Chase Auto Loans on the Rise

One of the leading auto lenders, Chase, has recently reported that auto loan new business has risen 5% since last quarter. However, looking at their auto loan originations on a year to year basis, business is now significantly since 2009. 

Q3 2010:  $6.1 Billion
Q2 2010:  $5.8 Billion
Q3 2009:  $6.9 Billion

Average auto loans revenue, in total, was $47.7 billion – a 10% increase.  These loans, of course, are not granted via buy here pay here car lots, which finance customers “in-house.”

Young Americans Driving Significantly Less

A new study has been published which shows that Americans aged 21-29 are driving significantly fewer miles than they used to. Apparently, this age demographic used to account for 21% of the total miles driven by Americans. In 2009, however, they accounted for only 14% of those miles. The study related this trend to the rise in popularity of cellular technology and texting. Cars, once an integral part of American youth culture, have become less important to this demographic, and they feel less of a need to congregate physically with their friends, preferring instead to interact socially via their cell phones, the web, or a combination of the two. Fewer American youths aged 16 and 17 have been getting their drivers licenses, as well.

In both of these cases, finances may play a bigger role than initially assumed. After all, texting and interacting with friends via cell phone and the internet is much more affordable than driving long distances and making car payments. For some of us, it’s lamentable that the car seems to be losing ground as a part of youth culture. Perhaps if more people realized that buy here pay here financing may make a car more affordable for them, they would opt to get their licenses and drive more often.

Sigh…

At least less driving is better for the environment, if not the economy…

“We Tote The Note” – What it Means

Often, you will drive past a dealership or see a newspaper advertisement which proclaims:  “We Tote The Note!”

A few members of our readership have asked what this phrase means, and how it relates to Buy Here Pay Here financing. Basically, “Tote The Note” dealers are synonymous with BHPH dealers. These, along with “Your Job is Your Credit” car dealers, are just different ways of advertising that a given car dealership offers in-house auto financing to its clients. Some of these slogans are used more prevalently in one region versus another, but all of them basically mean the same thing:  you can finance a car directly through the dealership, and you have a good chance of getting approved despite past or existing credit problems.

Buy Here Pay Here Motorcycles

Motorcyclists have to do deal with the difficulties of a financing a motorcycle with bad credit just like regular car shoppers. If anything, buying a motorcycle with poor credit can be more difficult than buying a car. After all, there a fewer motorcycle lenders and dealerships than automotive ones.  Given these difficulties, many riders go on the hunt for buy here pay here motorcycles. Unfortunately, car and motorcycle dealers typically operate out of separate establishments.  Buy Here Pay Here car dealerships sometimes offer motorcycles which they have received in trade; however, many of them simply do not have any cruisers, sport bikes, or other motorcycles in their inventory.

Finding Buy Here Pay Here Motorcycle Dealerships

You can call various motorcycle dealers in your area to see if they amenable to buy here pay here financing arrangements. You might find that although they do advertise this, they will work with you on a payment plan. Just beware of high interest rates.  Although your payments might be lower for a motorcycle vs a car, high rates can make for significant finance charges over time.

Keeping Your Bike Insured

Remember that most motorcycle lenders will require you to carry insurance on your bike before they will approve your credit. Too many people think they don’t or won’t need to insure their bike. Wrong.  In all but a select few states, it’s mandatory. If you have a high risk credit history or driving record, premiums could be very high. To find the cheapest deal possible, make sure to compare rates from a full spectrum of motorcycle insurance companies. Sometimes adding a bike to an existing auto policy is more affordable; sometimes not. The only way to get the lowest rates possible is to shop around.

Huntington Bancshares Increases Auto Finance Market Share

Based in Ohio, Huntington Bancshares Incorporated is a regional bank holding company that provides dealer financing in the following states:

  • Ohio
  • Indiana
  • Kentucky
  • Michigan
  • Pennsylvania

Last year, Auto Finance News awarded the company an Auto Finance Excellence Award, and the company has been #1 in customer service among bank lenders, and within the top 10 for auto lenders and in house financing companies overall. Since 2009, Huntington’s market share in the states in which they operated has grown twice as large.

