Car Dealerships and the Truth Behind “Guaranteed Approvals”
Have you seen this sign before? I am sure you have. Everyone can say that they guarantee finance approvals but it’s the terms that make all the difference in the world. Traditional dealerships have access to multiple lenders from national banks, credit unions, and subprime lenders. The national banks like 5th 3rd and Chase require perfect credit and offer the best rates. Credit unions offer great rates as well but will make exceptions on the credit files of their members more frequently than national banks. Subprime lenders like Santander and Credit Acceptance will do a more credit challenged customer. Subprime lenders typically charge a large fee to the dealership which makes it harder to negotiate the best price as that is an added expense to the dealer. These three resources that traditional dealers use will cover the credit score ranges of 580-perfect. So what if your score is below the 580 and they advertised “guaranteed approval”
They can advertise this wording to get you in the door and if they can not, in fact, obtain an approval on you they will come back to you with terms that they know are impossible such as “great news we got you approved, we just need 50% down. At no point did they false advertise since they did tell you that you were approved. It will most likely be possible for them to get an approval on your deal if you put this much down as well. The reason for this is because it limits the banks risk for the loan. They may not want to loan you $15000 for a $16000 car but they would loan you $8000 for a $16000 car. Their decision would be based on profit as with any business. They need to decide how long they think you will keep the car, chances are with your credit score, you will not pay it off so they will have to sell it at auction. If you only owe $8000 on it and they can sell it for more they made money, plus the interest that you paid while you had it.
No one knows your credit as well as you do. When you hear these ads it is up to you to make a decision if you believe that you will be approved. If you call the dealership to ask they will tell you to come in and apply. It is their job, if they told you that they doubt they could help they may have just missed an opportunity to sell a car. The only way for them to be sure is to pull your credit and submit your information to all their lenders.
If you find yourself in a situation where you were denied at a local Ford dealership, then at Honda, and then again at Chevy you will most likely not have any luck at Toyota. They all have access to the same lenders. Now would be a great time to research reputable dealerships that offer a program similar to Buy Here Pay Here. When I say reputable I mean a dealership that offers a program that will help you instead of take advantage of your situation. Believe it or not they are out there. The new era of “Buy Here Pay Here” will offer you the chance to own a 1-5 year old vehicle with 30,000-60,000 miles at a low interest rate. They will also finance you through an actual finance company as well as report all of your payments to the credit bureau in order to reestablish your credit rating. Complete your due diligence prior to purchasing and feel free to contact me if you would like a list of dealers in your area.