dealerers taking risks with low down payment?

rick ortin

Hi im new to this forum and have read many useful info from yall. But I had a particular question in regards to f&i. From what I hear, there are small dealers out there that finance through banks but take little as $500 for a down payment  when the bank lets say the minimum down payment for a particular customer is $2000 down.

For example, a customer with bad credit is required by bank to put down $2000 for a $6500 vehicle. But many low income customers with bad credit don't have that kind of cash but say can only put 500-1000. which the dealer takes and says you can drive off. Not sure how dealer recoups the rest of the 1500 owned but maybe yall can tell me. Is there something i'm missing here? Is dealer making up loss from selling gap,warranty,etc? Do some dealers have special incentive type of deals with banks maybe for sending so many applications in per month? Also with dealer taking little as $500, doesnt the risk of repos increase since customers put such a low down payment? Any info regarding this is appreciated.

Matteo Batelli

If the customer has 1K and the vehicle requires 2K down. You can make a deferred down payment the difference. $500 down is for good credit customers. I never seen a sub-prime deal with 500$.

David Brown

If there is enough equity in the deal I personally have taken less of the down payment and wrote up a promissory note for the remaining balance. 

An example would be im selling an aged unit I have $5,500 into for $10,000. 

sales tax is $800 (8%), VSI is $125 & inspection is $21. Depending on which bank I am financing through, the fee could be from $245 to $1,200. Lets go with the worst case scenario. 

$10,000 - $800- $125 - $21 - $1,200 = $7,854 + $1,000 down payment = $3,354 up front profit which means I can afford to "take a gamble" on the remaining $1,000. 

 

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