Buying repossessed cars at auction can be an excellent way to secure a quality vehicle at below-market prices, but it’s not without risks. Understanding the process from start to finish is crucial for anyone considering this route to car ownership.
Why do cars end up at an auction? Well, repossessed cars typically find their way to auction following financing defaults. When borrowers fall behind on payments, creditors first attempt to negotiate a solution. If these discussions fail, the lender obtains a court order or repossession warrant. The sheriff then repossesses the vehicle and places it in secure storage, where storage fees may continue to accrue against the borrower’s account.
If the outstanding debt remains unresolved, the vehicle is sold “in execution” through auction to settle the balance. Any surplus from the sale returns to the debtor, whilst any remaining deficit stays their responsibility.
Preparing for a repossessed-cars auction as a buyer
Before attending, you’ll receive a list of upcoming auction items. Most vehicles are available for public viewing one to two days before the sale. This inspection period is absolutely critical – bring along a knowledgeable mechanic or automotive expert to thoroughly examine any vehicle you’re considering.
Check for faults, signs of poor maintenance or evidence of abuse. Note down the VIN number to research the vehicle’s history, including any accidents, theft records, or insurance write-offs. Remember, all repossessed cars are sold “voetstoots” (i.e. as is), meaning no test drives are permitted and absolutely no guarantees are provided.
Registration & bidding requirements
To participate in auctions, you must complete FICA registration, providing certified copies of your ID, proof of residence (such as a utility bill, lease agreement, or affidavit), and evidence of your ability to pay for the vehicle.
You’ll also need to register at the auction house with a refundable deposit, typically upwards of R5 000. This deposit is usually reclaimed if you don’t make a purchase, but ensure you have sufficient funds or pre-approved finance before attending.
Understanding auction pricing
Reserve prices for repossessed cars are generally set around 10-20% below retail trade values, depending on the vehicle’s condition and model popularity. However, the final amount you’ll pay extends well beyond your winning bid.
The total cost will include your winning bid, plus approximately 6% commission, 15% VAT, registration and licensing fees, and any required roadworthy testing costs. If you successfully bid but fail to complete the purchase, your deposit will be forfeited.
Risks & essential tips
The primary risks when buying repossessed cars include hidden mechanical problems, poor maintenance history, missing service records, and the complete absence of warranties or guarantees. Where possible, try to purchase vehicles still covered by manufacturer warranties or motor plans.
Consider using professional pre-auction inspection services, such as the one offered by Nedbank MFC. These professional assessments can help identify potential problems before you commit to bidding.
Be particularly cautious of scams. Legitimate repossessed car auctions occur at reputable venues through established auction houses like Aucor, MyCars, Bidvest and Nedbank MFC. Avoid social media advertisements claiming to sell repossessed vehicles – genuine bank repossessions are never sold through social media platforms.
Getting started
If you’re new to car auctions, attend several as an observer first. This allows you to familiarise yourself with bidding dynamics and auction procedures without the pressure of making purchasing decisions. Set a strict budget beforehand and stick to it – don’t let emotions drive you to chase deals beyond your financial limits.
After winning your bid
Once you’ve successfully purchased a vehicle, you must pay the full amount immediately. This includes the hammer price, all commissions, VAT and additional fees. You’ll then need to arrange roadworthy testing, licensing, and registration.
It’s worth noting that, if the sale proceeds don’t cover the vehicle’s outstanding debt, the bank may still pursue the original borrower for the difference. Conversely, if there’s a surplus after settling the debt and administrative costs, this amount is returned to the former owner.
Final recommendations
Success at repossessed car auctions requires thorough preparation and realistic expectations. Always inspect vehicles comprehensively, check VIN histories, and budget for all additional costs beyond your winning bid. Only bid on cars you’ve personally inspected and researched thoroughly.
With careful preparation and realistic budgeting, repossessed car auctions can offer genuine opportunities to secure quality vehicles at competitive prices. However, the “buyer beware” principle applies absolutely – success depends entirely on your due diligence and preparation.
Feeling overwhelmed at the prospect of buying a car on auction? Let Cars.co.za help you find your dream car!
