Repossession Business Overview

A repossession business recovers tangible assets like vehicles, boats, equipment, and other items for creditors when borrowers default on their payments. These businesses work with financial institutions, credit unions, banks, and other lenders to retrieve property that serves as collateral for loans.

The work involves careful adherence to legal requirements, as repossession agents must follow strict protocols to avoid violating borrowers’ rights or damaging property during recovery.

The most common business models in this industry include:

• Direct Recovery Service: Companies that handle repossessions directly for lenders and maintain their own recovery teams and equipment
• Forwarding Company: Businesses that act as intermediaries between lenders and local repossession agents, managing cases across multiple regions
• Mobile Repossession: Operations that focus on vehicle recovery using specialized tow trucks and mobile tracking technology

Related: Checklist To Start A Business

How Do Repossession Companies Make Money?

Repossession businesses generate income by charging fees for successfully recovering assets on behalf of their clients. The fees vary based on the type of asset recovered and the complexity of the recovery process.

The common revenue sources for repossession companies can include:

• Standard Repossession Fees: Base charges for completing a successful recovery of an asset. This typically represents the largest revenue source since it applies to every successful recovery and forms the core service offering.
• Storage Fees: Charges for temporarily storing repossessed assets in secure facilities until they can be transferred to the lender or sold at auction.
• Skip Tracing Services: Fees for locating assets when borrowers have moved or hidden them from recovery agents.
• Transportation Fees: Additional charges for moving repossessed items beyond a certain distance from the recovery location.
• Investigation Services: Fees for preliminary asset location research and verification before attempting recovery.

Industry Statistics

Repossession services fall under NAICS code 561491: Repossession Services, which includes businesses that recover tangible assets for creditors due to payment defaults.

Here are some statistics that show the current state of the repossession industry:

Repossession Industry Size & Growth: The repossession services industry generated $1.1 billion in revenue last year. The industry saw steady growth, with an average annual increase of 1.5% over the previous five years. Growth projections indicate continued expansion as lending activity increases and economic pressures lead to higher default rates. (Kentley Insights)

Number of Repossession Companies: There are 4,400 repossession companies operating across various regions. The industry remains relatively fragmented, with the top four companies controlling 30% of the market.

Repossession Services Profit Margin: The industry shows varying levels of profitability, with an average net profit margin of 9.2%

Also See: Ideas for Naming a Repo Service

Costs To Start a Repossession Business

Starting a repossession business typically requires between $25,000 and $75,000. Here are some of the primary expenses when starting a repossession business:

Recovery Vehicle: A repossession business needs at least one tow truck or flatbed equipped for quick loading and safe transport. A used truck in good condition typically costs between $15,000 and $35,000, while newer models can cost more.

Storage Facility: A secure lot or facility to store repossessed vehicles and other assets is necessary. Monthly lease costs for a small secured lot typically range from $1,500 to $3,000, with initial security upgrades costing $2,000 to $5,000.

Insurance Coverage: Repossession businesses require specialized insurance coverage, including liability, cargo, garage keepers, and on-hook insurance. Annual premiums generally range from $3,000 to $8,000 for basic coverage.

Recovery Equipment: Additional equipment includes vehicle unlocking tools, diagnostics equipment, and safety gear. This equipment typically costs between $2,000 and $5,000.

Security Systems: Surveillance cameras, alarm systems, and monitoring equipment for both the storage facility and recovery vehicles are needed, with costs ranging from $1,500 to $4,000.

These estimates represent approximate costs, and actual expenses will vary depending on location, size of operation, and equipment choices.

Resources:
American Recovery Association