We’ve been hearing lots of rumblings about an auto loan crisis waiting in the wings, and now USAToday says that lots are overflowing with repossessions.
So many vehicles are being snatched from owners who stop making payments that some repo operators and auto auctioneers say lots are overflowing.
This year’s predicted 10% rise in vehicle repos to 1.6 million would be a third higher than 10 years ago, says Thomas Webb, chief economist for a unit of Atlanta-based Manheim, which sells cars to dealers worldwide. The increase comes atop a 10% rise in repos last year.
Webb blames overly “generous” auto loans in the past couple of years as a key factor in driving up defaults that lead to repossessions.
…
“We’re experiencing significant growth in repo volume to the point where we’re using additional lots to store them,” says Tom Kontos, executive vice president of Indiana-based Adesa Auctions. “Our inventories are growing to record levels,” caused by repos on top of a glut of cars coming off leases and out of rental service
One group of people who are happy? Locksmiths. They make new keys for the repo’d cars and business is booming.
Repo lots overflow with reclaimed cars [USAToday]
(Photo:strangeinterlude)
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@bohemian: I did too. That person I described above-when I told them I was looking for a car but trying to save as much as possible before I got a new one-they said “I just do it! Life’s too short”. Man am I glad I didnt’ listen to that advice!
When I bought my car, it was actually cheaper to finance than to pay cash, and that is factoring in the costs of funds over time, etc. I am convinced that GM is a finance company that happens to give away cars – good deal for me, bad for them I guess.
@UpsetPanda: I’ve had a car repossessed. It’s not something I’m proud of. I can tell you that if others are like me it’s not about buying things you can’t afford. My car died, I live in a city with no public transport and it was impossible to get me to work and my husband to school with one car – the schedules didn’t work.
With the outrageous school loans we both have and the rising cost of living there came a point where we had to ask for help. We did, but when we mailed in the check which would have paid what was overdue plus 2 months we were told it was too late, despite the fact that there was no notification of that fact.
I’m not justifying this, it was a few years ago and I think about it almost every week. I should also note that we didn’t buy an expensive car, we bought a small, reliable used car with good gas mileage because we knew our finances were tight.
@DashTheHand: Find a dealer, there are people who specialize in this. You let them know what you are looking for and they call you when they get one in.
I bought my 2004 toyota corolla new because all my used cars had high maintanance bills a month. I actually got the car f0r $500 less then what the dealer paid for it because we caught the finance guy right at closing time and he was late for picking up his daughter at dance class.
With loan payments this car has been cheaper in the long run.
Where are all these so-called overflowing car lots? I’ve got cash and I’m in the market for a car. Somehow I don’t think I’ll find a VW diesel in one of these lots though.
Most repo cars end up in auctions in larger cities and are bought up by used car dealers. That’s how all the little tin shack used car lots end up with any inventory. As far as I know the auctions are open to the public so you can snag a pretty good deal, the problem is finding them. I’m sure that information can be found for free on the intarwebs.
I’m a wholesale automobile dealer. To correct the quoted article, Manheim does not generally sell cars, they facilitate the auction process between the seller and buyer. They also act as a clearing house for funds, the buyer writes a check for the car plus the auction fee to Manheim and Manheim issues their own check less the auction fee to the seller.
As far as the very late model Mercedes being worth 1/3 of new? Only if there was body and/or mechanical damage or a ton of miles on it. There are no steals at these auctions; the market forces of the open cry auction process won’t allow that to happen. What you see much more of is dealers paying more than they really should.
All cars including repo cars at any normal non-salvage auction have keys. There are much smaller repo only auctions that may have keyless units, but it is mostly garbage cars. Why would the finance company attempt to sell a decent car that no one can see run and drive?
Cars are generally sold “with a drive.” This means the buyer after winning the bid gets a gate pass to take the car out on the highway for a test drive, if any mechanical repair is needed that would cost over $500, the buyer can then take the car to arbitration where it will be determined what the mechanical status is and if the mechanical defect claim is legit try and get a price adjustment. If no price adjustment is offered by the seller, the buyer can pass.
Many auctions offer the post purchase inspection mentioned, which will determine the mechanical health. Depending on what plan is purchased. the auction will stand by their report for up to 14 days, after which if something is determined to be wrong, the auction has to take the car back. The auction, who now owns it, will then sell the car the next week with an announcement of the defect(s) or sell it “as is.”
