"Repairable" Cars, How Do They Work?

September 1, 2010 6:57 AM

While looking at used Priuses on Craigslist (Minneapolis), I discovered a dealer in Faribault, MN that sells "repairable" cars. I started wondering where the money was in "repairable" cars and whether it was a scam or not.

The Priuses they have are low mileage (avg ~30k) recent models ('06-'09), most look like they were in rear end collisions. They give a statement of what repair it needs, but there is a clause at the bottoms saying that the damage assessment is from visual inspection only. They also say that all vehicles are sold as is, all sales final, must be paid within 7 days and no guarantee on parts or repairs needed to fix the vehicle. It looks like none of them would be drivable off the lot.

So what's the catch here? I could buy a "whole" Prius for the price they are asking ($6900-8900) but with 130-150K mileage. I can buy a "whole" Prius with low mileage for about $14-16000. It seems like the amount of money it would cost to fix the damaged car would be less than $6000, but I'm not sure. My questions/theories are:

• Why hasn't the dealer fixed it themselves and listing it for twice or more the price?
• Are they counting on people to gamble when it's possible that there may be internal issues with the car that would cost a lot of money to fix? I presume if they know about damage, they must disclose it?
• Are they counting on people to not know how much it will cost to repair the damage and hoping for a "sucker"?
• Is the low mileage enough to trump the damage in people's mind?
• I'm not sure if they have mechanics on site, but another theory of mine is that they fix it for you, but charge a lot more and get you on the fact that you'd have to pay to get the car towed off the lot if you were getting it fixed elsewhere.
• Is the catch just the lack of financing that would normally be available through a Toyota dealership?

I was also wondering how the car gets from the owner to this dealer. Presumably, the car was totaled out by the insurance, which is why the original owner didn't just get it fixed. Is there a middleman between the insurance and dealers like this?

Anyone have any experience buying "repairable" cars or know about how the economics of it work? I'm not seriously considering buying one of these cars, just curious as to the economics of this system. And I'm using the Prius as an example because that's been the car I've been looking at and have an idea of what they are going for used (at least on CL).

posted by radioaction to Work & Money (12 answers total)

Best answer: I believe cars that are totaled get a "salvage title" so will come with a stigma that drastically affects their value, even once repaired. Insurance companies sell totaled cars at salvage auctions so this dealer probably buys a bunch for very cheap and doesn't want to deal with the hassle and cost of repairing them. Their market is probably people who are willing to do the work themselves and maybe cut some corners on the repairs. There's probably also some percentage of customers who underestimate the cost of repairs. I really doubt you could get financing from anyone to buy a salvage car.
posted by ghharr at 7:23 AM on September 1, 2010

Just a gut feeling here -- maybe they're unloading cars that have an adverse issue like water damage or former rentals. This is the kind of thing you will find listed on Carfax reports. I clicked a few cars on the website and saw no VIN. What happens when you call them and ask for the VIN on a car they have? Consider that many of the traditional car dealers have no problems giving VINs and even post them on their car listings. You'd also want to verify the VIN on the car personally, as (sorry, borrowing trouble here) they might "accidentally" give you a VIN that will come up clean but isn't the one for sale. If they're up front about problems on the title, though, I'd give them the benefit of the doubt.
posted by crapmatic at 7:27 AM on September 1, 2010

So that crash stigma will follow the car forever. But if you decide to buy and repair, with good due diligence and all, and then drive it forever, you don't care about the the history as long as the vehicle is fully restorable. There's a guy near me who does the same thing with Saabs, and I have a friend who has bought a number of them for himself and family over the years with very reliable operation 100s of thousands of miles.
posted by beagle at 7:37 AM on September 1, 2010

Best answer: There doesn't have to be anything shady here. There are people out there willing to do extensive work on a car in order to get a significant discount. Insurance auctions are often limited (IE: you need a licence/permit/large pile of cash to bid on cars). There is enough money servicing the niche market of bringing damaged cars to the people who want them to make a living with relatively little work as a classic middleman. Fixing the cars up before sale both ties up capital and puts the owner into the well serviced used car market (with a perceived inferior product to boot). And they'd have to become an employer which is a world of pain and stress that many would avoid even if it means making less money.

The majority of wrecking yards are in this business in a small way in that they often have a car or two or six that are damaged in some way but are being sold as one piece with papers.
posted by Mitheral at 7:42 AM on September 1, 2010

The car might be cheap but the cost of the repair is really open ended? Is it worth it to buy a car for six grand if it needs another six in repairs? And what if it continues to have problems? I would avoid it and buy a car that's already in good condition. Repairable cars are usually aimed at people who are going to fix and resell the damaged car, not at people who plan on keeping the previously wrecked car.
posted by Jon-o at 8:06 AM on September 1, 2010

I presume if they know about damage, they must disclose it?

I don't think you should presume this. Like always, buyer beware.
posted by fritley at 8:09 AM on September 1, 2010

Repairing extensive accident damage can cost a LOT of money, especially when it involves airbags. These look like much more trouble than they're worth, unless you can do the repairs yourself. My guess is that you cannot. I would recommend avoiding them.
posted by Slinga at 10:34 AM on September 1, 2010

Best answer: My cousin and uncle have an auto shop in Minnesota where in addition to general auto repair they also buy "repairable" cars directly from auction, repair the cars themselves, and then sell them once inspected and cleared by the DMV folks. They usually don't know much about the history of the cars besides the obvious body damage and related diagnostics. But because the cars usually have salvage titles, you can buy them at heavy discount. Like the people noted above, if you're planning on driving them forever, it's a sweet deal. If you need to sell the car, good luck - but usually my family sells them back to my cousin/uncle, who sell them to others.

So that's the other side of the "repairable" cars business. My cousin and uncle are very selective about the cars that they buy from auction (usually hybrids, solid Toyota/Honda/Saab/Mazda imports, fancy racing cars, etc.). Out of 5 such cars purchased by my immediate family over the years, only 1 had undiagnosable gremlins inside - and that was the one with a clean, non-salvage title (stupid 98 Accord coupe)! So you never can tell.
posted by Maarika at 6:10 PM on September 1, 2010

Same thing as a fixer-upper house. They would rather make a quick buck than make the effort to fix it and sell it later at a hopefully larger profit.
posted by gjc at 7:46 PM on September 1, 2010

@gjc and others who mention the "rather make a quick buck" theory... even if its true that *they* want the quick buck, why isn't there *another* middleman further down the line who does and it willing to do the work on it?
posted by gregglind at 9:58 AM on September 2, 2010

gregglind, did you read what Maarika's cousin and uncle do? They sound like the middlemen you are asking about.
posted by soelo at 11:12 AM on September 2, 2010

Just a heads up: there is another tech at my shop who has been working on a Prius on and off for several months at this point. (There are 20 techs here and he works on the opposite side of the shop, so I just recently learned of this.) The cars owner bought it as a repairable car and so far tried to install more than one used inverter, a brand new high voltage wiring harness, and a new high voltage batter and the car still has problems as the result of it's collision and subsequent sitting in a junk yard. For what this guy has spent on parts and labor to fix this gen 1 Prius, he could have just bought a good used one.
posted by Jon-o at 7:06 PM on September 9, 2010