In this tough economy, the specter of the repo man hangs before many Americans like the Grim Reaper. People are even sleeping in their cars to make sure they don't get towed in the middle of the night. But knowing how and when the hook will come can help payment-challenged consumers deal with hard times.
First of all, if you're behind in your car payments, you're not alone. Many Americans are currently delinquent on their loans, and car repossessions are at an all-time high. It is estimated that 3.8 to 5 million cars will be repossessed this year. Additionally, repossessions have been expanded to include boats, RVs and other equipment.
"It's historic," one repo man said. "I've heard the news reports saying business is up 10, 12 percent. I think it's doubled."
Since it's costly and stays on your credit report for seven years, you should try to avoid repossession at all costs. For more tips on dealing with the loan company, read "What To Do When You Can't Make Your Car Payment". If you are facing immediate repossession, read on.
To answer a few basic questions on car repossessions, we turned to several industry insiders who have worked in the subprime loan business. "Not all repo agents have the tats and missing teeth," said Jeff Huang, formerly in the subprime division of a Los Angeles bank. "They are hard-working Americans like you and me."
While online courses promise that it is a get-rich-quick job, most repo men (called "recovery agents" or "adjusters" in the business) work long hours for uncertain pay. One repo man said: "After being up all night on a job I go back to the office to jump on the computer and search for new info on the debtors. All of this to bring back a car that someone didn't make a payment for. I don't have a lot of dough, but I make my payments even if my stomach is growling."
Stories abound of repo men being verbally abused, attacked and even shot at. "Repo agents are allergic to bullets, too, so they won't risk their lives just for a $350 fee," Huang said, adding, "There is a human face to the car repo business. When you are repo-ing a car with a baby seat in it, that's sad for everyone."
Still, most people can't work up much sympathy for the repo man since he's the one hauling your car away. But remember, they work on commission and are only paid if the car is repossessed. Their fee is usually about $350 per vehicle. But it sometimes takes weeks to find a car, since people often move their car from one place to another to avoid having it hauled away.
"Skip Tracing" To Find Debtors
Many repo men also do "skip tracing." This usually involves using online databases to find evasive debtors who owe the bank money on their car loan. Occasionally, some old-fashioned detective work in the form of door-knocking or phone-calling is required. There might even be informants — an estranged spouse looking to get even, for example — who tell repo men where to find a car in default.
Once the car is located, the agent will then wait until it is left unattended and use a tow truck to repossess the vehicle. In some cases, repo men have specially modified tow trucks that can yank a car away in a minute or two.
Once the car is in the repo man's possession, it is taken to an impound lot. From there, the car will typically be held for 30 days to give the owner a chance to "make the loan whole" by bringing all back payments up to date (including the repossession fee) — or by paying off the loan balance in full. If the account is not settled in time, the car is sold at auction.
The selling price is deducted from the amount owed, plus fees. The fees include the cost of the repossession, auction, interest and the amount owed on the loan. Odds are high that after your car is sold at auction, you'll still owe money on it to the bank.
How Much Time Do I Have?
How long does it take before the repo man has you in his sights? That depends on your payment history. "Banks use collection systems that are very sophisticated," said a source who worked for the credit department of a large Japanese automaker. "If you are considered a flight risk, you could come up in the collection queue only 10 days following your due date. If you're not risky, you'll come up later."
Most credit departments want you to call to make arrangements for payment as soon as you know you will be late. "If not, they might get nervous and try to nab the car," he said. "On the other hand, some people are chronic 'wait-payers' and the lender tries to keep them in the car as long as they can."
Our source emphasized two points. If a person is given a 30-day extension by the loan company, that's 30 days from when the payment was due, not from the day the extension was granted. "Some people don't realize that and they think they now have two months." Secondly: "As soon as you are one day late you are in default on your loan."
When You Know the Repo Man Is Coming
We're not going to tell you how to hide your car or block it in using other vehicles, as that's just postponing the inevitable. As one repo man said, "We use every trick in the book to get your car. We watch the house and follow you if you take the car anywhere. We'll grab it when you park, even if it is for a few minutes. I took one from a gas station when the owner went to the window to get their change.
"The harder you make it for the repo man, the more he is going to charge the bank," our recovery agent added. "The bank will add this to the amount you owe, and you will eventually have to pay it."
So before your car disappears, take your personal items out of it. This includes removing aftermarket stereo equipment or other accessories. Put the original equipment back onto the vehicle or you will be billed for it. If your car is repossessed, you have the legal right to claim your personal possessions from inside the vehicle. In some cases, personal items can vanish. "The agent is supposed to store and log everything in the car," Huang said. "But that doesn't always happen."
Still other people avoid repossession by simply surrendering their vehicle. This summer, in foreclosure-ridden Riverside County, California, dealers would come to work in the morning to find SUVs parked outside with the keys in the ignition and a note on the windshield saying, "I surrender this car." This avoids the repossession fee but not the balance owed or the auction fees.
Sadly, some people facing repossession become bitter and vandalize the cars. "Some cars we got back looked like someone had tap-danced on the hood," Huang said. This would only lower the value of the car at auction, further increasing the balance owed on the car.
Some Repossessed Cars Actually Have Equity in Them
In a rare turn of events, some people who have their cars repossessed might actually get a check from the bank. If you're in the fourth year of a five-year loan and a substantial down payment was made, you might have equity in the vehicle and not know it. After the car is repossessed and sold at auction, that amount could be more than what is owed on the loan, even after auction and repossession fees are deducted.
If the owner was aware of their loan balance, the entire repossession could have been avoided by a sale of the car, preventing damage to the owner's credit.
Consumer rights regarding repossessions vary from one state to the next. In some states, repossessions aren't even allowed. To get an idea of what may be allowed, read this handy repo FAQ for California. But before you do that, get out your car payment book and make sure you're up to date. If not, it's time to "make yourself whole" again.
To find a dealership that knows how to treat shoppers right, please visit Edmunds.com's Dealer Ratings and Reviews.