Even in this part of the country, where big trucks are as ubiquitous as the Big Sky, credit union officials have started to notice an upswing in repossessions of large vehicles as members just can't keep pace with rising gas prices.
While the overall number of repos hasn't risen versus 2004, Montana First CU officials say the number of members mentioning gas prices as a primary driver for no longer being able to afford a vehicle, has increased. In addition, CU officials say it's been very difficult to unload or get a fair price for the repossessed vehicle in the local market.
The situation isn't unique to Montana and ranchers. Credit union and car recovery experts around the nation told The Credit Union Journal that members are indicating that gas prices have made it difficult to continue to own large SUVs and trucks. In some extreme cases, SUV and truck owners have actually set their own vehicles on fire to get rid of the gas guzzlers and file a fraudulent insurance claim.
Montana First CU officials say, in addition to dumping their vehicle, legally or otherwise, many members are looking to move into smaller SUVs, such as the Toyota Highlander, a new hybrid-powered vehicle that still can churn out 270 horsepower and is available with four-wheel drive. Montana First Marketing Director Tyler Disburgh said it's normal for Montana residents to drive up to 50 miles or more every day, so the extra horsepower, four-wheel drive and smaller gas tank is now in demand.
"It's a geographic necessity for us," Disburgh said. "A thousand miles a month adds up quick."
Disburgh said the main problem with the higher number of repossessions is that even in a truck-hungry state such as Montana, there are fewer buyers once the vehicle is placed for resale and the credit union is taking a hit on the loan.
Disburgh himself recently sold his own Ford Explorer as over a six-month period he watched the value drop from $18,000 to $7,000. Disburgh expects to see declining loan demand for SUVs among everyday folks, while ranchers and farmers in the area will still need trucks for their work.
"Perhaps we're just getting in to this," he said.
According to Manheim's 2005 Used Car Market Report, repossessions declined during the previous year "by 6% to 1.5 million vehicles, though future repossession levels are expected to rise due to a growing volume of loans outstanding as well as an increase in longer-term loans and higher loan-to-value ratios."
Repo experts around the country report that they have already noticed more trucks, SUVs, four-wheel drives and even motor homes on their lots. One man who spotted the trend as quickly as Montana First CU, is Les McCook, president of the American Recovery Association and an experienced repo hand himself. McCook said his lot in Austin, Texas has three four-wheel drive vehicles sitting on it, whereas he usually doesn't have any. McCook said the SUVs and trucks he's seeing come through his lot aren't commercial trucks, but vehicles formerly owned by someone on the edge financially due to their car payments with insurance, and who just can't afford to pay $3 per gallon for gas while getting only eight miles to the gallon.
"Instead of small cars we usually have, you're seeing the big ones," McCook said.
One man from Casper, Wyo., "gave up the ghost" in Austin and McCook took charge of his Jeep. Only days before speaking to The Credit Union Journal, McCook and a young apprentice spotted a burned-out hulk under a highway bridge, less than four blocks from his car lot. McCook took one look and told the new hire it was an insurance job. How did he know? There were no personal items in the SUV, indicating it was cleaned out by the owner, and then torched. Police tracked down the owner and discovered that he was in fact behind in his payments. McCook couldn't provide hard data but estimated a 10% to 15% increase in gas-related repossessions and said it might taper off with falling prices, but it was too early to tell.
"It's happening. We're seeing it," McCook said.
In New Jersey, Paul Hallock of Capital Recovery Service has noticed a slight increase in SUVs reclaimed, but attributed to the high number of them currently on American roads in addition to high gas prices.
"I've heard actual comments from customers," Hallock said. "I think it's scared a lot of people away from SUVs."
Hallock expects SUV purchases to drop and said actual auto recovery will drop after Jan.1, 2006, too, reflecting the declining sales volume during the latter half of 2005.
In Birmingham, Ala., meanwhile, Mary Jane Hogan, a director of the American Recovery Association and the owner of National Locating and Recovery, said she hasn't seen an increase in SUVs on her lot. Instead, it's been even bigger vehicles, including motor homes and large boats, and even horse trailers. She has even repossessed some Harley-Davidson motorcycles, even though "hog" owners tend to be fiercely loyal. Hogan said the vehicles were from "nice homes" and not new purchases being dumped by an owner who didn't care about loan obligations.
"They can't afford them any longer," Hogan said. "For the first time, I have four large motor homes on my lot."
Hogan also said after the New Year many financial institutions in and around the Gulf States will have to face deferred loans due to Hurricane Katrina and also the fact that some loans don't have any collateral attached anymore. Katrina either destroyed it or swept it away.
"There's nothing there to repossess," she said.
The news for large vehicles doesn't appear it will improve. Repo expert Myles Weiss, owner of Able Auto Adjusters in Hawthorne, Calif., pointed out that there remain a high number of SUVs still on dealer lots that are loaded with cash incentives. Weiss said if it's more attractive to buy a new SUV, reselling a repossessed vehicle will become an even more difficult task in 2006.
