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  • It may be easier than consumers think to get a car loan right now, according to one dealership in Florida
  • Finance director at Delray Mazda says there is automotive financing for consumers at any credit level
  • Consumers with bad credit should be prepared to give a bigger down payment and pay higher interest

Is it Really That Difficult to Get a Car Loan?

By Liz Opsitnik
Tuesday, Oct 13 2009 11:17

In the current economic downturn, all we hear in the media is that there’s no credit available and it’s nearly impossible to get a mortgage, auto loan or credit card. We see stories of lenders being afraid to take risks on consumers and we hear about a lack of money to lend to consumers.

Now that economists and even the Federal Reserve Chairman say things have hit bottom and are starting to get better, consumers want to know how difficult it is right now to get a car loan or lease.

“With enough money down, anyone can be approved, as long as they don’t lie on their application,” says Evan Moss, finance director at Delray Mazda in Delray Beach, Fla. “There are banks for everybody.”

Delray Mazda

Moss says they recently had a customer who didn’t get approved for a new car lease, but it was because she lied on her financing application.

“The customer lied on her application, was late on a past lease payment and tried to get into a higher payment on the new car,” Moss explains. “Her application was rejected.”

The days of no money down car loans and leases are definitely in the past. Because lenders want to lessen their risk, consumers who put money down on the vehicle look better to a lender. If they default, the lender hasn’t lost as much money as they would have if the consumer didn’t put any money down at all.

Cory Willis, finance manager at Delray Mazda, says that there is no minimum credit score that buyers need to get financed at their dealership. Buyers with bad credit can still get a car loan, but they will just pay a higher interest rate and need a bigger down payment, he says.

Moss agrees, saying that buyers with bad credit need to be prepared to pay more to take out a loan on a vehicle.

“The majority of our customers have beacon scores over 660,” Moss says. “I get approvals for customers with beacon scores under 550 75 percent of the time. Moreover, I have several special finance companies that will give almost anybody alive a loan. However, they do tend to charge very high interest rates.”

Moss says that even first-time car buyers can get approved for an auto loan or lease, if they meet the lender’s criteria.

“First-time buyers need to have at least a 20 percent down payment, because the bank will only finance an 80 percent LTV, or loan-to-value ratio,” he explains. “This means they can only borrow 80% of the vehicle’s price. First-time buyers also need proof of income, proof of residence and references.”

The reports that the longer-term auto loans have disappeared seems to be just a rumor.

“A 60-month auto loan is the average at our dealership,” Willis says. “The longest is a 96-month loan offered through Bay View Bank.”

With lenders stressing the importance of down payments, one would think that most consumers put down at least 20 percent toward their car. Moss says this isn’t the case.

“The average down payment from our customers is $1,000 to $1,500,” he says. “With a small down payment, they don’t realize how much negative equity they’re building.”

Mazda dealership lot

Moss says they are able to finance so many customers, even those with bad credit, because of their relationships with their lenders. He says they currently have about 14 lenders they work with, and two lenders for auto leases (Chase and U.S. Bank).

“The right relationship with the bank can help more customers get approved,” he explains. “At least 80 percent of our customers get approved through our captive finance company, Chase. The more applications you give them (Chase), the more they’ll take. This makes them more flexible.”

Willis says that certain aspects of auto financing are very regional and vary depending on where the dealership is located and who the customers are.

“We don’t sell a lot of used vehicles,” he says. “In this area, people want new, not used.”

Also, in this area, there are a lot of customers who prefer to pay cash for their vehicle, Willis explains.

“Last month, for example, 48 out of 174 vehicles sold were cash deals,” he says.

Advice For Car Shoppers

If you plan on buying a new or used vehicle in the near future, there are some things you should be aware of and some tips you should know before you head to the dealership.

“Don’t lie on your finance application,” Moss says, “especially if you have a blemish on your credit. Consumers need to be honest with the finance manager. There’s always a reason why they didn’t pay their bills. People just don’t stop paying their bills. Be honest and explain your situation to the finance manager.”

Moss explains that if there’s a special circumstance as to why a consumer’s credit isn’t perfect, and they are able to afford the vehicle, lenders will sometimes approve the consumer if they know what the situation is.

“Also, know how much money you make and be able to prove your income. Banks will let you borrow up to 15 percent of your gross income (before taxes) to buy a car. They’ll want a minimum of $1,800 to $2,200 monthly income.”

Moss says that if you’re an independent contractor and file taxes using a 1099, you’ll need bank statements to prove your income.

