Auto dealer finance models
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Finance Models
Finance Information
No two bankers or brokers see credit the same or treat risk the
same. Finance companies operate differently. It is difficult to classify these
companies into a class by their method of operation. This by no means is an
absolute science but here are a few classes.
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Class 1
- Finance companies that buy bulk deals. They
usually pay percentage of the note balance based upon the number of notes in
a package and the age of the notes. They assume the service and the
collections.
- Class 2
- Finance companies that buy notes that will
accept a sub standard credit rating and usually pay a lower percentage of the
note balance. Their risk is higher. Some companies will allow the dealer to
service the accounts and collect the payments. The collections are then
forwarded to the finance company.
- Class 3
- Finance companies that buy paper as a point
of sale. The dealer does the credit report and provides the lenders
with the information. The lender views the deal and makes a decision based
upon customers credit history and the vehicle's book value.
There are a variety of formulas that lenders use relating to the vehicle's
book value and the risk management. They will usually limit the amount of the
loan or term of the loan based upon their own formula.
- When you sign up with a lender, their terms
and procedures are a bit complicated. Make sure you understand their offer
before you contract the customer and deliver the vehicle. They usually fax a
confirmation.
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- Its up to you to determine the lenders mode
of operation.
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