By Renée Jean, business and tourism journalist
The auto markets in the United States and Wyoming have been in a frantic race over the past couple of years, and it doesn’t look like the race is over yet.
The latest steep curve ahead appears to be an increase in car seizures – many of which appear to be holdovers from the start of the COVID-19 pandemic.
According to a representative from All Action Recovery, which operates in Wyoming, a number of them are voluntary foreclosures, when borrowers realize they can’t keep up with payments and call their banks to have someone come pick up the cars.
Others are involuntary and non-traditional seizures.
“I have people calling me saying, ‘I loaned this guy money or, you know, I sold a car on Facebook,’ or anywhere, or somebody owes me money because he’s been living in my rental for a year without paying rent, and now I have to sue them for it,” Panhandle Asset Recovery owner Stu Kissick told the Cowboy State Daily.
“So I put a lien on their vehicles, or you know, those kind of weird situations,” he said. “I didn’t see a lot of it before COVID, but I see a lot of it now.”
Kissick, based in Scottsbluff, Nebraska, estimated he was seeing three to four times the usual number of non-traditional grabs on handshake-type deals gone bad.
“A few times a year I had a really serious assignment like that where I had to find a few vehicles for someone under a private arrangement,” Kissick said. “Now I have two or three a month.”
By validating these types of foreclosures, Kissick traces the pattern back to the start of COVID, when traditional lending models were inaccessible to many.
“Either the income wasn’t there for them to show on paper, or other people were eager to sell because their income wasn’t there,” Kissick said. “So I think you’ve had a lot of non-traditional types of loans, handshakes, and personal contracts, and I need to pursue those now.”
Used car prices have skyrocketed
Car seizures during the pandemic have been lower than expected for the past two years, Kissick added.
There are several reasons behind this. Not only has the Financial Conduct Association banned car seizures during the COVID-19 pandemic, but with soaring used car prices, many people have found they can use car buying service companies. cars to unload vehicles they could no longer afford.
These high prices for used cars – sometimes higher than list prices for new vehicles – meant that many could offload their charges for a sum far greater than the outstanding amount of their car loan. Many car buying services also advertise that they will take care of outstanding loans as part of the sale.
COVID payments executed
Not all seizures are non-traditional.
Rich Whitaker, with Anytime Recovery Company and West Coast Recovery Services, told the Cowboy State Daily his foreclosures are up 20% to 30% year-over-year on everything from cars to RVs and gear of construction.
He thinks the increase largely reflects the depletion of stimulus funds. He also thinks a looming recession, forced by interest rate hikes from the Federal Reserve, could accelerate the rate of car seizures once they hit the economy.
“When the government gave everyone $2,800, they deferred it, and then everyone got more money for unemployment and they were working,” he said. “It saved people time. And then they also used the money to go buy stuff.
Expect a surge
As a result, Whittaker particularly expects to see a spike in foreclosures for RVs purchased during the pandemic.
“They had record RV sales the year the pandemic hit, and there will be a lot of these people who had never owned one before, but they went and bought one because they couldn’t bring their kids at Disneyland or something, and they didn’t realize that was a lot of work,” Whittaker said.
Cox Automoative, meanwhile, told the Cowboy State Daily that car repossession rates have dropped during the pandemic, but are slowly returning to historic norms. However, they do not expect a large spike, resulting in a crisis.
“While the evidence of stress in chargebacks is clear, chargebacks are not yet turning into defaults and foreclosures as they always have,” Cox Automotive chief economist John Smoke wrote. in a report on the subject, examining whether a default crisis is looming.
With unemployment rates still low, Cox Automotive expects the default rate to rise through the end of the year to 2.3%.
“An auto loan default rate of 2.3% would represent a 16% increase from 2021, but would still be among the lowest levels in 15 years,” Smoke wrote in the report.
A solid labor market
Kissick, meanwhile, believes a default crisis is unlikely in Midwestern states like Wyoming, where there are three jobs for every job seeker.
“I think in the Midwest we’re insulated from that by the fact that we have solid jobs,” he said. “It’s the right kind of jobs, jobs that pay.
“I mean, I know we have jobs that pay minimum wage and all that kind of stuff. But overall, I think in percentage terms, they’re better jobs than that. There are mines, railways and hospitals. It’s good economic pressure.