For the past few years, Americans have been feeling the pinch of a slowing economy. Businesses have been complaining of the difficulty they have with getting loans to expand their market or for gearing up to manufacture more products.
When you add the housing market collapse to the equation, one might think the money’s all dried up…unavailable to them.
It may be the case in business, but in the automotive industry, getting a loan for a new or pre-owned car is easier than ever. Not to mention, competitive.
Years ago, there were tons of “secondary” finance companies competing for sub-prime loans…much like the mortgage industry. Dealers across America knew the $30,000 loans they were securing were risky, but the lenders had a formula. They charged max-rates and charged the dealer additional fees to finance the vehicle.
Because people were still buying cars, and everyone was making a profit, no one questioned. But when the economy began to tighten, many of those lenders who laid everything on the line, found themselves in a bad situation. Auto One Acceptance, Wells Fargo Auto Finance, Drive Financial and countless other boutique finance companies sold what they had and got out of the business…others were not so fortunate, and lost big.
Those who remained, emerged on top…in a pool of fewer lenders. Americredit merged with GMAC and got back in the game. Capital One Auto Finance has changed their model to be more “dealer friendly” and all auto finance lenders came to realize that they needed to do a better job in a more efficient way.
Within the past 6-12 months, we have seen a refreshing attitude regarding the lending business. Banks and Finance companies are looking for deals. They have tons of money to spend, despite what businesses are saying and what you hear on the radio and TV.
If I had 1,000 customers who all wanted to purchase $40,000 trucks, and they had the credit to qualify, we could easily satisfy the 40 Million dollars required to do so. Ford Credit, US Bank, SACU, Capital One, and others are all waiting to lend you money.
So, now that you know the truth about the current conditions in the lending market, what does it take for you to secure a loan?
Well, it depends. Have you paid your bills on time? Have you had a few “slow-pays?” Or maybe, you’ve had a bankruptcy or repossession? Whatever the scenario, dealers have the lenders to cater to any category of credit.
With excellent credit, some banks offer rates as low as 2.5%…and Ford has 0% available on select models. On the other hand, if credit has been a challenge, you may be looking at rates in the 14-18% range, with a minimum down payment requirement. Also, many of these sub-prime lenders require additional documentation to prove the information on your credit application. You may be required to provide proof of income via check stub, proof of residence, proof of phone, references, and down payment.
If you are self-employed, you enter a different set of conditions. Many simply state they will not approve someone who is self-employed. Others will, on certain conditions, which primarily are associated with that individual’s ability to prove their income.
The catch here, is that most companies try to show as many deductions as possible, to ultimately pay the least amount in taxes. unfortunately, when people do this, they put themselves in a position of not being able to prove the income they may actually make.
For example, a man comes in to the dealership and owns his own concrete business. He’s bringing home around $5,000/month, but because he writes off most of his expenses when he does his taxes, line 31 on Schedule C will not reflect $60,000. It may show $25,000, and therefore, the banks will verify his income being $2,083/mo, and not enough to purchase a $40,000 truck for his business.
In addition, many banks will qualify a payment based on the income of the applicant. This is usually no more than 15% of gross. So, in this case, the business owner would qualify for a payment of $312. If this individual needs a truck, he may at that point decide to purchase a pre-owned truck for $10-15,000 and meet the requirements of the lender.
Ultimately, each customer is unique in their needs. We at Gloff Ford are happy to assist with financing options, terms, warranties, and insurances. It’s what we do.
If you would like to begin the process of qualifying for a loan, we encourage you to submit an application through our secure site.
If you have any questions and would like to speak with our Finance manager or Sales department, we can be reached at:
Gloff Ford
1206 N Ave G
Clifton,TX 76634
254-675-8369
800-659-6632