Repo’s are not announced as such, one just assumes when GMAC, Mercedes-Benz Credit, etc. are selling a consignment of cars it is mostly off lease and rentals (the rentals are obvious because of the options) with a small percentage of repos mixed in. The dealers could care less which is which.
On any given Friday, the Manheim Auction, Manheim, PA, one of about 54 Manheim auctions in the US, offers up about 7,000 to 9,000 cars in one day. When they hold a Thursday Exotic High-Line sale the combined two day total can be as high as 16,000 units. The auctions are dealer only and all dealers have to be pre-registered. The sales rate runs about 47% to 65%.
You can view the size of this monster by keying in:
1190 Lancaster Road Manheim, PA 17545 in Google maps or better: [maps.live.com] and click on the birds eye view. Anything that is not green is part of the auction.
Trivia:
The used car business was around 370 Billion dollars last year.
Where did car dealers originally get their bad rep? Read Chapter 7 of Steinbeck’s “The Grapes of Wrath.”
@lowlight69: “why anyone would buy a new car i just don’t understand….”
So true. How else would anyone be able to get an affordable Nissan GTR?
I think everyone should buy a new car. So I will have more used cars to choose from.
@UpsetPanda: “I’m still not sure how people think they can just stop making payments, like if you ignore it, it’ll go away.”
I had a friend who did EXACTLY this with her car payments, like five years ago, and she’s STILL pissed that they came and “stole” her car when she “didn’t do anything.” She’s a reasonably intelligent individual, so I really don’t know where the disconnect is, but she is mortally offended that when she stopped making payments (and ignored the problem), they repoed her car.
@Eyebrows McGee: That disconnection or breakdown in commonsense might come from the idea that people think buying a house and a car is like buying a large appliance or a tv set. Buying a car, doesn’t carry as much weight as it did in the past. Before you had to start out with a crappy car because thats all you could afford and until you COULD afford the newer car, you just dealt with the clunker. Now its just a matter of finding a place thats gonna create a loan for you.
That ideal removes a lot of previously conceived notions. One being, that YOU don’t own the car until you pay off the bank that gave you the loan. A great many people think THEY are the ones that actually OWN the car. ALthough people with a firm grasp of reality know the truth.
@remusrm:
Take it to another mechanic to discover & “validate” that there is actually a problem with it, go back to the Ford dealership & ask them to fix it. If they won’t do that take them to small claims court for breach of warranty contract.
@Eyebrows McGee: Yeah- so many people fall for the “big volume” auto dealer commercials. Way I figured it was that the bank would own the car for 5 years and then me for 5 years and any auto life cycle after 10 years is gravy to me…
I like the folks that put 7-8000$ worth of custom stereo equipment, 2 grand worth of rims and other junk on the car… Then they get pissed when they ‘skip’ 4-6 months of payments and their ‘rolling investment’ is gone.
I used to do a lot of custom stereo/alarm installs and I saw a lot of that go on in the 90′s. Nothing is as sad as a guys car rolling down the street with the alarm howling on a roll back wrecker.
Of course they call demanding the car’s contents. That never went well.
How does paying off your car make you happy? That does not prevent you from taking out a title loan. In fact, it makes it easy! I don’t understand unless you are just saying you are glad your car is paid off. In that case, what does that have to do with this story?
When I bought my car, it was actually cheaper to finance than to pay cash
????
How can that be? If the cash price is, say, $10,000, how could financing that — even at 1% APR for just one month — be CHEAPER than actually writing a check for $10k?
Just curious to know how the math works out.
@noodleman: Easy. 0% financing. That’s what I got on my SUV — now paid off! It’s cheaper than paying cash because you can invest the money you’d pay for the car and earn interest.
@winstonthorne: banks repo cars quickly because they can be painted a different color, hidden in a garage, taken to another state, driven up a tree or into a river, etc. the value declines daily, and they want (need) to recover as much as possible as quickly as possible to mitigate their losses.
@noodleman: my husband was offered a bonus for financing through the finance group the dealer had but it had no early pay penalty after 60 days. So he took the bonus, waited two months and paid it all off. It was less than cash.
This plan works fine for us:
Drive your cars 2-3 years longer than you thought you would, buy cars 2-3 years old so they are still under warranty and pay cash for them (unless you can work out a loan/rebate deal where you end up paying less than cash straight out).
This plan coupled with our 15 year mortgage has really made a huge positive impact on our overall financial goals.