By on December 13, 2009

Actual lot not shown (courtesy.njstateauto.com)Six hours to showtime. We have 58 vehicles and 1 motorcycle for today’s sale. It will be a very interesting day between the first dealer conversation and the last car that rolls (or gets pushed) through the lane. We’re going to be managing an on site sale for a large financial institution that is most definitely not in the car business. Their business is the money business. They will demand 59 checks in hand within 24 hours, and these vehicles must help keep their books healthy for the end of year bonuses.

As for us… we have the bank’s managers, a long line of new and returning dealers, dozens of flat tires, dead batteries, cars with varying sorts of mysterious starting problems, and a thunderstorm set to hit in an hour. The cars? Everything from a ragged out 2008 Chrysler 300 to a pristine Mommy-van van whose only owner had the misfortune of dying back in September. The cars are here… now we just need to build the market and have a great sale.

One of the fortunes I have is my dual role as a dealer and an auctioneer. As a dealer, I get on a lot of mailing lists from other sales and when I do, I get to constantly build my market… in an entirely legal way of course. This weekend yielded some very good results.

By Monday morning we have already sent off a list of vehicles to our dealers that now include several dozen new names. Within hours we have new dealers who are ringing our line to become registered with our sale. It looks to be a great day which isn’t surprising. Given that we’re on the cusp of tax season where folks put their returns towards down payments on their new rides, today’s sale will more than likely be especially strong.

Most auctions have one lot manager who is in charge of a given number of vehicles. They will battery jump the vehicles, add fuel, pump tires, change batteries, and will even shoot some starter fluid to awaken a long slumbering jalopy or ten. We have two lot managers for our sale. Why? It’s cheap insurance and all of these cars have been sitting for a while.

When you’re dealing with a lot of older repossessed inventory that has been laying about, you simply need extra hands to prepare for the uninspected. Even if one vehicle doesn’t go through, that ‘no-sale’ will translate into two lost fees. A buyer’s fee and a seller’s fee. Needless to say, we’re always amply staffed.

I love cars, but like the bank, I want the metal to go away. The long and the short of it is that our job as auctioneers is to take care of the ‘patient’ after the patient’s dead. Most of these cars have lived rough lives and when you open the door to these cars, you get a very complete picture of most of their owners.

Some were single moms whose debts and economic misfortunes simply caught up with them. Others were big spenders who were willing to pay big money for rims, audio systems, and TV’s. Some were perverts. Others were gangsta wannabes, druggies, or simply had more money than sense. A surprising number are laid off teachers and government employees. In 2007 very few repos on average came from responsible owners. In 2009, the title histories and well kept metal tell a very different story.

Looking at the titles for these vehicles, virtually all the rough ones are bought and repo’d within a year’s time. Low savings and a quick dose of unemployment will do that to those living it up. The ones that had long periods of ownership really break my heart. Folks that kept their cars well kept for ten, even fifteen years, can find themselves behind the eight ball of a terrible economy.

Medical expenses bring down a lot of these people. You can often see the unpaid hospital bills, pills, and test results that put them in the American poorhouse. Many of the dealers are dealing with the effects of these situations. Situations like these, and my own distaste for financing, are what kept me a strictly ‘cash’ dealer for the well to do until October of last year.

Anyhow, we’ve prepared well for the sale and the dealer interest has turned into a swarm. Cars are being started up. Wholesalers are calling their used car sales managers. Retail owners are checking to see what cars are worthy of their clientele. The first vehicle sells strong. A 2008 Chrysler 300 goes for $2700 above the reserve and the rest becomes the automotive version of a bull market.

Other than a tampered 1998 BMW 5-Series… that still sells at a healthy premium, fifty eight cars come and go through the auction block within a matter of thirty-five minutes. By the time the 7th Ford Taurus roles through, we’ve managed to sell all but two vehicles. Only a Mazda that the bank was buried in and a Honda crotch rocket that was customized by it’s owner pre-repo, keeps the sale from being a clean sweep.

We shake hands. Enjoy a few conversations. Take care of a lot of checks and titles, and close shop. The sale is over before 4:30 and by 5:30 we’re on the road. We’ll be coming back to do it all over again in two weeks

Get the latest TTAC e-Newsletter!

30 Comments on “Hammer Time: Behind The Gavel...”


  • avatar

    Fascinating snapshot of both your life and  the things that bring people down. 62% of bankruptcies are driven by health care costs according to Elizabeth Warren of Harvard, the expert on this stuff, and this is a very interesting view into that.
    It would be interesting to hear how you got into this business.
    plurals don’t take apostrophes! (TVs, not TV’s)

    • 0 avatar
      Paul Niedermeyer

      Fixed, if it was only one. Tx.

