Many students don’t understand how buying a repossessed vehicle works. Which is understandable, as it’s not a topic most people talk about. But, it is a thing, and it can be an affordable option when purchasing a vehicle – something which holds a lot of appeal for a cash-strapped student who needs to get from A to B!.
Here is a brief explanation of how repossessed cars selling works:
Repossession is when a lender takes back the vehicle they financed from an individual because they’re unable to meet their monthly repayments. To get the money back that they lost, a lender will host an auction where the repossessed vehicles get sold. Now, before anyone goes to an auction house, you must know what you’re getting yourself into. As enticing as it is, read the article below to get a full idea so that you can plan things out before you go bidding.
Understand how pricing works
Now, you may have heard that the purchase price for repossessed cars is affordable, and that’s true. Repo vehicles are more affordable in comparison to a car you may find at a dealership. This is because as the consumer, you are buying the vehicle “as-is”. Which means you will need to deal with any repairs or issues you get from the vehicle. As a student, you’ll need to factor this into your overall budget, as you may need to make repairs on top of the purchase price.
Unlike when you buy from a car dealer, you won’t have the luxury of being able to extensively inspect the car. Nor will you be able to test drive the vehicle.
Another reason why buying a repossessed car is affordable is because lenders usually want to get the money they lost from the sale. When calculating pricing, most auction houses will calculate based on the vehicle’s current trade value, mileage and condition. And, the auctioneer’s bottom line is to ensure that the vehicle’s sold at the auction and they raise enough money to cover any outstanding amounts.
The registration process
When you register to bid at a car auction in South Africa, you need to have your Financial Intelligence Centre Act (FICA) details. FICA is an act that helps fight financial crime, such as money laundering, tax evasion and terrorist financing activities. The details you need to have with you are:
- A certified copy of your ID document.
- Proof of address from your latest utility bill. (Students may need a copy of their lease if they’re staying in student housing, or an affidavit from their parents if they’re still staying at home.)
- Proof you’re capable of funding the purchase.
Apart from those three details, you will need to have a registration fee which ranges from R5000 to R6000. This shows auctioneers the seriousness of intent. The money is refundable after the auction has taken place. So, once you arrive at the auction in Cape Town or any other city, you’ll be required to fill in paperwork, and then you’ll be given your bidding number.
Things to remember once you’ve registered
Once you’ve registered for the auction, you will need to abide by the following rules:
- You will forfeit your refund if you make unsuccessful bidding. And unsuccessful bidding is when you make a bid but don’t make payment for the vehicle once you’ve won.
- The bid price excludes VAT unless the auctioneer states otherwise.
- There is no guarantee on the vehicle. As mentioned before, the vehicle comes as is. So, if there are any issues, you are liable to pay.
- You are allowed to view the vehicle a day before the auction. This will give you an idea of what you’re purchasing.
- The auctioneer is allowed to remove vehicles from bidding without any explanation. So, seeing a vehicle the day before does not mean the vehicle will be there on the day of an auction. So, a good idea is to have more than one choice.
- Attend a few auctions before you join the bidding process so you can get an idea of how it works and what you need to look out for. Take a parent or trusted friend with you, or someone who has been part of an auction before to help you understand the entire process.
- Lastly, do your homework! The last thing you want to do is go to a Cape Town car auction unprepared. This will either cause you to make a bad financial mistake or you might lose the vehicle you’ve been eyeing. So, take your time and make sure you’re comfortable before the day of the bid.
Myths you should avoid
Sometimes when people don’t fully understand something, they create myths. But, when doing your research, you must debunk all those myths.
- “Vehicles bought at an auction are too damaged.” Now that is the furthest thing from the truth. Repossessed vehicles are just like any other second-hand vehicle, if not better. Because in most cases, the individuals who had their vehicle repossessed weren’t planning for them to lose their vehicle. It usually happens because they struggled to make payments after many payment arrangements. So, you can find a vehicle that’s in good condition, of course, it depends on the driver, but not all vehicles will be damaged.
- “You won’t be able to bid in time.” This isn’t the case as there is a procedure put in place during the process to ensure it is as seamless as possible. And, as long as you’ve done your homework, everything will be fine. You just need to take a deep breath and collect yourself.
- “You’ll struggle to find a car.” Unfortunately, there are many vehicles that are repossessed by lenders yearly because customers are unable to make payment. So, the misconception that you won’t find a vehicle is fake. There are many available cars, and if you take a look at lenders websites, you’ll see that they have a long list of vehicles available.
- “There aren’t good vehicles for first-time bidders like students.” As mentioned in the previous bullet, there will always be vehicles available, and there are great vehicles available even for first-time buyers. Yes, it will be intimidating as it will be your first bid, but this article and further professional advice will prepare you. And, once you get there, you’ll get the idea of what you need to do.
- “You’ll get less than you planned for.” Many people believe that, but that doesn’t need to be the case. You never know what you can get when making a bid on a repo car. But, you need to trust your instincts and go for it. You never know what gem is there waiting for you to find.
With the tools and services you find online these days, anyone (especially tech-savvy students!) can purchase their new set of wheels at a car auction. The chances of you purchasing your dream student car are actually higher, as you never know which types of vehicle you can win when bidding. Just make sure you have registered, you’re prepared and have gone to see the vehicles being auctioned the night before to ensure you know what to expect.
And, remember, yes your first time will be overwhelming, but, just relax and always start by a low amount and work your way up to the amount you actually have. Making a big bid can limit your chances of winning as you won’t have the budget to more. Lastly, remember that this should not, in any way, be a competition. Only purchase a vehicle you can afford.