BHPH Vehicle Recovery: GPS Tracking vs Ignition Interrupt Devices

There has been some confusion of late about the similarities and differences between the GPS tracking devices and ignition “kill-switches” utilized by some buy here pay here dealerships. GPS tracking software is installed by some dealers to aid them if an owner defaults on his or her payments, and the vehicle in question must be recovered. The GPS tracking unit can notify auto recovery agents of the location of the vehicle so that they can more easily repossess it.

Some of these GPS technologies also come with ignition interrupt options. However, it is at the dealership’s sole discretion to decide whether to activate this feature or not. It is important to note that these types of ignition relays cannot shut down a car which is already running. Many buyers have expressed alarm, thinking that their vehicle’s ignition could be killed while the car was in operation. That is not the case. Additionally, many of these systems come with payment warning alarms.

If you make your payments, of course, you would never have to deal with any of these features. Importantly, it is the law in most states that buy here pay here car dealerships must use a disclosure statement at time of sale to notify the buyer that an ignition interrupt system has been installed. At this time, this is not the case for GPS tracking.

The Effect of Deflation on Car Buyers

Deflation is already having a deleterious effect on the housing market, and industry analysts have been quick to project what kind of ramifications we can expect to see on the automotive market. For the average US car buyer, the impact will be double-edged. Consumers can expect to find themselves:

  • Less Creditworthy
  • More Vehicle Savings

On the one hand, deflation makes a person’s assets worth less, and yet their amount of debt remains constant — in this way, the burden of their debt can become greater under deflation. Consumers with greater debt are seen as less worthy of credit, meaning they will have a harder time getting approved for credit. More drivers will flock could be expected to flock toward buy here pay here car dealerships.

On the other hand, deflation is allowing consumers to save money on car purchases. According to Edmunds.com, if you account for inflation adjustments since 2002, the average American car buyer is now saving about $1500 on each vehicle they purchase compared to 8 years ago.  So although we, as consumers, have less purchasing power than before, the required financial outlay for automobile purchases has declined on the whole.

How to Identify an In-House Financing Car Dealer

We talk a lot about Buy Here Pay Here dealerships on this site, but the question wasn’t recently raised by one of our customers:  how can I tell if a car dealership offers in-house financing without having to call them or visit in person?

This is one of those deceptively simple questions that we have rarely thought to answer. But it’s a good one. After all, who of us wants to have to call every dealer in town to find out if they offer buy here pay here financing or not? None of us. So let’s look at how you can tell if a car lot in question extends in-house financing. The primary way to identify these dealers is through the marketing language they use in any number of channels, such as:

  • Radio
  • TV
  • Newspaper
  • Web
  • On-site

In all of these cases, a dealership which offers financing in-house will say things in their advertisements such as:

  • Buy Here and Pay Here!
  • We Finance!
  • We Tote the Note!
  • Your Job is Your Credit!
  • No Credit Checks!

Rarely do these dealerships actually use the term in-house financing. It’s much more common for them to use the aforementioned marketing slogans, or close variations thereof.

Cash in Deal (CID): Seeing BHPH Sales from the Dealer Side

The key to success for any BHPH dealership is adhering to their CID, or “Cash in Deal.” CID refers to the dealers risk or exposure in any sale. Basically, if a customer defaults on the very first payment, this is how much the dealer stands to lose. The formula for calculating Cash in Deal is as follows:

CID = ACV + reconditioning + warranty cost (optional) + tax and fees – down payment

Once you understand this figure as a customer, you have a much clearer window into how to negotiate with your dealer. Many Buy Here Pay Here car dealerships don’t require down payments. However, many of them dictate the amount of down payment required by a customer based on CID. For instance, a higher down payment could bring the CID of a vehicle down to an acceptable level for the dealer. Car dealers who begin a history of not sticking to their Cash in Deal can easily run themselves out of business. Read the following article for more information on Cash in Deal.

Funny BHPH TV Commercial

This is a funny TV commercial featuring Rev Rob of Apple Auto Sales, a Buy Here Pay Here dealership in Charlotte, NC. Rev Rob, a former zone manager with Ford Motor Company, now urges customers to “stick it to the man,” and get approved for financing despite bad credit.

Cast

  • Grandma: Rick Little
  • The Man: Jason Lawrence
  • Bruiser Bro #1: Mario Santoro
  • Bruiser Bro #2: Gary Earle