    • 0 avatar
      golden2husky

      Fascinating snapshot of both your life and  the things that bring people down. 62% of bankruptcies are driven by health care costs according to Elizabeth Warren of Harvard, the expert on this stuff, and this is a very interesting view into that.
      When the bankruptcy rules were last re-written, Senator Kennedy lobbied to add a medical exclusion for that very reason.  This made tons of sense, as those who fribbed their money away on nonsense were still held accountable, and those who were responsible until they were broken by medical debt were given relief.  But of course,  that was stripped out.  Can’t let the need for making the credit industry even more profitable get in the way of those pesky average people who can’t pay for their chemotherapy.
      Interesting how a car can be such a snapshot of people’s lives.  Back in the day of dating, I always checked out my potential girlfriend’s ride.  Not for what it is but how it is.  Dirty, dented, always on empty were bad signs…

  • avatar
    educatordan

    That kinda left me with a creepy feeling.  More Halloween than Christmas.  Although I know my 2004 F150 came from an auction where it had belonged to an old fella in a retirement community who passed two years after buying it.  All the info was on the insurance papers that were still in the glovebox when I took delivery.

  • avatar
    ohsnapback

    Good, interesting read.
    I wonder  what 2010 will bring.

  • avatar
    lahru

    It always amazes me when I look in the zippered pouches that reside for years in the glove boxes of vehicles I sold years ago that get traded back in for a new one. There they are, all of the customer copies of the paperwork they signedt he day they picked it up and I stuffed inside the pouch along with all the various manuals and tire propaganda. Untouched, unread and have not been disturbed since I the day I stuffed them in there years ago.

  • avatar
    Jeff Waingrow

    Steve, I really enjoy your pieces. They’re  like a window into a world I know nothing about.  I do hope, though,  that you’ll have a chance to explore the human side of the used car business more often.  I think  it would be quite enlightening.

  • avatar
    CyCarConsulting

    It’s always been a question unanswered to me for years. Week after week as I send cars through the auction I witness first hand the irresponsibility of some buyers as you mentioned above, and inclusive to that, the way the vehicles  were maintained until traded in. You would think with the price of cars today, more care would have been given in order to protect what’s left of the reasale value. Not.

  • avatar
    psarhjinian

    Medical expenses bring down a lot of these people.
     
    I was talking with a new colleague of mine who runs one of our American warehouses (I’m Canadian, for the record).  He had an interesting take on entrepreneurship and health care, and that Canada and Europe actually make for better climates for small business because there’s far less chance of ruin should things go bad.
     
    The point extends to the social safety net in general, but his point was chiefly health care: he sold his own business and went to work for the man because he and his wife were going to try to have kids and they didn’t want the risk.  I thought it was interesting, and probably true.  It’s also one of the ways that not having a proper social safety net has a real cost, albeit one that’s heavily externalized.
     
    I had some trouble with this because I’ve grown up with the mantra that we were a worse incubator because of relatively higher taxation (I didn’t care; I’m still a pinko).  I think he’s right, though: it must be very hard to not only start a business, but to spend money in general, knowing that the consequences of misfortune can be much worse.

    • 0 avatar
      John Horner

      The health insurance access and cost problem is a big deterrent to potential entrepreneurs in the US. I’m surprised that point doesn’t come up more often in the political debate.

  • avatar
    50merc

    Sorry to go off thread, but it should be noted that the study by Elizabeth Warren definitely overstated the role health care plays in bankruptcies. Ax-grinders loved it, though.
     
    As always, enjoyed the report from the auction biz. A reminder to be wary of buying a used car that has an unknown history. A long time ago a guy who worked for a loan company warned me against buying a repo. He said those cars usually are abused.
     

  • avatar
    geeber

    The Elizabeth Warren study included bankruptcies that result from alcoholism and gambling addictions. She classified those as “medical conditions” because people often receive some sort of treatment as part of their therapy.  Her figures are definitely suspect.

    • 0 avatar
      John Horner

      The original study can be read here:
      http://www.pnhp.org/new_bankruptcy_study/Bankruptcy-2009.pdf
      It is better to look at original documents than it is to take someone’s word for what is in them.

    • 0 avatar
      geeber

      That does nothing to disprove that she included bankruptcies from alcoholism and gambling addiections. This study has been discussed on other sites (that are devoted to public policy, not cars); her figures are still suspect.

