One of the main reasons an auto repossession business fails is that they do not charge enough for auto repossessions. It really seems simple enough, but I constantly talk to auto repossession company owners that tell me they are in the red every month. I can see why, when they tell me their repossession fees. If you own a proper auto repossession business – one that has the correct insurance coverage, a real office, storage lot and decent equipment, then you need to charge a rate that makes you money. Remember, you are not in business to make yourself a living. You are in business to make money, to prosper, and to be a successful entrepreneur. You will not stay in business very long if you are just making ends meet. You need to turn a profit and save for your company’s future. One day, you will need to replace the current wrecker you have. Or you might have to finance the expansion of your repo business by opening a satellite office, hiring more staff and purchasing new wreckers. You will not be able to achieve any of that if your business is just surviving month to month.
So the question is, “What should you charge?” You need to look at several things. One is what your successful competitor is charging. Your competitor that runs a proper repossession company. You should evaluate and match his rates, rather than some fly-by-night company that can’t afford to get a burned-out headlight fixed on their 1984 sling truck. You should also look at what your business expenses are going to be and charge a fee that not only covers those expenses, but makes you a healthy profit. I keep hearing talk of repo fees at $200 for an involuntary! I can tell you what successful, profitable auto repossession company owners say about the $200 rate – “I would not turn the ignition key in my wrecker for $200 a car”. You need to look at the fact that if you work for rates that cause you to lose money, then you might as well not be in business. I know it is hard to not go in and undercut your competition. I know it is tough to say “no” to a lender when they call and ask you to lower your rate because “Rat Recovery” is doing repos for $25 cheaper than you.
It is also tough to have to go down to your local lawyer’s office and file bankruptcy on your auto repossession business. It is a lot tougher to have to announce to your office staff, repossession agents and other employees that they no longer have a place to work. It is real tough to lose your life savings that you excitedly invested into your new business venture. What will you do? Go work for one of your competitors? Sure, that may be an option, but I can tell you from experience, that once you have been a business owner, it is quite hard to go back and work for someone else.
The truth of the matter is that you can be successful in this business! You can do it through hard work, honesty, integrity and, most of all, good business sense. That good business sense entails knowing that you have to make a decent profit to survive in any business. If you are doing a great job for your clients, then you are worth paying a “great” fee. We, as an industry, have gotten ourselves in a mess by constantly lowering our rates, when we should have been raising them all along. I can tell you that 20 years ago, the auto repossession industry was a profitable business. Lenders were paying more 20 years ago than they are paying now. They were also paying for more services back then, and there were no “freebies”! Each and every company owner needs to take steps to overcorrect this downward spiral of the industry for which we have so much passion.
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