ATLANTA -

Cox Automotive estimates that repossession volume will make a “significant” rise in 2021 compared to last year.

According to data shared during Friday’s Cox Automotive Industry Insights 2021 presentation, repossession volume in 2020 softened to the lowest level in five years, sliding to 1.4 million units. In 2015, Cox Automotive said 1.5 million repossessed vehicles went through the wholesale market.

This year? Cox Automotive’s forecast has repossession volume jumping to 2.1 million units. And then analysts see volume staying steady at 1.7 million in 2022 and 2023.

“Indeed, repossessions were the biggest year-over-year decline within Manheim. And that’s phenomenal conceptually,” Cox Automotive chief economist Jonathan Smoke said near the end of the presentation that also looked at both new- and used-vehicle sales and more.

“If you asked any economist to predict what portion of the market would be down in an incredible recession year, they would not have picked repossessions. Accommodations played a role. Stimulus played a role,” Smoke continued.

“We were starting to see repossessions slowly pick up at the end of the year. That correlates with declines we’ve been seeing in loan performance in the fall and into the winter,” he added.

Meanwhile, auto defaults are moving counter to other credit segments.

Auto defaults rose for the fifth consecutive month in November, according to the S&P/Experian Consumer Credit Default Indices, but they are still below the reading that analysts pinpointed before the pandemic started.

In December, S&P Dow Jones Indices and Experian released data through November, showing that the auto-default rate rose 5 basis points to come in at 0.64%. The rate bottomed out at 0.40% in June, while in February, it stood at 0.89%.

For comparison, last November’s rate was 1.02%.

Meanwhile, S&P and Experian reported that their November composite rate — representing a comprehensive measure of changes in consumer credit defaults — actually dropped 7 basis points to 0.46%.

While 2020 represented a year-over-year decline, Cox Automotive data showed that repossession volume made a steady climb from 1.2 million units in 2014 to 1.7 million units in 2019

“What we are expecting, I wouldn’t call it a true catch-up. But think of it as a significant amount of repossessions that in essence were delayed, happening in 2021 instead of 2020,” Smoke said. “Part of the decline was simply a change in timing. It’s also a reflection of that I pointed out that we still have a substantial amount of people unemployed in the country. We’re not likely to see services sector jobs full recover until COVID risk has entirely gone away, and that’s not likely to be the case until we get closer toward the end of the year.”

U.S. Secretary of Labor Eugene Scalia gave some specifics on the job front when the December Employment Situation Report also arrived on Friday.

“Today’s report shows that the economy generally continues to recover, but that employment in certain sectors and states remains challenged,” Scalia said. “The 140,000 jobs lost in December were driven principally by the loss of 498,000 jobs in leisure and hospitality; data from the Restaurant Law Center shows that in the reporting period, six states (Washington, Minnesota, Michigan, Pennsylvania, New Mexico, and Oregon) reduced indoor dining occupancy to zero. 

“Fortunately, Congress finally enacted additional coronavirus relief at the end of December. The new $300 a week federal (benefit), combined with state unemployment benefits, will replace on average more than 90% of wages in leisure and hospitality jobs,” Scalia continued.

However, as Smoke mentioned, those benefits aren’t permanent, fueling how Cox Automotive made its repossession-volume forecast.

“That’s a stressful environment that as stimulus wanes later in the year and as we see things like enhanced unemployment benefits start to reach expiration dates, for example the current stimulus has them going only through the end of March, we’re going to see more pressure and a more normal flow of repossessions,” Smoke said.

“Plus, the fact that the economy is weaker, that’s behind some of our assumptions on repossessions being one of the sources of increased volumes in the wholesale market in 2021,” he added.