ARA Predicts Fewer Repos This Year
IRVING, Texas — Steadily rising amounts of auto loan defaults aren't necessarily translating into plenty of business for all repossession agents. That's the assessment of Les McCook, executive director of the American Recovery Association.
In fact, McCook shared recent conversations with member agents and other industry leaders that revealed two startling assessments. He indicated that often agents either have too many vehicles to recover that keeping up is a challenge or companies have too few clients to keep an operation afloat.
"I've had three members in separate, unrelated discussions comment how much repossessor equipment they had on their storage lot that they had repossessed," McCook told AutoRemarketing in an interview.
"That's probably one of the most extraordinary things I've seen during the time I've been in this industry," he added.
The deep recession that's gripped the nation certainly has placed the entire repossession industry into uncharted territory. Agents have recovered more units in the past couple of years than in any time in recent memory judging by the amounts of these vehicles passing through auction lanes.
Both ADESA's Tom Kontos and Tom Webb, of Manheim, calculated that close to 2 million repossessed units went through auctions last year. That figure came on the heels of when nearly 2 million repo units ended up at auction in 2008.
However, McCook says the repo level will not be so high this year.
McCook explained that usually about 1 percent of new vehicles sold end up as a repossessions. During better sales times, annual totals of more than 14 million units moving off of lots meant close to 1.5 million vehicles could turn into repossession assignments.
Now, McCook said stricter lending standards and sliding annual sales total is skewing that estimation from being valid nowadays.
"Overall, you're looking at a net decrease in the probability of recoveries and the number of recoveries," McCook noted.
Another element McCook expects to sway the repossession business this year is how many financial institutions have ceased their work into the auto lending arena. He estimated that more than 100 lender and credit institutions no longer issue vehicle loans because of the recession. Again, fewer loans means fewer possible repossessions.
Also, McCook has heard from member agents that financial institutions are working closer with consumers in order to keep them in vehicles despite inconsistent payments.
"Some people think they're better off keeping those accounts on the books," McCook indicated to Auto Remarketing. "At least it looks like someone owes them money rather than having a write-off."
Despite the conditions rarely seen in this industry, the amount of repossessed units projected to go to auction this year could still keep some agents busy. Kontos projected at least 1.6 million repossessed new and used vehicles annually between now and 2014. Meanwhile, Webb contended that repossessed unit would be a steady source in overall wholesale market going forward.
As the industry handles changes in the business landscape, McCook is hopeful an inaugural event held last year will gain even more traction this year. The association conducted the first North American Repossessor Summit last March in Dallas. It plans to have a similar event this coming March.
McCook described the maiden summit as one that allowed attendees to be frank about their situations and exchange dialogue and ideas to benefit all involved.
"We're going to see some changes to the good for our industry," he explained.
"As an association, we need to take the leadership front," McCook concluded.