You are about to learn little known insider secrets about car dealerships and bad credit car loans.
If you've been declined for a bad credit car loan, carefully consider the information in this article, in it's entirety and I assure you it will open your mind to facts that you never thought of about dealerships and bad credit auto financing.
Good People Get Turned Down...
Dealers decline people with bad credit away everyday without telling them where they can go to get approved for a bad credit car loan, outside of a car dealership.
Why?
Car dealerships mark up interest rates and make thousands on financing contracts and especially, bad credit car loans. Frequently, a dealer will advertise a car being sold at invoice. You see it on the TV and hear it on the radio, all the time. This is because the dealer can still make loads of money on the financing contract. I'm not referring to in-house financing or buy here pay here car lots... I'm talking about regular dealerships that submit your credit application to outside lenders.
They make money on the contract that they get you to sign.
It doesn't matter what company they get you approved with. They will make money on the loan contract. If they can't make money on the loan contract, guess what... you're turned down for a car loan. What this means for you is, if a car dealership submits your credit application to a loan company and gets you approved, and the dealer can make money on the contract, you will NOT be offered the interest rate that you are approved for. You will be told you've got to pay more, especially on a bad credit car loan.
This is 100% rock solid truth and most people are shocked to discover this...
If you're auto loan is approved at 9%, the dealer may very likely tell you that you are approved at 11%, 12%, 13%, 14% or much more. Dealers call it adding "points" which is an elegant way of saying, "I'm jacking up this customer's interest rate!". Bad credit auto loans frequently have several "points" added by the dealer. The dealer can get away with it because people with bad credit are generally desperate to just "get approved" and will sign just about anything.
Getting approved is a carrot that the dealer holds in front of you and you're supposed to be the rabbit running for it. Asking you about all of the blemishes on your credit report is to "remind you" that you'll have a hard time getting approved. It makes you run for the "approval" carrot. Run hard and you'll get nailed with a higher interest rate than you would have had to pay, had you been smart and got your financing elsewhere. You see, the difference between the interest rate you are approved at (dealer cost) and what interest rate you are told you'll have to pay (contract selling price), is nothing more than PROFIT for the dealership.
This results in $40, $50, $100, $150, $200 dollar a month jacked up car payments for you!
Dealers call the money made on adding "points" (jacking up interest rates), "backend profit". The selling price of the car above cost is called "frontend profit". You can negotiate the price of the car down to cost. Dealers advertise new cars at invoice all the time.
Why?
You'll still make the dealer thousands when you get into the finance manager's office to sign the contract. Thousands of dollars. In most cases, dealers make more money on new car "finance" than they do on sale price. If a good credit customer walks in with a Credit Union or Bank Draft to buy a car, the finance manager will try to talk the customer into using the financing the dealer can get them. Dealers will try to talk cash paying customers into financing the car. It's all about "backend" profit. It's where dealers make their easiest money... on loan contracts.
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