The Good, the Bad and the Ugly of a Packed Repo Lot

GUEST EDITORIAL The Good, the Bad and the Ugly of a Packed Repo Lot

Well, it happened, the day I knew was coming and that I have been personally stressing to my clients and staff. After an amazing month of volume, we have reached maximum capacity at ALL of our storage facilities and at the moment have no ability to add more vehicles. So now what?

The GOOD:

It for sure has been a record month of August for my company. Turning in nightly numbers that we have never seen before. IRS’s awesome staff has been hungry, dedicated and focused as this work has been coming in. The best part is while they are on the road crushing it, they have been safe and professional. I am truly proud of the team we have built.

The BAD:

So now I am faced with the problem I knew that was coming. The problem I have been preaching every chance I can to anyone that would listen, my staff, my clients, and my peers. IRS’s storage infrastructure has reached is maximum and until we can release or transport more vehicles, we can’t put new cars on the lot. The Good, the Bad and the Ugly of a Packed Repo Lot

Shutting business down even for one night to clear room is lost revenue for the business and lost revenue for the employees that cannot be recaptured while still providing the storage requirements. For the next 24-28 my company is operating at 100% cost model.

The UGLY:

The obligation of providing storage for free or at very least below market rates has created a bottle neck that is difficult to maneuver out of. “Well Jeremy why don’t you just get another storage yard and keep pulling in cars?” I would be happy to answer that question.

First issue since Covid large investors have recognized the market for outside storage sites due to the needs of companies like Amazon, FedEx and UPS for example. Like the housing market these investors gobbled up as much existing land as they could thus increasing the value to purchase raw land more than a million dollars per acre to purchase, or tens of thousands of dollars to rent. These rates effectively push out smaller businesses who can’t compete.

Second, let’s assume I can find that deal and purchase, mortgage rates are between 7-9% depending on the type of commercial loan. A twenty-year mortgage on a 1-million-dollar loan with 8% interest is almost 10k a month of a fixed expense. That fixed expense doesn’t care how many cars you’re doing, and that bill is due for the next 240 months.

Finally, how does it get paid for? Today things are pretty good repo prices are becoming closer to what they should be. Some clients are paying record bonuses to have their cars picked up which is great. We as agents are happy for those “pennies from heaven”, but we know it is temporary. Agents like myself can’t commit to long term infrastructure builds on temporary wins.

The SOLUTION:

I know I am a vocal person and have never been accused of being shy when it comes to sharing my thoughts. However, I like to think that given my boisterous nature that most believe me to be sincere in my approach. I don’t have an issue saying what I believe out loud even at the risk of my detriment. That being said, I do have a solution that is painfully obvious to everyone but avoided like the plague.

We must return to a daily storage service line item in the repossession process.

I think I speak for a lot of agents when I share my current situation. I would go farther and say that other agents that are currently playing “Jenga” on their lots as I am with lender’s cars have the ability to do even more. However, they are like me in the sense that they simply can’t commit to expansion of their services while still obligated to provide “FREE”.

We have the equipment; we have the teams to continue to service this market. We know the volume is going to continue to grow for the foreseeable future. We also have the ability in this market to choose what portfolios that will get our attention.

The industry is seeing it now. Decline rates are higher than they have ever been. As a lender ask yourself why?

Clients that understand this issue and embrace the necessary investment needed will be the ones that benefit as this crunch continues. That work will be prioritized and valued, that I can promise.

As for IRS, we will be just fine. We will adjust our incoming volumes accordingly to ensure we can continue to work. I guarantee that I am not alone, and many others will be singing this same tune a little louder in the near future.

For now, have a wonderful holiday weekend and most of all, Be Safe!

Jeremy Cross