Walk out of a dealership with a new car and cash?

[Remember0]

Never thought I'd post asking a question here but here goes...I came across what I thought was an interesting news article on the current state of affairs in auto financing and wanted to see if any members had heard of / experienced something like this. Sounds like BS to me, but perhaps I'm an old dog and there are new tricks.

Has anyone heard of going to a dealership, buying a new car, and have the dealer cut you a check for the differnece between max LTV and what you just bought the car for? As an example, say you buy a car with an MSRP of $25,000 for $25,000 OTD. The article says some lenders do 150% LTV (sounds high, but I've seen 140%). So then, people get the dealer to give them a check for up to $10 - 12.5k to go along with the new car?!

Direct quote from the article: "But almost unanimously, they all reported that banks were aggressively encouraging lending up to 150% of the value of a new car. So, on a $50,000 car, it is not out of the ordinary for the bank to lend $65,000 - $70,000 with the customer walking out the door with a check for up to $20,000 and a new car. The majority of these inflated loans appear to be at approximately 120% of the car value."

Hopefully I'm allowed to link: http://www.bankingexchange.com/blogs/item/7787-car-loans-defaults-the-next-embarrassing-crisis-for-b...

[Glen_M]

Have not heard of it before, but two things come to mind:

The opportunity to immediately drop the percentage of the loan balance down a couple of buckets and recover some points for new accounts, inquiries, etc.

The opportunity for people to get horribly underwater on a vehicle loan for a vehicle that could be lost in some way, the you're just stuck with a bunch of debt and nothing to show for it.

I see most people falling into the trap of the second option.

[Anonymous]

So, essentially an unsecured cash loan + auto loan hybrid.  Sounds peculiar, to say the least.

[flan]

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@Anonymous wrote:

So, essentially an unsecured cash loan + auto loan hybrid.  Sounds peculiar, to say the least.

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I suspect most people doing this are seriously underwater on the car they're trading in, and are just digging themselves deeper into debt.  The extra loan amount pays off the old car loan. 

That said, I financed the entire price of my current car, including tax and license fees.  I got an unsecured loan from lightstream, they lent me a stack of cash, and then I went car shopping.  The amount they lent me was about 130% of pre-tax price. (and would have quite a bit higher if I'd been allowed by my wife to buy my first choice vehicle.). I returned the excess amount, and lightstream will reamortize the loan based on the current principal balance if I ask them to. 

[MitchDeerfield]

I also got approved by Lightstream but they never would give me their phone number, you have to play email tag with them.  Horrible customer service.  I ended going with Bank of America, at least they take phone calls.

[Remember0]

Interesting to hear folks' experiences, thanks everyone. The negative equity comment is a good one...rolling in negative equity is exactly like getting a check (for the most part).

I'm going to call a few dealers pretending to be a buyer with some CC debt I want to pay down and see if they would be open to cutting a check to satisfy my curiosity. If they are really willing to cut a check, it's like we're back in 2006 in the mortgage heydays. I'll report back.

[Gmood1]

Yeah sounds like a very bad idea!

I know some FIs like Penfed will allow you borrow against your auto loan with them. That's if they see your vehicle is more valuable than what's owed on it.
It's their way of helping you out of a bind and keeping those payments rolling in.😂

[Loquat]

When I was spinning paper in the box most folks I had the pleasure of doing business with was financing over 100% of vehicle cost.  I never got a call for 150%.  Most of my dealers were structered under 110% on the front and 20% on the back.  There have been times when I've sent the customer out the door with a check in hand (or actually mailed as I never handed over MSO/title until the dealer was funded).  However that check was never made out to them it was to the DMV as we didn't do TT&L for the customer here.  Short of that, no, I never have or heard of a dealer financing over 100% for the sole purpose of extending a loan via car to a customer.  

[Kree]

I'm curious what the 150% LTV does to the APR.