Five years ago ‘financing’ was like a cuss word to me. I had spent the prior two years traveling around the country for an auto finance company liquidating 10,000+ repos annually. Seeing repossessed Ford Rangers with $600+ monthly payments and Kias given to anyone with a pulse made me very wary of that world. I stuck with cash cars and made a great worry free living doing that. That was until October 2008 when the cash customer literally disappeared from my landscape.
Since that time at least half my customers have been financed by yours truly. $500 to $700 down, $50 to $60 a week, for a 12 to 15 month period is typical for most of what I offer. I do have a few luxury vehicles that require longer loan periods. But typically my customers are simply looking for comfortable and worry-free A to B transportation. There are a lot of things I do to keep those folks happy… and honest.
The first is to catch little problems before they become big problems. On the payment front, I offer folks the opportunity to make their payment directly to a bank instead of at the lot. The bank that I use has long hours on Saturdays and is even open on Sundays from 12:30 to 4:00 P.M. The customers come by. Make their payment. Get a receipt with the company name showing the day, time and amount. Then call me so that I can confirm the deposit. If someone hasn’t contacted me by 3:00 PM on Saturday they will hear from me… in a decent and friendly way… and the process becomes far less problematic.
I do not charge late fees. Ever. I’ve always considered the terms usurious and surprisingly, I’ve found that you can get a far better return from referrals and the general willingness to work with people in their tight periods. There are some customers who have given me a five figure return through the referrals. Most others simply tell the truth. A few others tell convenient lies. It’s not a perfect world and in times of difficulty you also have to be willing to ‘pull the trigger’ and get your car back.
The trigger depends on any combination of three things. Do they pay? Do they tell you the truth? Do they return your calls? If #1 doesn’t happen, then either #2 or #3 will result in a repo. Some folks need the shock value of seeing the car gone before they are scared straight into paying. I’ve had people who mysteriously lose their cell phone come up with several hundred in cash within 24 hours. People who think by moving they can’t be traced. Kids who think they can keep on milking their parents for all the payments. Even con artists and drug runners who think they are beyond the reach of anyone. A $100 transponder can go a very long way to getting your asset back. And there’s one other thing…
I always pay a premium for experience. This comes to advertising, repairs, and most especially repos. My repo guy also happens to be a preacher at a nearby church (no I’m not making this up) and his powers of persuasion and ability to figure out people is amazing. I pay him a bit more than other folks typically do, and often times I not only get the car back, I get the key and a cleaned out interior as well. Most places pay a repo guy in 30 days. The big companies wait until 90 days or never. He gets it on the very day and I go out of my way to help him with anything he needs. In the new economy, it’s the collectors and the protectors that can save your skin.
A shotgun toting man of the cloth can be quite convincing.
With polices like that, Sir, you shall never be for want of customers. And if life smacks you upside the head, you won’t be lacking friends. It’s amazing how many business men don’t see the light of acting with long term interests of yourself and customers in mind instead of acting for short term gain.
“There are a lot of things I do to keep those folks happy… and honest.” i.e. Sexual favors. =O
“If someone hasn’t contacted me by 3:00 PM on Saturday they will hear from me…” He pop their knee cap with his pistol whipping skills.
“$500 to $700 down, $50 to $60 a week, for a 12 to 15 month period is typical for most of what I offer.” What kind of cars can you get with this payment? Is it mostly used cars?
I remember talking in the 1990s to a former manager of a subprime car dealership. He was going back a few years at that time, and he said his formula for pricing a car was “two times two plus two.” Translated, that means take a car with an actual cash value of two thousand dollars, double that to $4,000, then add $2000 to get a final financed price of $6000.00. Of course, then they financed the car at 21% interest.
Considering that it is almost 20 years later, Steven Lang’s cars seem much better priced.
Mr. Lang,
A while back you said you were starting to rebuild inventory. How has that bet worked out? The powers that be keep saying that the recovery is imminent but the jobs numbers don’t bear that out.
