Ever read the fine print on other “bad credit” car dealers ads? Car dealers like A Better Way Wholesalers, Major World, and European Masters (who are BY FAR the worse,) seem to write EXACTLY what needs to be said to get a customer through their door. Just look at this ad for this immaculate Mercedes-Benz CLK350 I found on today’s Craig’s List. $295 a month, all credit approved, AWESOME! When can I drive it home?
Oh, wait… “Financing term based on 72 months, 3.9% APR. Payments exclude tax/reg. Subject to lender approval. Final payment& final APR will be determined by lender.”
So what exactly does all of that mean? Let me, an industry insider with 11 years of vehicle financing under his belt break it all down for you line by line.
- “Financing term based on 72 months.”Who in their right mind would want to pay for a vehicle for 6 years? The “average” person puts between 12,000 – 15,000 miles a year on their car, so lets do some math and say that you drive an average of 13,500 miles each year. The car currently has 58,000 miles on it. After 6 years at 13,500 miles per year when the car is finally paid off you now are the owner of a proud new 11 year old vehicle with 139,000 miles on it…
- “3.9% APR” – Do you know how many customers actually qualify for 3.9% APR in 2012? Less than 1 out of every 100! To qualify for 3.9% APR (a VERY good APR on a used vehicle,) a customer must have a FICO score of 720 or better, owns their house, never been late on any car or mortgage payment, have a VERY low debt to income ratio, and have at least 5 pervious trade lines. IF, your credit was truly that GREAT would you be looking for a 5 year old vehicle on Craig’s List?
- “Subject to lender approval. Final payment & final APR will be determined by lender.” Basically what that means is if you do not have ALL of the requirements above, don’t even bother…
Our ads are nice and simple: “All down payments shown assume that the customer also meets the income requirements set by our lenders, has a CAPS score of 1, or meet Auto Loan’s “D” approval guidelines, and is factored at Connecticut’s 6.35% sales tax rate. If any variances, down payment sums may be greater.”
Let’s break this down, line by line.
- “All down payments shown assume that the customer also meets the income requirements set by our lenders”Our banks only allow a customer to have a reasonable payment, one that they can afford, usually 20 – 25% of the customers monthly income. If John Customer makes $8.50 per hour working 40 hours a week at Taco Bell, his gross monthly income is $1,360. Which means the MAXIMUM monthly payment allowed would be $340.The banks cap payments for YOUR protection! If John only makes $1,360 a month (BEFORE taxes) he probably brings home about $1,000. After rent, food, gas, car insurance, and just every day expenses how much does he really have left for a car payment? If a bank allowed a dealer to slam John into a $500 a month car payment just how long do you think it will take before John realizes he’s WAY over his head and the vehicle has to get repossessed?
- “has a CAPS score of 1, or meet Auto Loan’s “D” approval guidelines…” This one was actually explained in our FAQ section here, but I will simply copy and paste the same text again.
- CAPS Score: A CAPS score is a rating scale (1-10, 1 being the best and 10 being the worst,) that one of our sub-prime lenders uses to rate a customer’s stability and likelihood to repay a loan.Scores are determined based on numerous factors: credit score, positive credit history, delinquent credit history, length and type of employment, length of time living in your area, amount of income, current debt to income ratio, as well as numerous other factors. Many customers think that while they have “bad” credit they will be a 10, however this is not usually the case. Our average sub-prime customers CAPS score is a 2.
- ‘D Approval’is a rating scale (A, B, C, D, E) that one of our sub-prime lenders uses to rate a customer’s stability and likelihood to repay a loan. Scores are determined based on numerous factors: credit score, positive credit history, delinquent credit history, length and type of employment, length of time living in your area, amount of income, current debt to income ratio, as well as numerous other factors.Many customers think that while they have “bad” credit they will be an E, however this is not usually the case. Our average sub-prime customer’s approval rating is a D.
D Approval stipulations:
- Minimum required time in area of 1 years
- Minimum required time on job of 6 months
- Acceptable Income: Child support & alimony @ 50%, Second job accepted if 6 months on job
- Non Acceptable Income: Temp disability, workers comp, SSI other than applicant, supplemental security income
- No open bankruptcy
- No current active vehicle loans (primary or co-signer) with balance exceeding $2,000
- No co-applicants