      Here is one such analysis:

      “In fact, the ‘finding’ in this article of a massive rise in medical bankruptcies appears to actually be a result in the way in which medical bankruptcies are counted, rather than an actual change in the numbers. They draw their data from two sources. First, self-identified bankruptcy filers who say that some medical event ’caused’ their bankruptcy. Second, analysis of ‘objective’ facts on filers bankruptcy papers that find either (1) debtor or spouse lost at least 2 weeks of work-related income because of illness or injury or (2) uncovered medical bills exceeding $1,000 in 2 years before bankruptcy, or (3) debtors who say they had to mortgage their home to pay medical bills (which for some reason they list as an “objective” factor rather than a self-identified factor.

      “Do these findings support the claim that 50% of bankruptcy filings were caused by a ‘serious medical problem’?

      “First, consider the self-identified filers. Among the self-identified factors that are listed as “medical” causes of bankruptcy in Exhibit 2 of the article are the following: illness or injury, birth/addition of new family member, death in family, alcohol or drug addiction, uncontrolled gambling. (emphasis added) First, it is surely open to question whether uncontrolled gambling or a death in the family really should count as a ‘medical”‘problem. More generally, the category “illness or injury” is very broadly defined in the study, and there is no apparent limit on the time frame over which the illness or injury occurred, or the severity. So classifying all of these factors as medical problems that have ’caused’ bankruptcy certainly seems open to question.

      “Second, the ‘objective’ measures from the debtors bankruptcy petitions are, if anything, even more questionable. First, the authors count anything above 2 weeks of lost work income as a ‘serious medical problem.’ There appears to be no time frame over which this is measured, nor does it apparently even need to be consecutive lost work. So, for instance, if a restaurant waiter called in sick for 2 weeks or more in some indeterminate period of time prior to filing bankruptcy, this would presumably count as a serious medical problem.

      “Nor does the requirement of $1,000 in unpaid medical bills within 2 years of bankruptcy seem like a very plausible measure of serious financial problems. Again, it is pretty easy to rack up $1,000 in unpaid medical bills over a 2 year period, especially if elective procedures not covered by insurance are added in. Moreover, it is well-understood that debtors who are falling into bankruptcy pick and choose which debts they pay, paying down their mortgage or nondichargeable debts for instance, while not paying their unsecured debts, such as medical and credit card debt. So the fact that the medical debts were unpaid says little, because it may reflect strategic payment of debts prior to bankruptcy.”

      If the only problem with this study were the one I identified, she’d be lucky. There are serious issues with this entire study.  

  • avatar
    Colinpolyps

    I always enjoy your articles Steven. Kind makes me wanna be an action auction guy I guess. Or just to see the insides of what drives the secondary auto market. I can only imagine some of the horror stores you can’t tell about what goes on. Keep em coming.
    I was also astonished to read about people losing cars in order to finance a health crisis if uninsured. That just doesn’t happen here in Canada to my knowledge and speaks volumes for our system I suppose, although it does carry a high monetary cost and we ALL pay for it.

  • avatar
    Boywonder

    I’m sorry but one line in your story really had me scratching my head.

    “The ones that had long periods of ownership really break my heart. Folks that kept their cars well kept for ten, even fifteen years, can find themselves behind the eight ball of a terrible economy.”

    Find themsleves getting these cars repossesed?  How can you lovingly keep a car well kept for “ten or fifteen years” and still have a bank lien or loan, other than the usual culprit – the Title Pawn bloodsuckers.  But if I had to take a wild guess, that would be the mystery financial “money business” seller you are referring to.  Because I can’t come up with any plausible explanation for a traditional auto loan on a ten or fifteen year old car.

    That industry needs to be destroyed, either by law or by fire.  
    We got the payday lenders.
    That souless shill Rusty Wallace and his ilk should be next.
    Then the BH-PH usurious “lenders” next.
    It’s amazing that under the banner of good ole capitalism, Americans would perpetrate these schemes on fellow Americans.

    • 0 avatar
      zoneofdanger

      I used to work for a bankruptcy judge.  The majority of personal bankruptcies involved people with huge medical bills.  There were also a lot of divorced women with kids.
      In a personal bankruptcy, you can be forced to turn over most of your assets, including your car in some circumstances.  Outside of bankruptcy, any creditor with a judgement can get an order seizing assets, Including cars. So somebody with a 10 or 15 year old car with no car loan can still get their car repossessed.

