Not every person who has borrowed money from a financial institution pays it off on time. There are few borrowers who for some reason or the other turn defaulters. It is not that they do not want to pay their debts off but the circumstances somehow do not allow them to pay the debts. Many people who take up their career in the construction industry take incorrect decisions that have a hard hitting impact on their finances and eventually it leads to non-payment of monthly dues. There are handful of borrowers who simply lack the intention to pay-off the debts but these kinds of people are quite rare as people are aware that any default in payment can have a strong impact on their credit rating which they do not want to see tainted. Now the heavy equipment whose payments are defaulted are usually repossessed by the banks.
Banks do not want to incur losses when they realize that the borrower is unable to make any further monthly payments and therefore they give the work to repossess the heavy equipment to a third party who specializes in towing the heavy equipment from the borrower’s place to the bank’s garage. Now the work of the repo guys is tougher as it is not easy to tow the machine without the approval of the borrower. It is quite likely that the borrower will not approve the repo guys to just take away the heavy equipment. They may cause problems for them and the job of the repo guys is to tow the machine without creating a furor on the spot.
The financial institution has to pay decent amount to these repo guys for their hard work. Other than that, every other repo agent has different charges based upon their experience and their ability to repossess heavy equipment. So once the machines are handed over to the bank, the bank has to arrange to auction the heavy equipment and sell it at a price so that it can cover up the principal amount. Now the question that comes up is does the bank get any buyers for these used heavy equipment. Well, as a matter of fact, the banks get lot of buyers because the deal they will get during the auction, they can’t expect it anywhere else. Such auctions are just the thing any buyer would want to have.
However, the irony is they have to take what they get in the auction. They may not find the equipment they wanted for their business. For instance, if the bank decides to auction few equipment which are basically dozers and graders and people who are in need of an excavator may find the auction worthless. So it does not serve the purpose of everybody who is present in the auction. But for people who want to buy heavy equipment at lower price so that they can then rent it out, for them it is a fair deal. They have to pay the amount in cash and take away the heavy equipment.