I own a car dealership... ask me anything.

[Jlu]

I figured I could probably help dispell some myths about dealership financing since I run one.

The only question I won't answer is personal details about my dealership and it's location. Anything else is fair game.

[ordnance1987]

I have less than 60 days working at my current job, and I took a paycut with the new job, will I be denied for a loan? I was at my last job for eight years but had to quit because I had just started school. I am working part time and receiving military benefits my bills are about 1/8 of my monthly income combined. Do I clump up both my military benefits and job income together when I apply or do I list them both separately? I also have a recent BK.

Can you walk me through the car buying and financing process and letting me know what to look out for? I have never bought a car at a dealership before. Can I tell the financing people what is on my CR so they can gauge if I will be approved of a loan before they run my credit to avoid too many HPs?

How does the loan to value ratio work? Do they use the sticker price or the price the dealership is selling the car for?

So if a car's MSRP is 20k, and the dealership's out the door price is 20.5K and I put a downpayment of 2k, would the LTV ratio be (18.5k/20k)=.925. Since the LTV is less than 100% what am I looking at?

Sorry for the long post, trying to figure out if I should buy a car or not.

[Jlu]

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@ordnance1987 wrote:

I have less than 60 days working at my current job, and I took a paycut with the new job, will I be denied for a loan? I was at my last job for eight years but had to quit because I had just started school. I am working part time and receiving military benefits my bills are about 1/8 of my monthly income combined. Do I clump up both my military benefits and job income together when I apply or do I list them both separately? I also have a recent BK.

Can you walk me through the car buying and financing process and letting me know what to look out for? I have never bought a car at a dealership before. Can I tell the financing people what is on my CR so they can gauge if I will be approved of a loan before they run my credit to avoid too many HPs?

How does the loan to value ratio work? Do they use the sticker price or the price the dealership is selling the car for?

So if a car's MSRP is 20k, and the dealership's out the door price is 20.5K and I put a downpayment of 2k, would the LTV ratio be (18.5k/20k)=.925. Since the LTV is less than 100% what am I looking at?

Sorry for the long post, trying to figure out if I should buy a car or not.

---

It doesn't matter how long you've been at your current job as long as you can prove income. Make sure you include ALL of your income - list your primary job and the amount you make BEFORE taxes and then under additional income you can list your military bennies. How recently your BK was will determine what kind of loan you qualify for - if it was in the past year or two then you'll need a co-signer or you'll be lumped in to a subprime/buy-here-pay-here scenario where interest rates exceed 15%. Some people NEED a car so they are forced to go the subprime route - I don't reccomend it - current rates are 20.75% for my bad credit customers (not by my choice). 

LTV is the amount you are actually financing (taxes, fees, registration, etc minus your down payment) vs the retail value for NADA. Go to nadaguides.com and enter your desired vehicle with appropriate mileage and options. The loan amount cannot exceed 100% of the NADA retail value (sometimes they'll cut it back to 80% or extend out to 120% depending on the borrowers credit). Basically calculate LTV by taking the total amount to be financed and divide by NADA retail. It will spit out a number like .85 or .xx - that is the LTV %.

Don't forget that just because the sticker price is $20,000 that doesn't mean you will end up financing $20,000 minus your downpayment. You will finance $20,000 minus your down payment PLUS tax, registration, any add-ons like warranties and any fees that the dealer tacks on ...there are various names for the fees that get tacked on.. some call it documentation fee, other names include doc prep fee, administration fee, dealer contribution fee, etc.. they can range from a hundred bucks to thousands.

Hope this helps.

[CreditCuriosity]

Just curious if you own a dealership, why do you have an auto loan with Chase?   Usually a few people I know that own dealerships in this case Mercedes and an Infiniti dealership typically drive a car for a few months and put whatever 1k miles and then sell it slightly discounted.  Just curious is all

[Anonymous]

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@CreditCuriousity wrote:

Just curious if you own a dealership, why do you have an auto loan with Chase?   Usually a few people I know that own dealerships in this case Mercedes and an Infiniti dealership typically drive a car for a few months and put whatever 1k miles and then sell it slightly discounted.  Just curious is all

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Maybe due to customers like me that if I'm buying a new car, I want the miles as close to zero as possible. 

