How Subprime Financing works for Bad Credit Auto Loans
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- เผยแพร่เมื่อ 16 พ.ค. 2020
- Want to know how to get a car loan or finance someone with bad credit ?
Well, there is a lot a dealer has to go through in order to get a bankers license and finance a customer with bad or sub prime credit if they want to buy a car. Here is how it works.
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Sub prime buyers should never purchase an Audi, BMW, Cadillac or Mercedes rule number one. They can't afford the payment on those cars let alone the maintenance.
Jeremy T True, but that’s what they always want!
@@craigjorgensen4637 that and the latest model $900 iPhone
Brian Waller Korean cars are good for sub prime. They are now pretty reliable and they are still back of book unless something has changed. Saturns used to be popular on “Note Lots”. Trouble is, if they need a new battery, the payment gets skipped.
You are exactly correct. Several Subprime banks wont even allow you to finance those to them
Just because someone is sub prime doesn't mean they don't have money.
This is the greatest TH-cam channel I’ve ever seen.
My first day on this channel, and I’m binge watching!
"I want to sell people good cars" while pitching the sell for a Audi! Lmao
Suddenly that "Additional dealer profit" extra charge makes sense to me. You can't legally charge me the $540 the finance company charges you, but you can add an extra miscellaneous sticker, apparently? I'm looking at you, every Dodge Dealership...
They get their money....he bought that car for less than 10k....with 25% interest it will be over 20k....if it wasn't profitable they wouldn't do it....prime buyers buy at big dealerships not buy here pay here
Westlake (verification process sucks but they usually pay better on deals)
Credit Acceptance is very easy to work with and breeze to get funded plus no recourse I just wish the upfront payout was better.
we probably have 10 subprime lenders signed with, these two are really the only ones that end up using all the time.
I agree, it’s pretty often where they spend a lot of your time and don’t end up buying it
Great video !always wondered how the financing works. I’m a mortgage banker and the credit report is the tell-all. Lying shouldn't be an issue. What you need is a “auto bouncer” anybody that lies gets thrown out😉
Imagine that car comes back to the auction.... oooohwheeeewwww. The west lake financial lane at the auction are the most POS cars in the auction...
I’m going to show this video to all my customers
That's alot of valuable information. Here in California the dealership registers the car not the customer. Then the dealership charges the registration fee for the cars plates.
Should Title This "How to Get a Car For Free From a Used Car Dealer"
Great information! Its good to hear the other side.
Thanks for posting this video, totally accurate. I used to work for a dealer that made subprime customers buy an useless extended warranty that was priced to cover the extra costs. I always told my buyers this and many thought that it was a scam not believing banks charge dealers extra fees.
You need to use a title service to handle your out of state dmv work so you don't have to chase customers around or trust them with the title work. Also, we are free to decline the deal if unable to place the contract on terms financially acceptable to the dealership. Sometimes we have to choose our customers based on risk.
I love the mentality of the Sub-Prime buyers....I want to buy it today, with zero money down! So , Mr. customer: If you can't manager your own money, why would a bank allow you to manage theirs?
This is great information
As a dealer one of my biggest gripes with special finance, a lot of times the lender has first payment default meaning the customer doesn't make the first payment the dealer is on the hook for the loan. AND Those dealer discount fees typically $750-$1,500 are horrible and so critical to get cash down. I also know of some dealers who made the customer's first payment to avoid the recourse.
I think faked or forged paycheck stubs should be considered illegal and those persons coming into a dealership with fake paycheck stubs should be charged with fraud.
If you are willing to accept $11,2xx AND do a ton of work so a sub prime customer can buy it, would I be wrong to say you would sell it to a person with their own financing in hand for $11,2xx? AND save a ton of time as well?
He’s probably going to want more but just depends on the vehicle and the margin on it- cash does still talk these days.
He's moving inventory, he has a small family business which USA was based on, not some liar irresponsible car buyer
He will never sell a $15,000 car for $11,000.
