ARA – Open Industry Storage Survey Results

A Letter from ARA Executive Director, Joel Kennedy

To The Repossession Industry and ARA Membership,

The American Recovery Association (www.repo.org) recently completed a survey of the industry about vehicle and lot storage costs. The American Recovery Association (ARA) is examining this entire category of expenses that includes everything from rent, security, insurance, and staffing. Vehicle storage is a big expense category, and it is a common to all of our members.

Also, and more importantly, revenue from vehicle storage has been shrinking due to lower negotiated daily storage fees and free storage periods. A recent uptick in arson attacks at recovery agent lots has been another hit to already thinning insurance carriers and increasing premiums.

Our survey revealed the following:

71% of respondents have between 1-3 vehicle storage lots, and over 50% of those agents lease their lots
40% of agents who lease their lots reported that their rents increased by more than 10% in the last 2 years
Two thirds of all agents responded that their lots can accommodate a maximum of 200 cars at any time
80% of respondents reported that, on average, vehicles remain on their lots between 10-30 days

Lot rents are increasing at a rate that is outpacing inflation. If even some of our member contracts provide for between 10-30 days free storage, agents are falling short of covering this expense.

A statistic that the ARA is all too familiar with is the fact that the industry has seen 25% of its agents have shuttered up. Those that remain likely possess smaller storage lots that they don’t own, and with their rents going up, clients are keeping cars on agents lots longer than they have in the past.

The combination of smaller lot capacity and vehicles remaining on lots longer will create a bottle neck of services for the agents. A time will come that agents will reach a capacity and not be able to put new repos on the lot.

Imagine a business that cannot perform its core function due to the necessity of providing support function without supporting revenue. That is a death blow to a healthy operation.

The ARA endeavors to provide valuable information to the industry. As we enter the next phase of our economic journey, we all have questions and concerns about the overall capacity of the recovery industry to fully serve the needs of our clients in a period of higher default. While it is unlikely that we will see an entry of new recovery shops, the ARA sees some potential solutions:

Expand existing agent lot capacity, since the likelihood of new agencies starting up is low
Accelerate the movement of recovered collateral from recovery agent lots
Address fair storage fees, and eliminate free storage from contracts

The ARA thanks its members and the industry for their participation in this survey. The sole purpose of this survey is to put numbers to what we already know and provide that data to the industry at large.

We are committed to building a sustainable and profitable business model that benefits every stakeholder in our industry and, it is our opinion, a conversation about this topic and daily storage rates is paramount if things are going to change. We are aware that without an open discussion about how to accomplish this goal, we will see even more agencies depart our space.