  • avatar
    newcarscostalot

    One thing I always get a kick out of is how banks sell their repossessed property. They will sell it not for what you owe, but what someone else is willing to pay for it. This leaves you (the debtor) to pay off the remaining amount owed. Capitalism at its worst, is my opinion.

    • 0 avatar
      bikegoesbaa

      But what if “what you owe” is less than “someone else is willing to pay for it”?

      For example, perhaps you didn’t take care of the property or arranged your financing such that you would be upside-down throughout much of the life of the loan.  How is the bank supposed to deal with this situation? 

      They can’t sell the vehicle for more than someone else is willing to pay for it, right?

      Do you think banks sell property for less than the amount owed because they are mean, or because they like having outstanding unsecured loans?

      Obviously the best possible outcome from their perspective is that the vehicle sells for the amount owed and they no longer have to worry about recovering their money.  If they don’t do this it is because they couldn’t; not because they didn’t want to.

      If this is Capitalism at its worst, Capitalism must be pretty good…

  • avatar
    Robstar

    so if a 2008 chrysler 300c goes for $2800.  How much do motorcycles usually go for?  I wouldn’t mind having a honda crotch rocket that is super cheap & newer than my 05 crotch rocket….

    Edit: And I’d be willing to pay cash for it…

    • 0 avatar
      DweezilSFV

      That’s $2700 over RESERVE. Not the price the car went for. Who knows what that 300 finally sold for as Mr Lang never said what reserve was. We only know that it was sold for 2700 over reserve and that it was a bull market that day at the auction.

      Another great story Mr Lang. Yours are the stories of the “human side” of the car business. More Hammer Time

    • 0 avatar
      Robstar

      Good catch.  I did not see that.  Still curious on the motorcycle reserve price :-)

  • avatar
    ronin

    <i>”The Elizabeth Warren study included bankruptcies that result from alcoholism and gambling addictions. She classified those as “medical conditions” because people often receive some sort of treatment as part of their therapy.  Her figures are definitely suspect.”</i>
     
    The other flaw is that people may well have undertaken huge mortgages, car payments, and credit card debt.  Then they have unexpected medical expenses.  So we say that medical expenses drove them to bankruptcyt.  I wonder how often the person appearing in bankruptcy court claims medical payments because that is something more socially acceptable, downplaying all the other consumption related debt.  This, it seems, would skew any numbers.

    • 0 avatar
      windswords

      This is just like the statistics for the “uninsured”. If I lose my job for 3 months but find another one with benefits I will be catorgorized as “uninsured” for the entire year. I become part of the 42, 45, 47, 52 million or whatever Americans “without health insurance” (oh my!). Of course I am not without healthcare, because if anything serious happens to me they have to give me healthcare regardless of my ability to pay (try that in Mexico!). But I may have COBRA coverage which will give give me health insurance. Yes I have to pay pay for it, but it’s group rates, it does not have pre-existing conditions, and if I was smart and saved 3-6 months of expenses (like EVERY financial advisor, liberal or conservative tells you to do) then I can afford it. AND even if I did not have COBRA, if my kids get sick, I can apply for any number of state or federal programs to give them health INSURANCE (they already have health CARE, remember they can’t be turned down based on ability to pay?).  Also included in the ranks of the uninsured – wealthy people who can afford any medical care they want, and young people who vountarily refuse coverage because they are young and healthy and don’t think they will need it, but would like the extra money in their pocket. So I’m not buying the 42, 45, 47, 52 million or whatever Americans “without health insurance” (oh my!).

      Finally, I had to file for personal bankruptcy, due to a divorce. I really needed to just get out from under credit card debt (some mine, most was hers). But my lawyer advised to wipe out all my debts while I hade the chance, and so about $1500 in medical bills went away. I don’t doubt that advice is given to by many lawyers, but if you flush away your financial obligations and are still gainfully employed, you have money to pay for most medical bills (not talking organ transplants, etc.). I regret that I did that now, but at the time I wasn’t thinking very clearly with divorce and custody/visitation battles going on, so I did what my lawyer advised.

  • avatar
    Jeff Waingrow

    Ronin, good point. Sometimes the social scientists do try to goose the numbers in what for them is a more congenial direction. Nonetheless, I can speak from personal experience in saying that  people with modest lifestyles and no debt can still have financial ruin rain down upon them because of medical costs. Whatever the shortcomings of Elizabeth Warren’s methodology, I don’t think that essential fact can fairly be denied, nor should its harm be minimized.

