After a number of lean years, the repo industry has starting to grow again. A strengthening economy has led to stronger auto sales, and increased prime and sub-prime lending. As sales and lending increase, so do loan defaults and the need for repossessions.
The industry is standing at the starting line of what experts predict will be five year cycle of increasing demand. Higher profits are also predicted. But so far, repossession fees remain flat, as they have since the recession.
Most repo companies are already seeing an increase in assignments. And, while more business is better, if fees and profit margins don’t increase along with assignments, smaller operations are going to be left without the cash they need to compete.
Higher Repo Demand. Higher Repo Profits.
Recently, Auto Finance Excellence featured ARA in a blog post that highlights the forecast report of industry analyst Maksim Soshkin of IBISWorld.
“The strengthening economy has started to boost demand. As disposable income levels have risen, consumers have begun to increase their purchases, while creditors have expanded financing. As a result, loan volumes have increased and the overall number of delinquencies has climbed, though the share of delinquent loans has contracted. Consequently, repossession rates have increased and demand for industry services has increased.”
“In particular, the recent surge in subprime auto loans has resulted in more car repossessions,” the report says. “The resulting increase in the number of loans will lead to higher number of delinquencies, resulting in increased demand for industry services.”
The report also forecasts a rise in the industry profit margin from 20.4% in 2014 to 22.4% in 2019. “Increasing demand for industry services will lead to increased repossession rates, driving up profit per job. Moreover, as the economy improves, fewer people will become part-time or self-employed repossession agents. Consequently, competition is expected to decline, leading to higher profit margins.”
Auto Finance Excellence stated, and rightly so…
Repo companies that do their business “the right way” – i.e., by complying with stricter federal regulations and lender oversight – are likely to take a greater share of the expanding business.
Complying with today’s stricter federal regulations increases costs for the operator. So if repossession fees aren’t covering those costs, repo companies going to need another way to push their profit margin higher. The solution is to decrease your overhead and increase productivity. BellesLink can help.
Skip Tracing Profitably
BellesLink is a skip tracing platform that lowers your phone and database costs. It’s robust enough to replace your costly land-line phone-system and database subscriptions. BellesLink has tools for verifying information and contacting skips. You save time on every call and close more cases faster. And, by skip tracing from your desk, not the street, you save miles in the truck and reduce your fuel bill.
BellesLink makes skip tracing more profitable and will your company complete as the industry grows. Learn more about BellesLink or request a demo today.