You didn’t pay attention, He said he is not going to sale it at 11k.
I needed one of those.
For 7 years I only sold to buyers who either had their own financing prearranged, or cash on the table.
In 2019 we switched to providing some selective secondary lending, and gross sales grew 49.2%
It’s a hassle.
And the client has to pay back the full purchase amount, plus some pretty heavy interest rates.
But for some situations, it’s the only option they can find.
Better a dealer who is selective in choosing inventory, and runs everything through an inspection, then provides needed repairs before the sale than the client’s buying elsewhere to get a polished turd for the same money and terms.
Keep it up Craig, great content.
Hey, I know it's literally been 3 years, but quick question for you: I know that there's cash, there's also going to a bank and getting your own car loan, but how does "selective secondary lending" work? I'm looking to get into the business and there are a few things that are confusing to me.
@@whatsthat9408
I’m still following Craig 😅
There is a industry within the industry that provides sub-prime lending for your less than desirable credit score clients.
After you’re set up with them, you basically have the client enter all of their info into a credit application.
Then the lender let’s you know which (if any) of your vehicles in inventory will fit for that specific client to finance.
They (the lender) also usually want you to substantially lower what you will take for the car, while still charging the client full price, plus fees, and usually a fairly large interest rate over a period of time.
It shouldn’t be marketed as anything other than a last resort (if you deal honestly, and tell people the truth)
We usually suggest they enter this type of loan as a last resort, pay it down aggressively, and if possible: use it to build their credit back up so they never have to use that kind of loan ever again.
It’s rough, but sometimes it’s the only option for some clients who come in needing a car.
And again:
Be sure to fully recondition each car, they don’t need to be in a position of having to choose their car payment, or constant repairs.
Cheers!
Great video thank you
That made my head hurt. I could only imagine.
New tyres make the steering even easier and give more insulation between you and the road surface because theres more rubber on them so the car drives a lot better and your even more likely to make a sale however some tyres are far more noisy running than others and feedback road noise is not what you want.
Excellent information content
Need to get them on a contract that says if they miss their first payment you keep the down payment, for a few grand it’s might be worth it😬
MOST Subprime already do that. Called Recourse. but the downside is the dealer is liable for it then because the lender charges it back to the dealer. Then its up to the dealer to either repo it or hold the note in house. Most just repo it. The fine print on the lenders terms always says has to be an ON TIME payment too. So even if they are late 1 day for the 1st payment, in the lenders eyes its still recourse valid for next month. So if the next month the customer doesnt Pay at all. Then the lender will call the loan and the dealer will be stuck dealing with it. Its a wonderful game sometimes. Ask me how i know.....
Nothing against Craig. Maybe its just the state hes in and the market area. But here in my area i KILL it with Subprime. Just have to know how to buy right and sell right. I always shop my customers.Just like craig said to ask them questions before the test drive or spending time. I have them fill out the app almost always from their home becuase they found the car online. I hate to say that, but i will check you out before i even consider you "able" to finance that car. In other words ill have you tell me about yourself, what docs you have or dont have. What kinda Down Payment and/or trade in.
Subprime is/was my bread and butter almost......almost... The deals were fantastic and made great profit....but that pesky recourse depending on which lender. Now get one thing right. The lender isnt trying to punish anyone. But one of the reasons for the recourse is also so the dealer isnt selling shitty ass vehicles that will break down like in 1 month. because guess what? Vehicle breaks down means customer wont pay the payment, customer cant pay to fix the car either. So why the hell would the lender want to deal with a car they just financed that will break down in one month or less. The dealer has to take that into consideration.
You can thank all the jackass fuckface scammer dealers from the last 10-15 years for that. Because of their shit many dealers are paying for it now. And what i mean by that is, how craig mentioned about Fake Paystubs and W2's etc... Well guess what those fuck face Dealers did back then? THEY ACTUALLY HELPED THESE SHIT BALL CUSTOMERS BY PRODUCING THOSE FAKE PAYSTUBS AND W2'S etc. Trust me, thats exactly what those jackasses did. Alot for drug dealers and low lifes like that.
oh and btw some Lenders (the really small Subprime Banks) have like 2 month recourse..
