Weep Not for Repo Man; He's Adapting With the Times

When the police finally intervened, he climbed down with only bumps and bruises.

Chalk up another victory for a business that traditionally booms when the economy goes bust.

The past three years have been no exception. As the economic downturn forced millions of Americans into arrears on their vehicle loans, the "collateral recovery industry" grew dramatically.

Now, the market for repossessions has started to slow, which probably means better times for everybody else, right?

Not so fast, repo insiders say.

Repossessions are dwindling not because the economy has suddenly improved. Rather, the roads have been swept of the juiciest targets _ newer vehicles with high resale values and big unpaid loans attached. With new-car sales in a state of collapse, the pipeline of attractive repo candidates is running thin.

In addition, after getting burned in the recession of 2001-02, vehicle lenders adopted stricter standards, resulting in fewer loans that shouldn't have been made. Given high unemployment, default rates have soared, but "these were good loans gone bad," said Tom Webb, chief economist at Manheim Consulting. "It's not like the mortgage market."

The same cautious lenders recently have been cutting back on their spending for repossessions, partly to reduce expenses and also because of diminishing returns. It all adds up to a sharp drop in repos over the next few years.

Weep not for the repo man, however.

Plenty of vehicles with overdue loans remain at large, if only they could be tracked down more efficiently.

For 21st century recovery agents like Scott Jackson of Palatine-based MVTRAC LLC, the looming downturn is a call to action. Technology, he believes, holds the key to revive growth rates in a business rarely associated with sophisticated practices.

The same cameras that monitor traffic, toll booths and red lights also can be watching for wanted vehicles. Mounted on a "spotter car" or tow truck, optical character recognition can transmit the letters and numbers from license plates into databases that search for what the industry calls "hits."

The new equipment could alter the balance between hunter and hunted forever, said Jackson, chief executive of the 60-employee firm.

"If I can get enough cameras out there, it's game over," he said. "Everywhere we go, we will be picking up cars, like a fisherman casting his lines."

Jackson got his start in the business two decades ago and came to specialize in "tough to find" vehicles, he said. Today, he has licensed 8,000 stationary cameras covering the roadways, he said. But the bigger opportunity is in mobile.

He launched his first camera-equipped vehicle in May and deploys fewer than 100. By the end of next year, he said, he wants a fleet of 5,000.

Economist Webb expects the industry to impound roughly 2 million vehicles this year, a record, and then see its volumes decline by roughly 10 percent in 2010 and another 10 percent the year after.

Cameras, Jackson said, will change the calculation: "The technology will be a savior for the entire recovery industry."

Delinquent car owners, beware.

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