WOODLAND HILLS, Calif.–The ongoing supply chain issues, low inventories and high car prices has led to a resurgence for the auto repo man. And as one credit union’s portfolio indicates—it has seen a doubling of delinquencies in its used car portfolios—the repo man may be busy for a while.
“In times past, auto dealers and lenders were slower to retake cars when borrowers fell behind. Finding and repossessing vehicles was often difficult, occasionally even risky,” the Los Angeles Times reported. “And recouping costs on seized vehicles was a losing game. But the pandemic changed that.”
Game ‘Turned on Its Head’
The unprecedented rise in used car prices, up 43% since August 2020, has “turned the repo game on its head,” the Times noted. “Now a dealer who moves fast to repossess a vehicle can expect to resell it quickly, sometimes at a far higher price.”
The prevalence of tracking technology has also made it much easier to find vehicles, the Times added.
Title firms, government regulators and many people involved in auto collection and auctions told the Los Angeles Times that repossessions are rising notably, particularly for used cars.
“There was a period for a lot of creditors, they were deferring earlier in COVID,” Colin Welsh, a Woodland Hills, Calif. attorney who works with borrowers, told the Times. He said he has been fielding many more repo calls. “That has waned, and now they’re seizing the moment.”
Borrowers Suffer, Benefit
Some critics, including many borrowers, however, are complaining that the quick repossessions by auto dealers are allowing them to sell the same cars twice.
On the other hand, Robert W. Murphy, a Fort Lauderdale, Fla., attorney who represents borrowers, told the Times used car prices have gotten so high he even had two clients get paid several thousand dollars each after their cars were repossessed and sold at an auction.
Neither of those borrowers had put any money down on their vehicles.
What About Credit Unions?
In the interview, CUNA’s chief economist, Mike Schenk, dismissed worries that credit unions will increase repo’s, saying auto loan delinquencies of greater than 60 days are up only slightly for credit unions and remain historically at very low levels.
The Los Angeles Times reported, however, that Virginia-based Pentagon Federal Credit Union, which has one of the largest portfolios of used-auto loans, about $3.6 billion as of March (up 80%) over a year earlier), has seen the dollar volume of delinquent accounts 60 days or greater has more than doubled from a year ago to about $45 million, according to quarterly filings.