Craig, im surprised out of state titling the customer is doing? WTF? i would NEVER allow that. Are you sure your Sub Prime lender requires that? Because ive done out of state deals and filed the titling in my state (with the lenders lien too) And didnt have any issues. The customer can after that get plates/title redone in their state.. OR i use a titling company that i can perform that with. but you need to rethink that whole out of state customer filing the titling and lien.. Cuz Whoa, thats a huge huge risk
@@lsimson I learned to shop the customer within one week working for Hyundai years ago lol. First subprime applicant had me spending hours and lied about everything. The older salesman were lazy and didn't even want to work with subprime applicants, but I surpassed them in sales as a green pea by taking those applicants plus drawing them in from my own leads from friends, family, social media. I can definitely see where wheels is coming from by showing the frustration with drawbacks from being the sole proprietor. a salesman at a dealership doesn't have to do every step of the process. The sales managers and finance are doing alot of the tasks alongside of the salesman to make the deal go thru
i went from having a FICO score of low 400's to now having a score of over 700. Having good credit is a lifesaver, it makes your life so much easier when banks are willing to loan you money.
Heres an idea, and I could be just spit balling here.....pay cash!!!!! Then, no payments!
i would hustle to 10-15 $3500- 5k cars than bother with financing one $15k car.
Good video, very enlightening. The lesson is try not to do subprime deals “If” you can!
You can always insist that they pay their first payment in cash up front to you and you pay it on that account so you aren’t worrying whether or not they’re going to make that first payment.
Thanks for the content, I have a BHPH and debating bank financing as an option
Here's the thing,this guy didn't say, what he payed for the car.He just sayed what he wants for the car.
Facts
Thanks for sharing. The GoPro fisheye on the video so I can't really see the numbers you are showing tho. How much percent you get are subprime?
the sad truth is you can't be successful if you don't profile your customers
Why the hell would a subprime person even want a 15k audi??? Can't they just get a old toyota or honda which will last longer than these junks!!???!!??
I do small Bizz loans and its the same for me its called the claw back and some times you loose your shrit on deals
That was a very informative video.
I think it’s different/easier in Canada.
Craig, you need to record when you Repossess those cars!!
I'm sure they pay other people to do that. Being a repo man is a real thing.
Those repo shows are fake. Repos aren't really that exciting.
OMG! Craig, Thanks for the information about sub financing. Not sure how you do it. What % of your transactions are sub, or regular financing or cash? Do you make any money on the example you used?
I won't sell it on those terms
@@FlyingWheels good to hear!
When I wanted to get involved with financing my buddy told me about a bank he used for bad credit you had to pay the band a 10k deposit to start using them, the customer has to make 3 payments on time before you get a check which was only 75-80% of the amount and have to wait till it’s paid off till u get the rest.
Seems like you’re really going above and beyond to be fair and forth coming about these types of loans. Good on you mate. Crack on.
Audi and reliable are words not usually spoken together. An Audi is just what a low credit, low budget person should not be buying. Thanks for the interesting info.
Thank you
That's crazy, I had no idea the dealers paid for financing in subprime situations, I thought it was the other way around (dealer gets a finders' fee for the loan). And the hit you take if they don't pay the first payment, that's a crazy amount of risk for a small dealer. These subprime deals must be pretty lucrative sometimes, I hope!