“If you expense everything to reduce your taxable income, this will hurt you when you apply for financing, because it looks like you make less money,” Moss says.

Willis says that buyers should know that the add-ons that are being offered to them when they are in the finance manager’s office are being offered at the same price to every customer.

“The warranty, for example, is the same price for everyone,” he explains. “You’re not getting ripped off. The price is non-negotiable. Look at all the options and purchase what works best for you.”

Moss says one of the most important tips for car shoppers is to only do business with people you feel comfortable with. He also says that shoppers should listen to the advice and suggestions of the finance manager.

“The finance guy knows more than you,” Moss says. “Listen to them. Consumers do this once every few years while we do this three or four times a day.”

Lastly, Moss says consumers should realize that if they need to improve their credit before they buy a car, they should do so because they will pay less in interest over the life of the auto loan or lease.

“If you have good credit, you can get whatever you want in this world,” he says.


Copyright © 2009 AutoLoanDaily.com. All rights reserved. This material may not be published, rewritten or redistributed without permission.

Photos copyright © 2009 AutoLoanDaily.com. All rights reserved.

Confused or unsure about some of the car loan terms used in the article? Click here for our Auto Loan Glossary.

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4 comments on this story so far.

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Comment By: Clark on Tue, Oct 13 2009 at 12:28 PM
I guess I'm rare then. I was a first time car buyer with no money down and got approved. There truly is a lender for everyone. I think essentially it's more fear from the consumer getting into a new loan with the job market uncertainty still out there. It's almost as if the customer has the same risk fears as the lenders at the moment.
Comment By: Robbie Ingram on Wed, Oct 14 2009 at 11:28 AM
Great advise Mr. Willis. I might need to talk to my husband about what you are saying! Keep up the great work. Robbie Ingram Mt. Juliet, TN
Comment By: Philip Pane on Thu, Oct 15 2009 at 10:35 AM
I'm not a fan of the finance manager. Most F&I; departments try their best to pressure the consumer (after keeping them waiting for more than an hour) into purchasing a bunch of additional products and services that are not necessary or even competitively priced.
The F&I; person's job is to up-sell the consumer and they use high pressure tactics such as "you want to be sure to protect your major investment" to push the sale. What is being sold is highly marked up to add SIGNIFCANT margin to the overall transaction. The reality is that the vast majority of products being pushed at the F&I; table do little to actually protect your depreciating investment.
That extended warranty typically does not cover the big ticket repair items which are most likely to need repair as your vehicle ages. The extended warranty offered by the dealership is no better than what any consumer can shop around for and purchase elsewhere at a more competitive price. The dealer extended warranty is never as comprehensive as the original factory warranty, but most consumers think that it is because it's sold through the dealership.
The F&I; guy will also explain at the very top of his conversation that you should expect a call from the dealerships hired call center to survey your experience at the dealership. The F&I; person will then go on to say that everything they are about to present to you will be confirmed as having been offered to you at the time you are contacted by the call center representative. This is an elaborate scheme intended to shift the impression that the F&I; person is pressuring you into purchasing additional products and services as most consumer will now feel they are simply doing their job and that their livelihood actually depends on your evaluation of the their presentation skills in explaining everything in their sales kit.Yeah, right.
Comment By: Evan Moss on Thu, Oct 15 2009 at 12:32 PM
Is sounds like Philip has had some poor experiences in auto dealrships. Let me first say that only the factory can offer a Warranty on a car, What dealerships offer are "service contracts". The service contract we offer is more comprehensive then the maufactor's. For example, rental car reimburstment is included for any covered component. A service rental is not offered by any factory warranty. Service contracts also give you roadside assistance for the term, trip interruption, and on ours at DELRAY MAZDA even include road hazzard!! Moreover they are completly transferable and renewable. If you are going to have a car for more then 3 years, why not be covered? The factory gives you the first 3 years, why not protect the rest? Philip brings up a good point, know your coverages! Unfortunitly its not your investment your protecting, its you money. make sure your service contract is an "exclusionary" contract, meaning it only excludes certain items, NOT an inclusionary contract, which as the name says only includes certain parts. Ask your finance manager which one he is offering you, and know the diffrence. Lastly, in the state of Florida, all service agreement prices are filed with the state and can not be changed. If the dealership offers you one for $1200 thats the price, I would love to be able to offer my customers it at a discount, but that would be in violation of florida statue's. If Philip or any other readers of your page have any other questions I can be contacted at emoss@metromotorgroup.com

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