  • avatar
    50merc

    Thanks, geeber and Ronin, for helping to keep this thread from becoming a sounding board for health care “reformers.”  And yes, Mr. Waingrow, social scientists–and I used to be one–are bad about slanting their research. Some people find what they want to find. (Notice I said “some.”) But no doubt, there are prudent people who get crushed by  major medical expenses.
     
    Say, anyone know whether CarFax or such will reveal a car was repo’d?

  • avatar
    pb35

    Count me among those that enjoy reading Hammer Time as well. My dad sold cars and I would tag along to work with him when I was a kid back in the 70s. 

    I would love to be a lot manager, that sounds like fun. 

  • avatar
    newcarscostalot

    bikegoesbaa:

     When folks who purchase a car and are no longer able to pay, the banks take the property and sell it for a lesser amount than the debtor owes, and far less than the original loan amount. Often, the outstanding balance is more than the bank has sold the property for. If the original debtor is unable or unwilling to pay, than the bank is out that money for good. The only winner is the new purchaser.

    You stated:
    For example, perhaps you didn’t take care of the property or arranged your financing such that you would be upside-down throughout much of the life of the loan.  How is the bank supposed to deal with this situation? 

    This is the fault of banks for underwriting the loan in the first place and the debtor for falling for it.

    You also stated:
    Obviously the best possible outcome from their perspective is that the vehicle sells for the amount owed and they no longer have to worry about recovering their money.  If they don’t do this it is because they couldn’t; not because they didn’t want to.

    Banks rarely sell the vehicle for what the debtor owes, they sell it for less. Again, if they were stupid enough to give out a loan that they knew they would not be able to regain the orginial amount owed from said loan in the first place, then it is their fault if they are unable to at least break even.  This kind of stupidity has led to alot of the financial problems that we as Americans are dealing with today. If this is Capitalism at its best, then God help us. Again, this only my opinion! Thank You for the opposing viewpoint. Makes me think! :-)

    • 0 avatar
      bikegoesbaa

      You stated:
      When folks who purchase a car and are no longer able to pay, the banks take the property and sell it for a lesser amount than the debtor owes, and far less than the original loan amount. Often, the outstanding balance is more than the bank has sold the property for. If the original debtor is unable or unwilling to pay, than the bank is out that money for good. The only winner is the new purchaser.

      I understand this.  I also agree that it is a suboptimal outcome.  I would like to better understand why it is evil/wrong/etc rather than merely unfortunate.
       
      I contend that there are many reasonable cases where the value of the vehicle is less than the loan amount outstanding through no fault of the bank.
       
      As far as I know, banks have no real good way to determine whether an individual vehicle will suffer a reduced resale value due to high miles, poor maintenance, cosmetic damage, tasteless modification, or even just changing trends or high gas prices.
       
      Let’s say you’re a bank.  You loan somebody $20k to buy a new car.  They proceed to neglect and abuse the vehicle to the point that two years later when you repossess it it’s only worth $8k despite the fact that there is still $14k outstanding on the loan.  Because of the car’s condition, you cannot sell it for $14k.
       
      Or, let’s say you finance a $30k SUV to a responsible owner when gas costs $2/gal.  A year later, gas costs $4/gal and the residual value of the vehicle drops tremendously.  You repossess it due to default, but it will only sell at thousands less than the outstanding loan amount.
       
      What would you do in either of these situations, since nobody is willing to pay you what is currently owed on the car?

      You stated:
      Again, if they were stupid enough to give out a loan that they knew they would not be able to regain the orginial amount owed from said loan in the first place, then it is their fault if they are unable to at least break even.

      I think you are misstating the case here. Nobody is stupid enough to give a loan that they know they will not be able to recover. I doubt any bank had a deliberate policy of “make lots of loans that will never be paid back”.

      If stupidity was a factor, it was thinking they could recover on a loan when in fact they could not. Bad investments happen all the time, but that doesn’t mean that the people making them are evil.

      I’m not trying to be difficult, I’d really like to understand the alternative that you favor.

  • avatar
    newcarscostalot

    If stupidity was a factor, it was thinking they could recover on a loan when in fact they could not. Bad investments happen all the time, but that doesn’t mean that the people making them are evil.
    That’s it! that was what I was trying (longwinded) to say. I don’t know if there is an alternative, except to change society as a whole. People want new stuff and are willing to take large loans out to get this stuff, so things will continue this way until things change! Thank You for responding to my comment!


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Contributing Writers

  • Jack Baruth, United States
  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Vojta Dobes, Czech Republic
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Cameron Aubernon, United States
  • J Emerson, United States