I will admit my credit score is about 620 and I have a 2013 Ford F-150 I finance 2 years ago and I have never been late on a payment I have a job and I work my ass off I've been trying to build up my credit but like the stock market it goes up and down and never lie or ever made fake paycheck stubs my credit has lowered the last couple months honestly I don't know why like I said all my payments have been on time including truck payment credit card payments but I do understand those losers out there and ruin it for the rest of us I work for a company called Terminix pest control I make good money I pay all my bills off on time no matter what it is. Right now that truck that I'm paying off completely broke down that transmission went out and I'm trying to buy a new vehicle and it's because of all these low life scumbags that try to fake a check stub or whatever that ruins it for the rest of us that don't lie and make their payments on time yeah do I feel embarrassed saying this sure but hey what can I do I make money I'm working my ass off for a living eight to 15 hours a day and yet I'm getting screwed over
It’s all related. Bad credit = bad life choices and decisions. Other part is these people also don’t take care of their cars either so they break down soon thereafter and they just stop paying and it gets repo’d and the process starts again.
Audi? Scotty Kilmer enters the conversation.... Watch for flying hands, Flying Wheels.
Dealing with Westlake is a headache! You should try using Credit Acceptance for subprime loans they have no recourse.
I will thanks
I do credit acceptance for subprime financing!!! Once you go CA YOU WILL NEVER DO ANOTHER WESTLAKE DEAL! This is from Shaddai Auto sales I'm in Columbus Ohio !!!! I always watch all your videos , I opened up on my own in 2011 with my family and God has been good!!! Maybe I get to meet you one day ! God bless !!!!
@@JS-xk6dr I couldn't agree more with you! And congrats we are from Chicago!
Thank you for the info will sign up for credit acceptance today one of our biggest problems at our dealership is the low amounts of banks many bad credit people come in but we cannot find financing for them
@@buflabs2098 credit acceptance is the answer for you friend ! As long as you have been in business for 2 years they will become a CA dealer! Hopefully you will have a good CA rep, here in Columbus we have Brian and he is excellent ! Good luck & and make some money !!!!
Scotty said. - Money pits!
I tried to get into a 8 grand beater just to establish credit a few weeks ago. The dealer shot that down but said he could get me into a $20,000 pickup that looked like crap. When I picked out a different vehicle at the same $20,000 only to be told that vehicle is too expensive. WHAT GIVES?
All Lenders have a grade they give all vehicles. Meaning an A-B-C type rating. A gets the best deal (or terms to the dealer) and B- C gets less and less.. Get it?
Have you ever used Credit Acceptance Corp dealer financing? Any feedback would be appreciated. Thx
absolutely 100 % true... everything down to the last detail. I've had all this happen to me.
That Audi is the LAST car they should buy! They can barely afford the payments and one hiccup from a troublesome car will be impossible to pay for! I know you need to find a car that is “back of book” to put these people in. If I owned a small lot I wouldn’t
mess with bad credit people. I know. Sometimes you get ambushed.
Can you do a video on why car dealerships hate when you come in with cash
They make so much profit on selling car loans to banks that they hate cash deals. It's such a low profit on cash deals.
In a previous life I sold new cars at a new car dealer. I was young and stupid and I was fired because I "didn't make them any money" even though I sold 16 cars in the couple of months I was there. New cars had very little profit on the front end. Come to find out that the dealer made a $3k-$5k kickback on each and every one of those deals when they sold the lease or finance deals to the bank. I'm not sure if this works with used car dealers... but new car dealers LOVE people with good credit because they are easy to get financed and the financier pays them instead of vice versa. At least that's how it was 20-some odd years ago when I was selling.
What I don’t understand is why business don’t get together , or certain groups (industry’s) and refuse to pay these type of extortion fees? I think the banks have run out of ideas to make things sound legitimate and short of just saying you want this deal? Give us X-amount of money to push it through, they dress it up like a dealer discount fee. Who stands to lose the most money if all sub-prime lending stopped? The banks... so if the bulk of car dealers new or old started refusing to pay and we’re willing to let the deal die it’s the banks who will lose the most. It’s the same with credit card companies. They charge merchants anywhere from 1% to 3% of each transaction for the privilege of being “allowed” to except their card . Are you kidding me? If enough places banded together and refused to pay and refused to except whatever credit card things would change. Somewhere along the line it got twisted.... credit cards should be giving small kick backs to merchants for using or excepting their card over the competition, same with the banks to car dealerships, they should be giving the discount fee to the dealer for applying to their bank instead of the competitors . Must be nice to be able to say, “ Ya, I’ll lend this person $10,000 and charge 20%+ interest. Oh by the way, if they don’t make their first payment we will steal the sale money back from you. Also you owe us 15% of the loan for us to lend out the money as well.” Ridiculous......
