Report: Repo Revenue to Approach $1B During Next 5 Years

A combination of factors prompted research firm IBISWorld to report that revenue for repossession agencies is projected to increase during the next five years.

IBISWorld analyst Maksim Soshkin explained what is sparking that forecasted revenue rise through 2019 includes increasing per capital disposable income levels and declining unemployment predicted to create more consumer spending.

As a result, IBISWorld contends that repo industry revenue can hit $914 million.

“Many consumers will likely opt to finance their vehicle purchases, and creditors are anticipated to make loans more accessible,” Soshkin said. “Specifically, auto manufacturers are expected to increase subprime financing for borrowers. The resulting increase in the number of loans will lead to higher number of delinquencies, resulting in increased demand for industry services. However, rising interest rates and cautious consumers will temper loan volume growth.”

Despite the potential for vehicle financing originations to moderate slightly, Soshkin pointed out the revenue potential forecast should be welcome news for repo agents that have struggled in recent years.

“At the height of the recession, an increase in loan defaults and delinquencies caused repossession rates to soar as creditors sought to collect loan collateral,” Soshkin said. “As a result, industry revenue increased, peaking in 2009.

“However, during subsequent years, the number of consumers defaulting on their loans bottomed out, with the risk composition on debt holders improving amid deleveraging. Consequently, demand for industry services collapsed as repossession rates fell. Therefore, in the five years to 2014, industry revenue is expected to decline at an annualized rate,” Soshkin went on to say.

“Repossession rates have increased and demand for industry services has risen. In particular, the recent surge in subprime auto loans (loans to borrowers with low credit scores) has resulted in more car repossessions, which is the industry’s primary source of revenue,” Soshkin added. “Therefore, industry revenue is estimated to increase in 2014.”

IBISWorld’s complete report on the repossession industry is available here.