Thanks,
Detroit
Back in the 60s I worked as a rent collector. My boss was the classiest, most charming guy I have ever met. Looked like the Don Draper character on Mad Men. Women went ga-ga over him. He was previously in the used car business.
He told me to jump on the late payers right away and bring any that gave me trouble to him. Invariably he collected even the toughest accounts in a few days. People literally ran to the office to pay him in cash.
Wow, I said to myself. This is the greatest businessman I have ever seen. I have to find out how he does it. So I asked him.
“Easy, he said, I know a guy who breaks legs for $50!”
Which “$100 transponder” do you use?
Thanks in advance.
“Seeing repossessed Ford Rangers with $600+ monthly payments and Kias given to anyone with a pulse made me very wary of that world.”
Years back I supervised poeple that made less than half of what I did with monthly car payments over twice the largest payment I ever made. People make decisions and one indivividual that comes to mind ended up getting his Xterra reposssed. Hopefully the days of easy money and reckless lending are gone for good as it’s better for us all. My adage is and will always be that the best car is always the one that is payed for. More money to stick into my boats!….LOL
Before wising up and going to college I worked for a printing company, average salary range $8-$10/hour (with a few exceptions, I was one b/c I learned how to do operate every piece of machinery in the place, to keep from sitting in one place pushing 2 buttons all day and my pay was $12/hour), if you didn’t like it, you were easily replaced (this company also paid 100% of health insurance and matched 100% upto 15% on 401k’s, most of the people didn’t understand how to factor this into thier income). When the new camero (90’s) came out, week after week a new one pulled into the parking lot (mostly V8’s/SS) and I couldn’t for the life of my understand how they were paying for this car. And then after a few months where once there was cameros there were cavalers. The dealers knew what they were doing, those cars were so popular at first that they could still sell close for retail after return while the poor suckers driving cavalers (72 month financing I’m sure) were still paying for the cameros.
It shall be retitled:”Sopranos & Repo Man”.
I have to give you credit for being upfront about the business you are in.
And that’s about it!
So the down payment is pretty close to 60-70% of the cars value.
If you even get a few payments the car is paid for but the buyer just keeps paying..and paying…and paying.
How much….three to four times what the car is worth and if they miss a couple of payments….well they should have known better????
You repo the car and sell it again…..
I have always enjoyed you sharing your insight into the auction business but I cant sit here and read about your ‘tote the note’exploits without a cringe…
the rich get richer and the poor get…
Are you serious? If you are then you really need to learn about:
1. Business in general
2. The car business in particular
3. Learn the meanings of value and worth
I don’t see how his comment shows or implies that he doesn’t know meanings of value and worth.
oldyak –
So you are saying he should what, not mark up the cars he sells? Or perhaps not repo the car of someone who breaks the contract and stops paying for it? Or maybe it would be better to just not offer car loans to anyone at all? In the first two situations he goes out of business fast, and can’t support himself or family, which doesn’t help anyone.
As far as the third goes, one of the first things you have to learn in sales is that you are not your customer’s financial advisor. The customer has the right to spend their money as they please. There are some basic checks and balances sure, you don’t offer a $500 a month loan to someone who makes $1500 a month and has a $700 per month rent payment, basic math and common sense shows you that is going to end poorly. However, when you have someone who makes $3,000 per month, and maybe has some negative equity they want to roll into a new car loan that’s going to give them a $600 payment on a Ranger, well, if they really want that Ranger who are you to say no?
