topic Re: I own a car dealership... ask me anything. in Auto Loans

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

Jlu — Tue, 28 Oct 2014 14:05:37 GMT

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.

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

ordnance1987 — Tue, 28 Oct 2014 15:50:22 GMT

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.

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

Jlu — Tue, 28 Oct 2014 16:22:20 GMT

@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.

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

CreditCuriosity — Tue, 28 Oct 2014 16:35:59 GMT

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

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

Anonymous — Tue, 28 Oct 2014 17:02:27 GMT

@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

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

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

ordnance1987 — Tue, 28 Oct 2014 17:32:03 GMT

@Jlu wrote:

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

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

0REDSOX7 — Tue, 28 Oct 2014 17:45:00 GMT

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?

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

Jlu — Tue, 28 Oct 2014 18:34:05 GMT

@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

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...

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

Jlu — Tue, 28 Oct 2014 18:47:07 GMT

@ordnance1987 wrote:
@Jlu wrote:

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

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.

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

Jlu — Tue, 28 Oct 2014 18:41:59 GMT

@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?

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_wellsfargo.html

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!

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

StartingOver10 — Tue, 28 Oct 2014 19:57:09 GMT

I was able to finance a used vehicle purchase exactly 2 years to the date of discharge for 7.14% with Chase through the dealership. You have to negotiate the rate anyway - the dealer started out at 12%+ and I just walked out the door until I got what I thought was reasonable for the risk involved (my prior Bk). Remember, the dealership adds to the rate as much as they think you will take - certainly more than what the bank will require.

I chose to wait the two years because I didn't want to have to have a co-signer nor have high double digit rates.

Since that time (Jan 2011) - credit has loosened up tremendously. Getting a new car is much easier than financing a used vehicle (depending upon the age of the vehicle).

Check a credit union or small regional lender in your area

OP - what is your average add on for the rate quoted by the lender?

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

Rackham94 — Tue, 28 Oct 2014 20:18:13 GMT

I want to purchase a used car what is good starting point to negiotiate (I know it depends on model and market) but as of today. It was a used Mazda 6 2014 with 26k miles the mid level package iTouring.

Listed for 25k so I was thinking about offering 22k.

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

Jlu — Tue, 28 Oct 2014 20:23:36 GMT

@StartingOver10 wrote:

OP - what is your average add on for the rate quoted by the lender?

As an indirect lender (the dealer) I'm able to do either what is caled a flat incentive or a rate markup. The flat is a set amount (generally $300-600) that I make up front with the option to enhance the amount by marking up the approved rate by half a percent. Or then there is a rate markup which generally is a maximum of 3% that I make on the 'back end' or in other words, when the loan is paid off. As a dealer I make a lot more on the markup but then I run the risk of getting nothing if the borrower defaults.

Personally I always do the flat w/ half a percent tacked on. As a fellow human being it helps me sleep at night knowing that I didn't just unreasonably jack up some poor bastards APR for my sole benefit.

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

Jlu — Tue, 28 Oct 2014 20:25:20 GMT

@Rackham94 wrote:
I want to purchase a used car what is good starting point to negiotiate (I know it depends on model and market) but as of today. It was a used Mazda 6 2014 with 26k miles the mid level package iTouring.
Listed for 25k so I was thinking about offering 22k.

The best public resource for used car market pricing data is cargurus.com - click 'car values' at the top and enter either the VIN or the year/make/model with mileage and zip code. That will give you an excellent idea of what the market is like for any particular used vehicle based on what dealers are asking all across the country for the same model.

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

Anonymous — Tue, 28 Oct 2014 20:28:08 GMT

How can I get the lowest price for a car with out the added stuff like delivery fees?

Is there a lower price than what the white sticker states?

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

Jlu — Tue, 28 Oct 2014 20:37:07 GMT

@Anonymous wrote:
How can I get the lowest price for a car with out the added stuff like delivery fees?
Is there a lower price than what the white sticker states?

Of course there is. It's called negotiating skills. You can negotiate all the way down to 'invoice' on a new car and then some. There is the invoice minus rebates minus holdback. If you were negotiating with a crazed gunman in your building with 6 hostages and he shot each and every one of them I would suggest you use a new car buying service like edmunds.com or truecar.com, but if you're good you can buy a car without these guides.

PS The value of a car isn't dictated by the amount of money you want to spend.

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

Creditwiser — Tue, 28 Oct 2014 22:05:18 GMT

I'd like to start by saying thank you for the time you're spending answering questions. Its a pleasure to read your replies and I certainly appreciate it as does everyone else on here Im sure.

A member asked you about running somones credit with out authorization. There has been much discussion on here about the Patriot Act and other means of getting around the legal end of things. A week ago I test drove 2 cars at a dealership in PA. Naturally they requested my Drivers License and I gave it up so they could make a copy. The next day I had a CR update for some account balance decrease and I ran a new report as part of my EQ monitoring subscription. To my surprise I had a SP from Wilson Technologies. Some Googling turned up info that basically said Wilson Technologies is a company dealers use to manage customer information and other data associated with the business. Now granted it was a soft credit pull as I mentioned but I thought " you sneaky sons-of-B's " Funny thing was that I joked to the guy when I gave him my License and said" Dont be pulling my credit" as I was only shopping and test driving.

So, was the SP ethical ? Can you really take a sneak peak just because I gave you my DL ? I guess I'll be getting some flyers in the mail from this and other dealerships. Thanks again for your insight on these posts.

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

ordnance1987 — Tue, 28 Oct 2014 22:21:44 GMT

@Jlu wrote:
@ordnance1987 wrote:
@Jlu wrote:

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
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.

What is a good way to negotiate the interest rate? Like you said in a post earlier about the maximum rate markup generally being 3% does it vary by state? Is there a way to know what the interest rate the bank told them?

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

CreditCuriosity — Tue, 28 Oct 2014 22:30:32 GMT

Yes much appreciated on your honesty in this thread OP, alot of people will learn alot of things including myself and I went to school with some people that own dealships as stated earlier, but I know they are still making money off me and not sharing everything

I find the financing side of the dealership the most intertesting part and probably the most profittable part, is this true? Obviously you make X of sale of car, plus on financing you make set amount plus .5% you stated, plus tire and wheel, GAP, Extended warranty, etc. I honestly feel like I am going into a boxing match whenever I go into the finance dept of a dealership. I know they will put up a fight to up-sell me on stuff.

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

Jlu — Wed, 29 Oct 2014 00:14:13 GMT

@jettech wrote:

So, was the SP ethical ? Can you really take a sneak peak just because I gave you my DL ? I guess I'll be getting some flyers in the mail from this and other dealerships. Thanks again for your insight on these posts.

Glad you appreciate my time. Most dealers will enter your information into their CRM (customer relationship management) software that will automatically pre-qualify a customer much like a pre-qualification you get in the mail for a CC/loan. It is no less or more legal than the junk mail you get. The only way to stop them is to freeze your reports. If it was a HP you would have legal grounds to get that HP dismissed.