[ordnance1987]

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@Jlu wrote:

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It doesn't matter how long you've been at your current job as long as you can prove income. Make sure you include ALL of your income - list your primary job and the amount you make BEFORE taxes and then under additional income you can list your military bennies. How recently your BK was will determine what kind of loan you qualify for - if it was in the past year or two then you'll need a co-signer or you'll be lumped in to a subprime/buy-here-pay-here scenario where interest rates exceed 15%. Some people NEED a car so they are forced to go the subprime route - I don't reccomend it - current rates are 20.75% for my bad credit customers (not by my choice). 

LTV is the amount you are actually financing (taxes, fees, registration, etc minus your down payment) vs the retail value for NADA. Go to nadaguides.com and enter your desired vehicle with appropriate mileage and options. The loan amount cannot exceed 100% of the NADA retail value (sometimes they'll cut it back to 80% or extend out to 120% depending on the borrowers credit). Basically calculate LTV by taking the total amount to be financed and divide by NADA retail. It will spit out a number like .85 or .xx - that is the LTV %.

Don't forget that just because the sticker price is $20,000 that doesn't mean you will end up financing $20,000 minus your downpayment. You will finance $20,000 minus your down payment PLUS tax, registration, any add-ons like warranties and any fees that the dealer tacks on ...there are various names for the fees that get tacked on.. some call it documentation fee, other names include doc prep fee, administration fee, dealer contribution fee, etc.. they can range from a hundred bucks to thousands.

Hope this helps.

---

Thanks for the info my BK was in the last few months so pretty recent. What would you recommend I do? I do not have a cosigner, the only person that can cosign for me is currently looking for a house so they are not able to take on more debt. My pay is about $800/ month because I am only working part time the biggest part of my income is military benefits. My job currently doesn't give pay stubs because they are getting their payroll set up, it is a start up. They pay by direct deposit, can I show a bank statement saying "Payroll PAY" as proof of income, I can also print out a copy of a check because my direct deposit didn't work my first pay period?

Yes they quoted me the out the price door including tax, title, license, and documentation fees. I calculated the LTV  with the NADA guide MSRP  and it will be .94, I can bring it down to .91, or does it need to be calculated with the invoice price? I think the price they gave me is  invoice price with the destination price, plus tax, title, license, and doc. fees is that the lowest they will go? It is a new car. Since I have the bk will they cut the LTV down to .8?

How does the vehicle  appraisal work? Do they just give a flat rate if a vehicle is past a certain age. The car I'm trading in is 15 years old and it's not running so hot, can I expect at least 1k for it?

Thanks for the quick response

[0REDSOX7]

I got 12.99% with GM Financial (at Honda dealer) five days post discharge with $500 down.

But, here is my question. When we got our car, our dealer said we were financed with Wells Fargo dealer services - he even showed me the printout from their system showing "Approved" - yet, this particular loan ended up going with GM. The dealer never told us or signed new paperwork. How can they change lender without paperwork if that's what our docs show?

Also, if a customer comes in with their own financing and they insist on it - do you still run their credit (use Patriot Act as excuse) to beat their rate?

[Jlu]

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@CreditCuriousity wrote:

Just curious if you own a dealership, why do you have an auto loan with Chase?   Usually a few people I know that own dealerships in this case Mercedes and an Infiniti dealership typically drive a car for a few months and put whatever 1k miles and then sell it slightly discounted.  Just curious is all

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For credit reporting purposes - I needed to diversify my credit report with a mix of auto/revolving/etc. Plus I can make more than 1.49% with my cash soooo...

[Jlu]

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@ordnance1987 wrote:

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@Jlu wrote:

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It doesn't matter how long you've been at your current job as long as you can prove income. Make sure you include ALL of your income - list your primary job and the amount you make BEFORE taxes and then under additional income you can list your military bennies. How recently your BK was will determine what kind of loan you qualify for - if it was in the past year or two then you'll need a co-signer or you'll be lumped in to a subprime/buy-here-pay-here scenario where interest rates exceed 15%. Some people NEED a car so they are forced to go the subprime route - I don't reccomend it - current rates are 20.75% for my bad credit customers (not by my choice). 

