Repos rise as auto loans sink

| Print |  Email
Archives - June 2008
Sunday, June 01, 2008

RepossessedCar.jpg STATEWIDE Bobby Sylvester has a front-row seat to the repo show.

Sylvester is the fleet manager for Brasher’s Cascade Auto Auction in Troutdale, one of Oregon’s largest auction lots. About 1,500 autos move through the property each week, and the percentage of those that were recently repossessed is climbing steadily. Last summer, Sylvester was seeing 400-600 new repo cars per month. That number has doubled, and with fuel prices and defaults shooting up, Sylvester doesn’t expect the trend to reverse.

“When people have to choose between paying their mortgages and making their car payments, they tend to lean more toward the house.”

The same freewheeling “No credit? No problem!” loan environment that has upended Oregon’s housing market also is returning to haunt the auto industry. Subprime lenders, banks, credit unions and dealerships that finance their own sales are scrambling to keep ahead of a growing wave of repossessions exacerbated by record levels of consumer debt. Each new repo costs the lender approximately $7,000.

According to a recent study by Benchmark Consulting International, the average credit score for purchasers of new cars dropped from 709 in 2006 to 678 in 2007, and the percentage of “upside down” borrowers owing more on their cars than they were worth (by an average of more than $4,000) jumped to 25%.

Tighter underwriting standards have chased many mainstream banks out of the auto business, but for large subprime lenders such as Reliable Credit Association of Milwaukie and People’s Credit of Portland, car loans remain both risky and profitable: risky because of the rising delinquency rates, and profitable because of the whopping interest rates charged. According to Reliable Credit’s website, the company charges interest rates ranging from 19.99% to 36% in Oregon.

Credit unions offer much better terms, but they are also facing new challenges from cash-strapped borrowers. Pam Bowersox, vice president of lending for Beaverton-based First Tech Credit Union, says her institution works to avoid repossessions by developing “work-out plans” for members with financial troubles that may involve skipping or reducing payments. About 35% of First Tech’s lending portfolio is in auto loans, she estimates, but the number of loans closing has dropped over the past year. As is the case with most lenders, First Tech is making adjustments to its auto loan program.

Oregon credit unions began delving deeply into car loans during a broad shift in the early 2000s towards an “automated approval matrix” that made lending faster and more convenient to help credit unions compete with larger institutions. Under the automated system, borrowers no longer had to document stated income.

Given these all-too-familiar fundamentals, it comes as no surprise that Oregon’s repo men are busier than they’ve been in years, lenders are renegotiating to avoid losses, and dealerships are buying and spending less at auction in an effort to beat back oversupply. The most immediate slow-down Sylvester has noticed are the vehicles that used to sell fastest: “The big gas hogs are definitely not moving,” he reports.                        

BEN JACKLET




To comment, email This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
 

More Articles

Game On

March 2015
Wednesday, February 25, 2015
BY LINDA BAKER | OB EDITOR

The big news at Oregon Business is we’re getting a ping pong table. After reading the descriptions of the 2015 100 Best Companies to Work For in Oregon, a disproportionate number of which feature table tennis in the office, I decided it was time to bring our own workplace into the 21st century. It was a tough call, but it’s lonely at the top, and someone has to make the hard decisions.


Read more...

The Human Factor

February 2015
Monday, January 26, 2015
BY BRIAN LIBBY

Matt French opens up South Waterfront.


Read more...

On the Brink

March 2015
Friday, February 20, 2015
BY APRIL STREETER | OB CONTRIBUTOR

Leslie Carlson channels the big idea.


Read more...

Meeting Facilities Perspective

March 2015
Tuesday, February 24, 2015
BY KIM MOORE | OB RESEARCH EDITOR

A conversation with Donna Earley, director of sales and marketing for the Salem Convention Center.


Read more...

Playoffs pay off for the Ducks

The Latest
Friday, January 02, 2015
oregon-ducks-logo-helmet-thumbBY JACOB PALMER | OB DIGITAL NEWS EDITOR

The University of Oregon football team looked unstoppable on the field Jan. 1 — and the university is reaping the benefits of the new postseason format.


Read more...

Editor's Letter: Tortoise and the Hare

February 2015
Monday, January 26, 2015

The day after this issue goes to press, the city of Medford will host its annual business conference. The event features Minoli Ratnatunga, co-author of the Milken Institute’s annual “Best-Performing Cities” report. Preliminary data suggests that Medford is likely to retain its No. 1 ranking among best-performing small cities for having a higher concentration of high-tech firms than the national average. 


Read more...

Convention Wisdom

February 2015
Monday, January 26, 2015
BY KIM MOORE

After more than a decade of wrangling, construction on a convention center hotel in Portland is slated to start this summer. But debate over project financing continues.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS