Even repo men are having troubles

Posted by Ray on July 24, 2009 under Economy, Main, Markets | Be the First to Comment

One would think that the repo business, and debt collectors, are having a field day at this point in our wonderful, excellent, and recovered economy, but not so. Yesterday collection firms said they will wait to buy debts from banks because they are expecting a sharp increase in delinquent accounts which will drop prices on buying such debts. Now, repo business owners are saying they are loosing business because now anyone with a tow truck will undercut the pricing of “professional” repo people and banks are more willing to let people take more time to pay before they try to repo their car.

Why would a bank not want to call a repo person on a delinquent auto loan – They want to wait because as soon as they repo the car they will, more than likely, take a loss on that loan. It is estimated that the bank would only receive about 1/5 of the loan value if the car is auctioned. This leads me to believe that thee will be more credit problems down the road since banks do not have to write off these loans until that loan is really delinquent. Some firms are allowing borrowers up to 4 months to make a payment, which is crazy.

To repo a car is also expensive which is leading banks who have no choice but to repossess a car to bid for the lowest cost. Typically it costs about $350 to repo the car, plus storage charges and, as just stated, the loan is written off. Now, regular tow truck operators are bidding on these deals to make extra money and are under bidding the “professionals” by about $200 a job.

The point being is that things are not even good in the lowest form of business, debt collecting and repossession. On top of that this is another warning that credit troubles are still alive and well.