A Look Back At 2008 – A Commentary

   With 2008 quickly coming to a close, I wanted to take a look at what the year has brought to the repossession industry and make some predictions for 2009. Without a doubt, the American economy has tanked this year and in just this last month, we have seen the Dow Jones stock index dip below 8000 for the first time in 5 years. In September, 81,312 homes were lost to foreclosure while 265,968 troubled borrowers received foreclosure filings. In October, 240,000 lost their jobs as the unemployment rate rose to 6.5% nationally. In the first half of the year, it seems that the trend of individuals are still buying cars that they cannot afford continued. Statistics show that some were spending 40% of their income on vehicle notes when even 20% can be too much on a depreciating asset. Low interest rates over the past few years made it easy for people to buy cars they ultimately couldn’t afford. Between 1998 and 2008, the total of Americans’ auto loan balances jumped from $282 billion to $772 billion.

  Thomas Webb, chief economist at Manheim Consulting, a wholesale vehicle auction operator, says 1,505,000 vehicles were repossessed in 2007, a 10 percent increase over 2006. He predicts another 10 percent increase in repossessions during 2008, sending repo numbers to one of the highest levels in a decade. Wells Fargo reports it has also seen an increase in auto loan delinquencies and wrote off $1 billion in auto loans in 2007, an almost 17 percent increase over the $857 million in write-offs in 2006. An even higher write-off rate is expected to close out 2008. I have never been a big fan of statistics as they can be manipulated and twisted to suit any agenda, but there is no doubt that auto loan defaults are on the rise and that can only mean good news for us as a whole. Right?

  In years past, once a debtor was in default, the order to repossess would fly off our fax machines. We knew which times of years were busy, adjusted for the slow times and watched for the signs of economic downturn, knowing that less money in the consumer’s pockets meant more money in ours. But much like the trend with home foreclosures, many lenders are now trying to avoid repossessing vehicles. Decades ago, this was a different business. We would knock on doors, make contact with the debtors and work as a liaison between the finance company and debtor, keeping the communication open between both parties and helping bring the loans current. This is where the term ‘Field Adjuster’ originated. I began my career as a field adjuster, but that title and it’s duties quickly gave way to the new title of ‘Repo Man’. Lenders stopped wanting any dialoge or promises and wanted their collateral repossessed as quickly as possible. Debtor contact became a last resort and the industry transformed in to the business we know today. However, with lenders receiving less and less return at auction while write-offs continue to climb, I see a return to the days of the field adjuster.

With an estimated 1.9 million repossessions expected to close out this year and an even higher number predicted for 2009, I see a good financial year ahead of us. According to the latest US Census statistics, there where 1,226 repossession agencies, with 7695 employees in 2000. That number declined in the next 5 years to 941 agencies and 5949 employees in 2005 and an annual payroll of $166,718,000. While I expect to see an increase in orders for repossession in 2009, I also predict an increase in the number of new agencies. Along that thought however, I recently saw someone post on a forum that he and his son had started a ‘repo company’ and was asking the following questions:

1. What goes on an “assignment” Sheet? We were asked for one of these from a Bank who is willing to give us business, but didn’t want to sound unknowledgeable (sic) by asking them?

 

2. Where can we get a quality vehicle inspection report to use?

 

3. What kinds and levels of insurance do we need? We know what the State minimums are for use of our tow truck. I have heard of lot insurance, tow truck insurance, on hook insurance? I have been given quotes from $300 to $1000 per month. Any suggestions on what company to use?

 

    4.What fees to charge and to whom. I had a finance ompany (sic) tell me they are charged anywhere from $50 (no not a typo) to $350. They said some charge storage and some charge mileage. If we charge storage and mileage, what is the going rate? We have had a car lots say they are charged anywhere from $150 to $250. We want to make sure that we do not price ourselves out of the business.

 

5. In addition, we had a finance company ask if we sell the cars from oour (sic) lot or take them to an auction. this caught us by surpirse (sic). Any advise on this. If we sold them off our lot, would there be an additional fee to the finance company or part of the repo ree. If so what is reasonable. If we have to take them to an auction after storaging (sic) them for the minimum waiting period, do we charge an additional fee or is it included in the repo fee. If so what is reasonable.

   With newcomers asking questions like that, I question the longevity of new companies. Established companies that implement action towards becoming a more service oriented agency and just not a recovery based service, should fare very well in the coming year. Lenders are going to expect more from us in 2009 and new fee schedules should be in order. Those agencies working for forwarder’s fee’s don’t have the ability or knowledge to revert from repo man to field adjuster and they will quickly fall by the wayside as well.

 Wishing you a prosperous and happy New Year,

Dave Branch