I recently had a customer who drives over 20,000 miles a year, was way upside down on his current truck loan due to the mileage he put on it and the fact he rolled some negative equity into it, and wanted to buy a new $45,000 truck. He had a payment in mind that no one could hit in a short or medium term loan like he would need with the miles he piles on, and I blew him off, telling him to come back when he paid his truck down some more. He came back a couple weeks later wanting to try again with a tiny bit of money down, same sort of situation, and I ran the numbers and showed it really wasn’t in his best interests. Finally, the third time he came by he told me he wanted to take out a 84 month (7 year) loan and didn’t mind if his payments went up. At that point, I realized that this guy, regardless of common sense, was going to buy a new truck from someone, so we did the deal, and he left with a close to $800 payment on a 7 year note for a truck that he is going to want to get out of in three years just from the miles he drives, but in the end, it’s the customer’s choice – people are going to do what they are going to do. The guy makes good money, he can afford the payment, he’s just at the end of his rope when it comes to buying all the bells and whistles and trading out when the miles pile up. I didn’t take advantage of him, but business is business, if someone wants to do something dumb, and they have the means to do it, then c’est la vie, it’s a free country.
And that is the key! People are going to do what they are going to do, regardless…
The key is to avoid the trap of credit. Buy what you can afford, and you will be in a better situation. I know a whole lot of people that own their cars outright and repair them. No credit, no interest, no lenders, no repo, no worries.
The key is to avoid the trap of credit. I know lots of people that own their cars outright. No payments. No interest. No repo worries. Cheaper insurance. A better situation IMHO.
While buying outright has benefits, so does credit. Insurance being cheaper isn’t that cut and dry, yes, if you own the car outright you only need liability, but if it gets totaled, you get a big fat nothing back.
If you buy within your means, you shouldn’t have repo worries.
When purchasing a new car, and sometimes when purchasing a used car for a short finance term, you can get finance rates that are lower than the rate of inflation or the potential return of your money in an investment. In those cases, financing is actually the more fiscally sound proposition.
Finally, you need to borrow money to build credit, and you need to have solid credit to get by in today’s world. What happens when you go to get a mortgage and you have no credit history? Right now buying a home is a no-brainer, interest rates and real estate prices have never been lower. Anyone who is in a position to buy now should absolutely do it, because in five years, maybe ten years max, after the markets and economy have fully recovered, you will be able to sell it for at least half again over what you paid for it, much more than offsetting any interest costs.
Finally, paying for a car in cash means saving up for a long long time for most people, but most people need a car to get to work to earn money to do the saving. Yes, you could probably buy a beater for a few hundred to get by, but that is hardly pleasant, and life comes down to more than numbers in a table. I’m willing to spend more than I absolutely have to over the long run to have a vehicle I actually enjoy driving right now, and most people would feel the same.
Credit and interest can cause debt. Also, all the people I know that paid for their cars outright were able to avoid loans. These are nice cars that serve their purpose and are not beaters. Credit is a necessary evil to be sure, but I have seen people do fine without it at least when it comes to car purchases.
I know a guy who seems to constantly live on the edge where car payments are concerned. Over the years he’s had vehicle after vehicle repoed or the bank/finance company has threatened to do it. Somehow, he kept getting loans. I don’t understand how. His last one was for a Chrysler 300 SRT8 with about 8K miles on it. It was a very nice car. Was, not for long though. His payments and insurance were insanely high as the F150 he traded was worth about $500 after the payoff. Almost immediately, he started having trouble making them, and started hitting up friends who actually did help him out. Finally, he got behind, and they came and took it from the parking lot of where he worked. He got it back the first time by hitting up his parents and sister for about $1200 each, and then about six months later, they took it again, and it was eventually auctioned off. A friend and I went to the auction, my friend was thinking about buying it, but it was trashed, inside and out, and he passed on it.
Right now, he’s driving, and complaining about, his mom’s old Camry, with 200K on it, and a caved in passenger door. He has no car payment for the first time in about 30 years, but is already planning on buying either an F150, or a Ram 1500. New, of course. If the finance companies have any sense, they will just tell him NO, and make him pay cash for whatever he wants to get. But I bet one of them bites and he gets what he wants. Someone gave him a mortgage about 5 years ago too. Somehow, he hasn’t lost the house yet. The bank probably would do almost anything to keep from taking it back at this point.