Vehicle repossessions are up 10 percent this year, a result of tough economic times and sky-high fuel prices over the summer. Analysts predict about 1.6 million vehicles around the country will be repossessed in 2008.
But much like the trend with home foreclosures, many lenders are now trying to avoid repossessing vehicles.
Laurel Adjustment Bureau owner Bill Johns says it's a blast from the past. When he first got into the repo business in the late 1960s, the emphasis was on adjustments — working on behalf of banks with borrowers, adjusting their loans so they could get current on their payments. That's why his business was named the Laurel Adjustment Bureau.
But Johns says that fell out of fashion, and hooking cars to tow trucks became the bulk of his business. Now, he says, adjustments are back.
"Sometimes, they'll not make you make any payments on the principal and just let you pay interest only," Johns says. "These are things that used to happen years and years ago, but now it's back."
Johns says his clients are telling him to knock on people's doors and talk to them, find out what's wrong and whether there's hope of the situation improving.
"Mostly, we represent banks, finance companies and credit unions. And all of them do not want to repossess anything, all of them are trying not to have to repossess something," Johns says.
Low Prices At Auction
A shiny black 2005 Ford Expedition rolls into the chilly warehouse where Johns holds his weekly Tuesday night auto auction. The room is painted with a checkered flag race car theme, but people aren't racing to take this baby home.
"Eleven thousand anywhere," Johns asks over a crackling microphone. There's no response. "I have 10 thousand dollars — would anyone bid 10 one?"
The car sells for $10,000. That's well below the blue book value of this SUV, and likely even further below the outstanding balance on the loan. And this isn't just happening at John's relatively small auction.
A Wide-Spreading Trend
Manheim auctions off 5 million cars each year. The company's economist Tom Webb says auction prices are down — way down --across the board.
"The overall market is very poor," Webb says. "And it's not just full-sized SUVs. But it's everything. Everyone has taken a hit recently."
Webb says the high number of repossessions and low returns are motivating some lenders to try to keep borrowers in their cars.
"A lot of them obviously do not want a repo to occur," he says, "because they're going to incur a loss, obviously."
Analysts expect the flow of repossessions will eventually slow down, because new car sales are in such a slump. In time, they say, there will simply be fewer loans that can go bad.