Auction repo check-ins 14% below pandemic levels

The number of repossessed vehicles at auction is growing but remain s 14% below pre- pandemic levels as recovery agencies have become more selective in the vehicles they pick up and are prioritizing assets from lenders offering incentives . “There's a lot of talk in the marketplace that repos are up a lot … and that’s true, but you have to put it in perspective,” Jeremy Robb , senior director of economic and industry insights at Cox Automotive , said at the recent Auto Finance Summit East 2023 in Nashville, Tenn. “When you look at repos in general [that hit auction in 2023], we’re at 86% of where we were [in 2019].” By comparison, 2022 repossession check-ins at auction sat at 70% of the volume recorded in 2019 while 2021 came in at 75% of 2019 levels, according to Cox Auto data. “If you look at pre-pandemic [numbers], we haven’t caught up yet, but we are trending up,” Vaughn Clemmons , president of the American Recovery Association and repo agency Automobile Recovery Bureau , told Auto Finance News . Vehicle recovery requests peaked in January and February but have come down slightly since March due to tax refunds propping up consumer payments, Clemmons said. “As tax season came, a lot of people were able to pay off their debts, and we’re seeing 60-day late notices go down right now,” Max Merzin , enterprise sales representative at recovery vehicle transport company ACI Transport , told AFN . “It’s all in a rotational cycle. Repossessions are highest in the wintertime and lowest after tax season.” Lack of storage creates a bottleneck When payments are no longer propped up by tax refunds, the industry is going to see an increase in defaults, leading to a bottleneck in the recovery process due to a lack of vehicle storage space, Clemmons said. “We still don’t have enough repossession yards. We have to increase the amount of land at repossession yards in the country, because we lost so many of them from COVID,” ACI Transport’s Merzin said. It is estimated that 30% of repossession agencies across the U.S. shut down amid profitability woes during the pandemic, James McNeil , chief executive officer of Fremont, Calif.-based repo agency Daybreak Metro , previously said . Some recovery agencies had to stop repossessing vehicles on certain nights when levels were high in January and February because they ran out of storage space, Clemmons said. Storage space is increasingly a problem for agencies as the cost for land is high and they are competing with large corporations for land, he said. “We had an agent in Philadelphia that was paying $7,000 a month for his storage space; Amazon came in and paid $18,000 a month and, because the agent missed the period where he had the ability to renew his contract, he lost his space,” Clemmons said. “When you got Amazon willing to pay triple over what the cost is, it’s impossible for us to compete.” Agencies maintaining profitability The lack of space on recovery lots is leading repo agencies to prioritize recovery requests to remain profitable, Clemmons said. “We are being more selective on the accounts we choose to accept and decline,” he said. “If there’s a [lender] out there that has low recovery rates and their fees are not in line with what we need and anticipate for a good client, then we may decline a company’s work or put it on the back burner of lower priority.” Houston-based Automobile Recovery Bureau receives about 375 recovery requests per day, but only accepts 150 to 175, Clemmons said. “What we’re doing differently now than we did pre-pandemic, is we’re scoring the client community,” he said. “What we’re doing now is we’re saying, ‘Based on your data that we get from you, we’re going to decline work from you or put you on a lower priority level, because it’s not worth us doing your work. The chances of us making money or being profitable on your accounts is not as great as another [lender] that has good recovery rates and a good fee schedule.’” For example, Automobile Recovery Bureau is prioritizing requests from lenders that have higher recovery rates because the agency is losing money if it accepts a request but does not recover the vehicle when employees go to pick it up, Clemmons said. “If a lender sends me 100 assignments, and I pick up 10 of their units, you’re probably talking about $3,000 worth of spent revenue checking those 90 other assignments [that came up empty],” he said. “I know the [lender] community sees a bottleneck coming down the road. For them to control that bottleneck, they’re going to have to make some changes in their business practice.” Lender incentives A few lenders have implemented incentives to encourage repo agencies to prioritize their assets, Clemmons said. Wells Fargo , for one, pays repo agencies a $500-per-vehicle incentive to prioritize the recovery of their vehicles. “Wells Fargo currently pays $500 in addition to the standard cost for repossession services,” a spokesperson from Wells Fargo told AFN . “We regularly review our business practices to find ways to improve service and competitiveness and may make changes over time. The additional $500 is paid by Wells Fargo, not the consumer.” Due to the lender’s incentive, repo agencies are likely to prioritize Wells Fargo assets, Clemmons said, adding that Toyota Financial Services (TFS) has implemented a $400 incentive and some other lenders are offering $50 to $75. TFS could not confirm the incentive amount before press time. The Big Wheels Auto Finance Data 2023 report , the only tabulation of the top 200 auto lenders by outstandings, is available now.

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