Repos: The Magic is Back
Uncle Sam has stopped lending a helping hand and now repo men are back in business. Repos for the first half of 2024 are up 23% from a year ago. Higher-for-longer interest rates mean new car loans average 7.3% and used car loans average 11.5% putting stress on consumer pocketbooks. However, Claire Ballentine wrote in Bloomberg of something all too familiar. “Lenders are eager to make loans, even with the risk that the borrower might not be able to make the payments. That’s because car loans, like home mortgages, can be sliced up into bonds and sold to investment firms, hedge funds and other investors.”
Monthly bills are now average $739 for a new car and $549 for a used car. Three missed payments and the repo man is summoned. And seizures are easier than ever with “technological advancements such as tracking features and license plate data.”
During the pandemic deadbeat drivers had no worries “when relief measures for consumers meant repos largely dried up. Repo agents were laid off. Now, with tougher times “repossession companies are struggling to find enough workers to meet repo requests,” Ballantine wrote last year, reporting from the North American Repossessors Summit up the road from Disney’s Magic Kingdom.
Last March, the percentage of subprime auto borrowers who were at least 60 days late on their bills was 5.3%, up from a seven-year low of 2.58% in May 2021 and higher than in 2009, the peak of the financial crisis, according to Fitch.
The Repossessors Summit made its debut in 2009, when there were a record 1.77 million repossessions. After General Motors Acceptance Corp. and Ford Motor Credit Co. began to lend to Americans who desperately wanted vehicles, repossession companies emerged soon after in the 1920’s to track down those borrowers not making payments.
Supply chain issues during COVID lead to an increase in car prices leaving some with “no choice but to sign on to loans for high-priced cars with high interest rates.”
Ms. Ballantine wrote, “According to calculations by ratings agencies, investors in the safest parts of today’s subprime auto bonds would still get their money back with interest even if more than three-quarters of the borrowers defaulted on their loans, assuming repossessed vehicles can be sold at auction for a modest share of their original prices.”
The repossession summit’s agenda featured the tagline alongside a sketch of Disney World’s Cinderella Castle: “Putting the magic back in repossessions.” The main attraction on the exhibit floor was a self-loading wheel-lift truck called the Python, which is designed for easier towing on uneven surfaces.
“We’re putting ourselves in places where no one wants us,” said Todd Case, a former cop who owns Indiana Recovery Services, in a panel discussion. Most summit attendees had been shot at, at least once.