LTV is the amount you are actually financing (taxes, fees, registration, etc minus your down payment) vs the retail value for NADA. Go to nadaguides.com and enter your desired vehicle with appropriate mileage and options. The loan amount cannot exceed 100% of the NADA retail value (sometimes they'll cut it back to 80% or extend out to 120% depending on the borrowers credit). Basically calculate LTV by taking the total amount to be financed and divide by NADA retail. It will spit out a number like .85 or .xx - that is the LTV %.

Don't forget that just because the sticker price is $20,000 that doesn't mean you will end up financing $20,000 minus your downpayment. You will finance $20,000 minus your down payment PLUS tax, registration, any add-ons like warranties and any fees that the dealer tacks on ...there are various names for the fees that get tacked on.. some call it documentation fee, other names include doc prep fee, administration fee, dealer contribution fee, etc.. they can range from a hundred bucks to thousands.

Hope this helps.

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Thanks for the info my BK was in the last few months so pretty recent. What would you recommend I do? I do not have a cosigner, the only person that can cosign for me is currently looking for a house so they are not able to take on more debt. My pay is about $800/ month because I am only working part time the biggest part of my income is military benefits. My job currently doesn't give pay stubs because they are getting their payroll set up, it is a start up. They pay by direct deposit, can I show a bank statement saying "Payroll PAY" as proof of income, I can also print out a copy of a check because my direct deposit didn't work my first pay period?

Yes they quoted me the out the price door including tax, title, license, and documentation fees. I calculated the LTV  with the NADA guide MSRP  and it will be .94, I can bring it down to .91, or does it need to be calculated with the invoice price? I think the price they gave me is  invoice price with the destination price, plus tax, title, license, and doc. fees is that the lowest they will go? It is a new car. Since I have the bk will they cut the LTV down to .8?

How does the vehicle  appraisal work? Do they just give a flat rate if a vehicle is past a certain age. The car I'm trading in is 15 years old and it's not running so hot, can I expect at least 1k for it?

Thanks for the quick response

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Well if you are buying a new car then the poster a few posts up was right - you can get a loan no problem with recent BK. However used cars are much harder to qualify for. The reason why comes down to how easy it is for the bank to get their money back if you default. It is much easier to predict the value of a new car than it is a 7 year old car that may have who knows what wrong with it.

Bank statements will work for income verification purposes. As for LTV use the total amount financed, which is the cost of the car plus all the extras minus your down payment. I don't believe they will cut down the LTV on a new car. The dealer can tack a couple percentage points on the rate, so make sure you understand that INTEREST RATES ARE ALWAYS NEGOTIABLE AT DEALERSHIPS.

If you have a 15 year old beater with a heater don't expect more than junk prices for it. $500, or you can try your luck finding a sucker on craigslist. Your choice.

[Jlu]

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@0REDSOX7 wrote:
I got 12.99% with GM Financial (at Honda dealer) five days post discharge with $500 down.

But, here is my question. When we got our car, our dealer said we were financed with Wells Fargo dealer services - he even showed me the printout from their system showing "Approved" - yet, this particular loan ended up going with GM. The dealer never told us or signed new paperwork. How can they change lender without paperwork if that's what our docs show?

Also, if a customer comes in with their own financing and they insist on it - do you still run their credit (use Patriot Act as excuse) to beat their rate?

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Wells Fargo is known by about 50 different names. They may be the one buying the note from GM or they may be doing business as GM Financial even though they are two seperate institiutions. See ---> http://media.gm.com/media/us/en/gm/news.detail.html/content/Pages/news/us/en/2012/Mar/0301_wellsfarg...

If you have your own financing secured don't even mention it. Just pay for the car with the check that the CU/bank gives you. The dealer can not force you to finance with them nor can they run your credit without your express authorization. Watch out for what you sign!