Here’s a lesson in how a bad economy spreads like the flu: Car repossessions are up drastically this year, with those numbers preparing to top 1.9 million, which is a 15% jump from 2007. We’re guessing a good portion of those vehicles are luxury cars or large trucks and SUVs that real estate agents and mortgage brokers bought when they figured the good times would roll forever.
Now that the housing bubble has erupted like a lanced boil, those monthly payments and the cost of gas have become utterly unaffordable. Unlike other lenders, automakers can’t even be blamed for handing out risky loans. Borrowers with high credit scores are having their BMWs yanked right alongside those who got Honda Civics.
This is bad news for automakers (as if they needed any more) because the average loss for a repossessed car is about $10,000. Then the heavily discounted repos wind up on dealer lots and give the few car customers still wandering around a great reason to bypass a new car in favor of a discounted repo.
You’d think that at least the repo companies would be doing bang-up business, right? Guess again. Repo men say their businesses are suffering as automakers lower payments for people struggling with loans instead of repossessing the vehicle in an attempt to mitigate losses.
Record Rate of Repos in 2008 (Autoblog)