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Repossessed cars: everything you need to know

Find out what happens if your car is repossessed, and what to look out for if you're thinking of buying a repo car

Finance is a major cog in the wheel of buying a car, especially when buying new. Indeed, over 80 per cent of the 2.7 million new cars bought in 2016 were financed in some way. But what happens if you can't keep up with the monthly repayments? In the worst case, your car may be repossessed, as the finance company attempts to recover any outstanding costs from you.

If you're struggling to keep up repayments and have arranged the finance via a car dealer, then you may be tied into the agreement. If this is the case, the paperwork of the agreement should have information on what to do if you can't keep up repayments. You should get in touch with the finance provider, rather than the dealer where you bought the car, as they will have more knowledge and ability to arrange what happens next if you can't keep up your repayments.

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Another useful contact is Citizens Advice, as they will be able to provide free information on how to handle outstanding debt. It's more of a general service for people needing help with all kinds of debt, so it may not be able to cover the specifics of your finance agreement, but it's still a useful port of call all the same.

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If the worst does happen and your car is repossessed, that might not be the end of the situation, as the finance company may want to try and recoup any outstanding interest that the value of the car may not cover. If you took out dealer finance, then the only asset that is at risk is the car itself, and there is no risk to any of your other assets. Either way, failing to keep up repayments on a loan will have a negative impact on your credit rating, and means it might be harder to arrange finance in the future.

When is a car repossessed?

A finance company will usually only repossess a car as a last resort, once all other avenues of repayment have been exhausted. If your car is going to be repossessed, then a bailiff will be arranged by the finance company to retrieve the car, so that the finance company can sell the car to recoup any money lost in missed repayments.

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Some people may feel aggrieved when a bailiff, or repo man, comes to take their car away. However, any issues you may have with the situation of having your car repossessed should be directed towards the finance company, rather than the repo men, who are just doing their job. As far as the finance company is concerned, the vehicle is an asset, and they are taking the vehicle back to recoup the losses from the broken finance agreement.

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How can I tell if a car has been repossessed?

If the finance company has repossessed a vehicle, it will be sent to auction as soon as possible so the finance company can recoup as much as they can from the defaulted agreement. Repo cars are sold on at specialist auctions that are only open to trade customers, so there's no direct way of buying a repo car.

There's no obvious way to find out if a car you're looking at has been repossessed, but if you carry out an HPI Check, it will tell you if the car you're looking at has any outstanding finance against it. If it does - and 25 per cent of HPI Checks come back with an outstanding finance warning - it means that whoever is selling the car doesn't have the right to do so, as the car is still technically owned by the finance company.

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If a check comes back clean, then you know there will be no finance company looking for reimbursement, but aside from that, there's no obvious clue to a repo car. The only other giveaway there may be is with the condition of the car. If somebody is struggling to keep up repayments on a car, then they are likely to find it difficult to keep the car maintained. Servicing could well have fallen by the wayside, and even cleaning the car could take a back seat, too.

If the person who has taken out the finance feels resentful towards the finance company, they may have damaged the car before it being repossessed. Still, if a car is in a shabby state and missing some service history, that means you could well pick up a bargain that could easily be brought back up to scratch.

Have you ever bought a repossessed car? Tell us how you got on in the comments section...

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