The Cost of Liv­ing Large Repo men thrive when high ex­pec­ta­tions fall short

The Washington Times Weekly - - National - BY HEATHER COBUN

With high gas prices, ris­ing in­ter­est rates and grow­ing un­em­ploy­ment, more peo­ple are be­ing forced to give up the keys to the car when they can’t pay the bills.

The eco­nomic slow­down has led to a na­tion­wide in­crease in ve­hi­cle re­pos­ses­sions, par­tic­u­larly in the past five months, ac­cord­ing to Les McCook, ex­ec­u­tive di­rec­tor of the Amer­i­can Re­cov­ery As­so­ci­a­tion in Irv­ing, Texas.

Bill Johns, owner of Lau­rel Ad­just­ment Bureau in Lan­ham, Md., said peo­ple used their tax re­funds and eco­nomic-stim­u­lus checks to stave off cred­i­tors ear­lier this year. But the ex­tra money ran out, lead­ing to a 10 per­cent to 15 per­cent in­crease in re­pos­ses­sions since May.

“We get on top of our game right now. This is a boom­ing busi­ness for the bad guy,” said Robert Jones of AGR Tow­ing and Re­cov­ery Inc. in Tem­ple Hills, Md. “We’ll eat real good for the next three years, eas­ily.”

AGR’s work­load has more than dou­bled. A year ago, Mr. Jones said, his com­pany was re­ceiv­ing about 175 calls a month for prop­erty to be re­pos­sessed. Now he gets more than 400 calls a month.

It can come down to peo­ple sac­ri­fic­ing their cars to make their mort­gage pay­ments, said Mr. Johns.

When peo­ple are strained fi­nan­cially, they start mak­ing de­ci­sions. First, they get rid of prop­erty such as boats and jet skis. “Toys go first,” Mr. Johns said.

Even back­hoes, trac­tors and pi­anos are be­ing re­pos­sessed th­ese days, Mr. Johns said. Mr. Jones said he was re­pos­sess­ing “stuff you wouldn’t think of.”

For Mr. Johns, the in­crease in re­pos­ses­sions means that his com­pany gets more calls from credit unions, banks and fi­nanc­ing firms about peo­ple who are be­hind on their pay­ments. Th­ese peo­ple have ig­nored writ­ten no­tices and phone mes­sages from their banks, some­thing Mr. Johns said is hap­pen­ing more of­ten. Then the banks turn to him.

Mr. Johns said he tries to buy more time for the bor­rower and tells his bank and credit union cus­tomers when they can ex­pect a pay­ment.

When it be­comes nec­es­sary, how­ever, cred­i­tors ask Mr. Johns to re­pos­sess a ve­hi­cle and auc­tion it to cover as much of the debt as pos­si­ble.

“I don’t want to take some­one’s car,” he said.

Mr. Johns said he thinks of re­pos­ses­sion as a learn­ing ex­pe­ri­ence for bor­row­ers.

“Cold, hard re­al­ity is here,” he said. The next time that a bor­rower de­cides to fi­nance a car, he will think, “I won’t do that Mercedes thing again.”

Robert El­lis, di­rec­tor of op­er­a­tions for Con­sumers’ Check­book, a non­profit con­sumer in­for­ma­tion and ser­vice re­source based in Wash­ing­ton, of­fered sim­i­lar ad­vice, say­ing sim­ply, “Don’t buy more than you can af­ford.”

Peo­ple of­ten fi­nance cars think­ing they will be able to make the pay­ments if noth­ing goes wrong, Mr. El­lis said. He urged bor­row­ers to con­sider the pos­si­bil­ity of the sta­tus quo chang­ing, whether it’s ris­ing in­ter­est rates or los­ing a job.

Con­sumers should shop around for a bet­ter deal or a smaller car, he said, if they can barely af­ford to fi­nance a sport util­ity ve­hi­cle.

Mr. Johns has no­ticed an in­crease in the num­ber of big cars and trucks on his lot. Not only can peo­ple no longer af­ford to make pay­ments, but they also can’t af­ford to fill the gas tank. Even buy­ers at his auc­tions shy away from the gas guz­zlers.

Of­ten bank or credit union will set the min­i­mum price that they will ac­cept for a ve­hi­cle to be auc­tioned, and if that price is not met, the car is en­tered in the next week’s auc­tion.

Th­ese cars are called “if bids” ac­cord­ing to Mr. Johns, and if a ve­hi­cle is not sell­ing at the set min­i­mum price, the bank may lower it un­til the car does sell.

In­creas­ingly, smaller cars with min­i­mum prices sell more read­ily than SUVs, which sit on the lot week to week un­til the min­i­mum price is low enough to en­tice buy­ers, he said.

“Of course [gas prices] are hav­ing an af­fect on every­one,” Mr. Johns said, adding, “The pop­u­lar­ity of a small car is ob­vi­ously up.”

Mr. McCook of the Amer­i­can Re­cov­ery As­so­ci­a­tion said he is see­ing a lot of peo­ple giv­ing up their SUVs and trucks when­ever pos­si­ble and try­ing to keep smaller, more fuel-ef­fi­cient cars.

Mr. El­lis rec­om­mended that peo­ple go back to money-sav­ing ba­sics to get back on track when they start fall­ing be­hind on pay­ments.

“In some ways, it’s looking back to the fun­da­men­tals,” he said.

He said peo­ple should look at where they are spending their money, be­cause of­ten they will find sim­ple life­style changes that can yield big sav­ings, like cut­ting back on lux­u­ries such as dry clean­ing and ex­pen­sive ca­ble pack­ages and bar- gain shop­ping for gro­ceries.

“When times are flush and peo­ple have more money in their pock­ets, they’re less will­ing to shop around for bar­gains,” he said.

Mr. El­lis also rec­om­mended that strug­gling debtors con­tact their lenders and in­form them of their sit­u­a­tion. “Tell them, ‘I know I have a prob­lem, here’s what I can do,’ “ he said.

Most com­pa­nies are will­ing to work with bor­row­ers be­cause do not want a car; they would rather have the money.

“No one wants to take a repo back,” Mr. Johns said.

Some­times, how­ever, there is no choice.

KEITH SMI­LEY / THE WASH­ING­TON TIMES

Bill Johns, owner of Lau­rel Ad­just­ment Bureau Inc. in Lau­rel, Md., speaks with a re­por ter while stand­ing among cars wait­ing to be sold at auc­tion in Lan­ham, Md. Banks, credit unions and other lenders hire LAB when bor­row­ers de­fault on auto loans. The com­pany con­tacts the bor­row­ers and tries to help them reach agree­ments with the lenders. If an agree­ment can’t be reached, LAB re­pos­sesses the ve­hi­cle and sells it at auc­tion. LAB holds auc­tions ever y Tues­day.

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