its extremely hard to get rid of stupid/outdated laws
Well you have options but you go with the one that gives you the least profit. Why don’t do you in house financing? And even for that customer your keeping 2,000 dollars if he doesn’t make a payment, I don’t know about you but that’s a lot of money. So it’s in his best interest to make that first month payment
I filed chapter 7 bankruptcy and right after discharge Capital One 18.49% and Santander 15.99% approved me at Carmax with $500 down. (The salesman asked me to run it with $500 to see what happens) my credit was barely 500. Are you having to do all of this because the Audi is older and has higher mileage? Why not use CapOne and Santander for all your deals?
No, carmax has to do the same
CapOne is a hard lender to get with sometimes. Depending on your dealership and history. Also I dont think santander is taking any independents for a long while now. Even so, doesnt mean those same type of terms would apply at Craigs place or any random used car place.
i used to work for drivetime's loan servicing company - bridgecrest. what they do is straight up criminal. they overprice the cars by well over 5k above market value, the give them a garbage interest rate sometimes as high as 29% APR - and then sell them an overpriced garbage warranty that covers nothing on top of it all.
I know it is just an example, but a sub prime buyer getting an Audi is crazy. No wonder Dave Ramsey says debt is dumb.
Bottom Line: LOL, why go into the used car business when you can just open a bank?
Are we talking BHPH Or CAC style Finance?
A customer lies, you’ll find out when the credit is pull or verify their info. The worse that happens is you wasted your time. A dealer lies, the customer is locked into a lemon, a bad deal, money is scammed from them. The list goes on. If people are forging those documents, that’s on you to do your due diligence. You are supposed to be experts in this. The customer is not an expert.
Its hilarious how poor peasants always want expensive cars but they can barley afford thier phone bill
Come on bro you can’t call them peasants
nibbzs15 Very true! The Credit Bandits have to have leather, sunroofs, fancy models etc.
translator missing subtitles. tanks craig.
Thanks for the info. What do they mean by the term pools?
Pause hold your money all together on multiple vehicles and then payout in bulk a long way down the road
Damn that’s crazy.. I gotta clean up my credit its better for everybody 🥴
Alot of Banks will not give you a loan due to the high mileage of these cars......So Credit Bureaus will not loan either to to your bad credit
So if the bank says we will only go 11,200 on this car/customer. So why can't you say we need more of a down stroke = to the 15K asking price.
Because of someone has subprime credit and can hardly get approved for $11g it would be highly doubtful they have the difference to put down as a down payment
Most times they don't have that much of a down payment
When it comes to not having enough down. Then it's time to say look for a cheaper car
Hi can you the Dealership charge the customer for that first month payment ,, so you pay it and the loan won't come back.
We're not supposed to
@@FlyingWheels ...Yeah.... but we all know it happens. Our dealership will straight up offer the 1st months payment free when we have vehicle grossing 3 pounds or heavier and it is a subprime borrower that we think there is any chance they might default. Give them a check for the amount and then tell them to bring in the proof it's paid when they come to pick up their regular tags...
Wow that’s a lot of paperwork
Whats the minimum credit score that can get approved? Can a 500 get approved?
We used to call them 1st time Liars.
Damn Bro the wig needs a good cut!! Same here open the world up!!!! effers!!!
Let's see how long we can grow😁✂️
It seems easier to flip stocks
Alot of people keep saying why waste time with this customer. When you have the weight of the world on your shoulders as an entrepreneur, you have your own bottom line. Sitting and waiting for that perfect customer will never get you any fkn place in life. I've been an entrepreneur my whole adult life, and I'm always chomping at the bit. Something could happen the next week, next month, or even the next day and you might wish you had worked that extra four hours to get that money you watched walk out your door. There's no way to make you feel this concept unless you live it.
