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Auto repossessions shift into high gear

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  • Auto repossessions shift into high gear

    http://www.columbiatribune.com/2008/...613Busi015.asp

    Auto repossessions shift into high gear

    LOS ANGELES - "JJ the Repo Man," as 40-year-old Jon Anderson calls himself, has 100 repossession orders piled on the dashboard of his tow truck.

    Many documents bear a simple note: "Can’t pay. Pick up the car." In short, the car owner is surrendering to the troubled economy’s Grim Reaper: the repo man.

    "It’s easier for these people to say, ‘Here, take it!’ " said the 6-foot-2-inch, 250-pound Anderson, driving to a lot filled with scores of cars he’s repossessed in recent weeks. "They can’t afford a car payment, insurance and paying high gas prices. I’d say 75 percent of them are losing their houses, everything. It’s just a big mess right now."

    Just as home foreclosures have become a national crisis, prompting the U.S. House to pass a $300 billion bailout bill, auto loans have become the other shoe to drop.

    With car repossessions up 10 percent to 15 percent so far this year, on top of similar increases last year, auction yards are filled across the country as consumers are forced to choose between their homes and their cars - and often are unable to pay for either, said economists with auction firms and other experts.

    "The unusually high amount of repossessions that we got at the beginning of the year seems to be a reflection of the spillover of mortgage resets, subprime and others, that caused some folks to default on their car loans," said Tom Kontos, executive vice president of Adesa, a national car auction operator in Carmel, Ind.

    Delinquencies in car-dealer loans reached a historic high in the final quarter last year, 3.13 percent, said the American Bankers Association, which has tracked such data since 1990. Such dealer-arranged loans make up 90 percent of banks’ automobile loans; the group does not track loans extended by auto manufacturers, a spokeswoman said.

    "Look at what’s going on. Food prices are up. Job creation has slowed. People are losing their jobs. And gas is up. It’s all these factors combined," said Carol Kaplan, the bankers association’s spokeswoman.

    Last year’s 1.51 million repossessions marked one of the biggest increases in a decade, 10 percent, and the growth is projected to continue this year, to 1.6 million, said economist Tom Webb of wholesale car auctioneer Manheim Consulting.

    "They weren’t making a lot of bad loans. It’s just that the market has turned," Webb said. "You can almost guarantee that repossessions will be down in 2009 because the tightening of lending standards has been very severe."

    GMAC Financial Services, the world’s largest auto financing provider, has beefed up its collection services and increased its phone calls to at-risk consumers, said spokesman Mike Stoller. As a result, its delinquency rate fell in this year’s first quarter to 2.42 percent from 2.52 percent a year ago, he said.

    "The credit environment being what it is has created a lot of stress in the marketplace, and we haven’t turned a blind eye to that," said Stoller, whose company is affiliated with GM dealers.
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