The economy is still mired in its slump and everyone is feeling the pinch. It won't surprise you to learn that the number vehicle repossessions has skyrocketed over the past year. Experts suggest that the number of daily repos increased nearly 20% during 2008. What's more, the increase in activity is not limited to certain types of cars. Luxury models are being repossessed as quickly as low-priced models.
Because this is an area of the automotive industry that few people know about, I'm going to explain what happens behind the scenes. We'll follow the trail of a repo'd vehicle as it changes hands throughout the process.
The Person Who Owns The Vehicle
Let's suppose that you purchase a new Mercedes. You found a dealer who was willing to let you drive it off the lot without your having to put any money down. Of course, the monthly payments are staggeringly large. Eight months later, you've lost your job and have begun to have a problem with making your payments on time. Eventually, you simply stop paying the lender each month.
The lender will send several notices to you requesting that you bring your account current. If they don't hear from you, they'll begin legal preparations for the repossession. For example, the lender will file a lien, request the court to grant a levy, and notify you regarding where the Mercedes will be sold. Then, the repo agent is dispatched to pick it up.
The Person Who Repossesses It
Repossession companies are hired by the lender. The laws surrounding what a repo agent can and cannot do in order to acquire a vehicle vary by state. Also, state law varies regarding what the owner (in this case, you) can do. For example, some states will allow the agent to cross into private property without the owner's permission in order to acquire the car. On the other hand, several states will let you relocate your car in order to evade the repo agent. In that case it's up to the agent to find you (and your Mercedes).
The Auction And Dealership Lot
Let's assume the agent found you and took possession of your Mercedes. In most cases, the vehicle will end up at a private auction attended by the lender, a representative of the dealership, and any number of other dealers who are interested in buying it for resale. If your Mercedes is purchased - and it's likely that it will be - it ends up on the new dealer's lot.
Hopefully, you'll never need to experience firsthand the process of having a car repossessed. That said, it is an important part of the automotive industry and explains how many used cars end up on a dealer's lot. As for whether repossessed vehicles are reliable, they typically are. But, use the same level of caution you normally would when shopping for a used car.