There is a contract rate the buy rate. See most of smart buyer already know the dealer can make money on the spread. In this case they didn't give you a spread. That is harsh. Maybe you can sell a warranty if the lender allows it. In your state I'd take them to DMV and witness the the filing. Bum deal didn't blame you.
Have you had to deal with recourse?
Hey Craig, I have a question. When staring a used car dealer what price range do you think is best for inventory. I tried going through the banks but they always had some excuse to hold our net check. So we stayed at the $2k - 5k range and tried BHPH however as you can guess that took a lot of our capital and time so we had to shutdown for now. How would you combat this?
Stick with cars in the 4000-8000 range and trucks also few thousand more than that. Trucks are were its AT. If you can buy correctly then the lenders are paying good on them. I kill it with Chevy Trucks like the 1500s from 2004-2007 or so. Thats my favorite truck to buy especially the crew cab 4 wheel. I have one lender which loves to buy trucks. They are known for it. But again, it might all depend on your area. What one lenders pays me here might not pay you the same in your area.
Why don’t you just do BHPH??
Because if you on a floor plan you have to wait to get payed and by the time the car is paid the interest has eaten all the profit. BHPH only works on lower value cars with a good down payment.
How much are the emobilizer
So a person has a better chance if they just don’t lie pretty much?
If it's such a hassle then why do it?
Westlake Financial 🤮🤮🤮
Thought this video might be helpful for customers who are sub prime and want to buy a car. Instead it’s a dealer complaining entire 18 minutes. About owning his own used car dealership. And how much it sucks for him to sell a car to someone who doesn’t have great credit score. This video would turn me off 100% to buy a car from you. Maybe Just up your game to a new car dealership. Or geez, put up a video of how to HELP people make it easier for you as a dealer. A how to maybe of what to do to ensure they can get a decent car with you, and in turn it’s easier you you and them.
Ok, why bother financing sub-prime? Just let someone else have their business?
Because it pays so well!
He explains some of it near the end. If that sub-prime person happens to be non-white and they get denied, they love crying "discrimination" and then the government comes to hassle you. Some people just sell the car so they don't have to deal with the "anti-discrimination" BS.
You can get a 2015 a4 for 15k that seems like a rip-off to me
Pure comedy 😂
it happens when the fee is put in your payment
"Yes, Tyrone, you're interest rate is going to be 25%". Uh huh, but how much do my note payment be?
You recessive are a joke.
k but what is a sub-prime loan? what are the credit scores these people have?
Below 600
Sub prime is a nice way of saying bad credit
some of them even go down to the low 500s
Jay nobody gets approved for car loan with score below 500’s... at that point you might want to re-evaluate your priorities lol
Never trust a stealership !
La Llorona, the crying lady
Wow lol 😂
The irony is, that the bank defaults every night and has to go to the repo (repurchase) market. Like a pawn shop. Borrow huge amounts of money with promise to pay back plus a few points. Yet we're the scumbags, Lol.
Don’t go to the subprime subterranean by here pay here places
Good God
If there wasn't good money in it they wouldn't do it......most of customers are sub prime at those dealerships......and most sub prime lenders are clueless how financing works....clueless about their scores, sure they lie but you guys do too so whateves......more work, more risk but much bigger payday and chances are good they will make first payments....its later ones they tend to miss cuz they really can't afford a 25% interest payment.....15k audi will net you 20k easily off those rates.....and lender gets their cut
Hell Santander just got busted for scamming and they are sub prime lender, lol
Get a haircut ya hippy! lol
You sound like my wife
@@FlyingWheels lol I hope not, I can sing baratone!
Still hate dealers
What if someone if I have 8,000 cash on a 30,000 dollar vehicle which is 20% down. Do I qualify? Although I had a previous repo 5 years ago.
Situational based