SAN DIEGO — An adage of the used-car business is that if a subprime customer's car stops running, chances are the loan payments soon will stop, too.
Another low-end auto-financing axiom: People unable to keep up with loan payments on their cars probably aren't spending much to maintain them properly.
So it figures that many cars repossessed from the subprime set look bad and run badly, if at all.
It then becomes decision-time for remarketers assigned to sell such stock. How much money does one sink into reconditioning a repo with issues?
Not much, according to attendees of the National Remarketing Conference held here.
Some of them are blunt, such as Howard Segal, national remarketing manager for Wells Fargo Auto Finance Inc.
“If you put too much money into a subprime repo, you are just stupid,” he says.
Such “challenged” vehicles often come back dented, scratched or otherwise banged up.
“They are not all front-line vehicles, but it depends on whose front line you're talking about,” Segal says.
On the other hand, used cars in general are in demand. “The market is favorable to the supply side,” Segal says, nevertheless adding it is unreasonable to expect to get back $2 on the price for every $1 put into reconditioning a cheap repo.
Westlake Financial Services shoots for a 2-for-1 return, but “we don't spend a lot of time reconditioning” cars taken back from subprime loan defaulters, says William Walters, the firm's vice presdent-remarketing.
“Basically, we first try to get the car running,” he says.
Some cosmetic reconditioning is done to such cars by BB&T/Regional Acceptance, says Neil Boardman, the company's asset remarketing manager.
“We'll do paint and bumper work, but if there is severe damage, we are not going to put a whole lot into it,” he says.