to pinpoint problems until you start driving the car. Some banks allow you to start the vehicle so be sure to come with a trusted mechanic to help you assess the car’s condition.
Now that you know the pros and cons of buying a repossessed car, decide if it’s suitable for you. If you choose to shop for repo vehicles, be careful and strategic to ensure you’ll buy a high-quality car at the lowest price possible.
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Venus is the Head of Content at Moneymax, with 15+ years of experience in digital marketing, corporate communications, PR, and journalism. She invests in stocks, mutual funds, VUL, and Pag-IBIG MP2. Outside of work, she’s crazy about cats and Korean dramas. Follow Venus on LinkedIn.