Equipment repossessions and abandonments continue to grow in the equipment industry as default rates rise from pandemic-era lows.
Repossessions have increased 33% since March, Nick Walker, director of sales and marketing at Great Lakes Asset Solutions, told Equipment Finance News. Great Lakes Asset Solutions is a nationwide commercial asset repossession firm, with most of its business in truck, trailer and heavy equipment repossessions, he said.
Truck repossession volume has posted a notable uptick, Shawn Smith, chief executive of Dedicated Financial GBC, said during a panel at the National Equipment Finance Association’s (NEFA) Funding Symposium in San Antonio on Oct. 5. Still, default rates remain better than pre-pandemic levels, he said.
“It didn’t go back to those record low default rates that we had, but it’s also for most people still below historical default levels and pre-pandemic defaults,” Smith said. “Everybody’s nervous. … I’m not seeing these things that point to this massive downturn.”
Repossession agencies growing
With default rates down and repossession activity limited during the pandemic, 30% to 40% of repossession agents left the industry, Kevin Carr, vice president of financial services at PassTime GPS, said during the panel.
“With repossession agents being more limited in markets — especially good ones — these guys are taking the low-hanging fruit,” he said. “More lenders are moving up in their credit spectrum level, with who used to be just C- credit, now it’s B- credit wise because it’s easy to put the [GPS] device on and ultimately helps them better gauge what’s happening.”
While some agents left the industry, Great Lakes Asset Solutions has doubled the size of its firm to keep up with the increased activity, Walker told EFN.
“There’s some areas where there’s a little less density, where it can be a struggle to find [agents] in some of the more rural areas,” he said. “We are in all 50 states, and we’ve got hundreds of agents that are ready to go.”
Abandonments rising, impacting values
Equipment abandonment — when a driver or operator leaves, or abandons, their truck or other equipment with no intention of retrieving it — presents another problem for equipment lenders and leasing companies, Carr said.
“We have certain reports that tell them about abandonment, leading to potential problems of vehicles being towed and impounded,” he said. High impound costs can make it less valuable to the lender to repossess the asset than to leave it behind, depending on the length of the impoundment, he said.
How the lender or lessor responds to abandonment depends on how they value the asset, Walker said.
“A lot of times it’s worth it and they go to remarket it,” he said. “Some of these leasing companies will just put a right back in their fleet.”
The relationship lenders and lessors have with their vendor partners remains key to successful repossession and asset recovery, GBC’s Smith said.
“You want to have your vendors competing against each other and see how they’re doing on both cost and effectiveness,” Smith said. “You’re going to want to know that you have the right companies in place, the right attorneys, the right collection agencies, the right repossession agents, portfolio managers and re-marketers that can handle that volume and know how they’re going to do that.”