How to Buy a Repossessed Vehicle From the Bank

Banks across the U.S. repossess vehicles when borrowers default on loan payments. Banks sell the vehicles to get reimbursement for the outstanding loan. Many lenders quickly offload repossessed vehicles because of the maintenance expenses. People who buy these cars from banks often pay below market prices.

Repossessed Cars

Most major banks have two separate financing divisions that handle car loans: consumer lending and dealership services. The consumer bank handles loans for individuals making in-person loan applications in branches, while the dealership services division deals directly with car retailers. The local branch employees may have no knowledge of cars repossessed by dealer services and vice versa. Small banks and credit unions fund loans locally and also handle repossessions through local branches.

Locating Repossessed Vehicles

People looking for repossessed cars should contact their local banks or look for listings on their websites. Cars repossessed by the dealership services divisions of major banks typically go to car dealerships for resale. Car dealers either buy the cars cheaply from the lender or sell the vehicles on the lender's behalf. Some car dealers organize auctions involving cars repossessed by several lenders. Dealers usually advertise these auctions online or in local newspapers.

Negotiating Terms

Anyone thinking of buying a car from a bank should go online to the Kelley Blue Book and find the value of comparable vehicles. KBB takes local market conditions into account when pricing cars because prices vary from state to state and even within states. Kelley also bases values on the additional features of a car and its overall condition. Prospective buyers should offer less than the market value when entering negotiations. Banks have to maintain repossessed cars, and lenders often will accept bids well below the KBB value if the buyer offers cash.

Financing Bank Owned Cars

Many people believe if that they buy a car from the same bank that finances their loan, they will get a better deal than if they borrow elsewhere. In reality, banks prefer to accept cash bids for cars, and the departments that handle repossessed vehicles typically have little or no involvement in loan underwriting. Credit unions usually offer lower rates for car loans than banks because credit unions are non-profit entities. Someone can take out a loan at a credit union and use the funds to pay for a bank-repossessed car with cash.