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