Auto Dealer Monthly, September 2014

In an oblique reference to unusual insurance policies the Times writers may have been referring to GAP or vendors single interest coverage both of which may be necessary to protect the customer and lienholder against a total loss resulting in negative equity SEPTEMBER 2014 AUTODEALERMONTHLY COM 31 panying fees for items such as the home inspection appraisal title insurance government fees and taxes private mortgage insurance and loan origination fees the borrower will likely pay another 5 minimum over the price of the home and be left with a mortgage of 200000 If the buyer were to then sell the home for what they paid they would be responsible for the realtors commission typically 7 and all the associated seller closing costs which would likely be at least 1 Th e 200000 sales price would net out at 184000 In this case the seller would have a payoff on the mortgage plus one months interest of roughly 200900 leaving them with a 16900 defi ciency Tell me again how the auto fi nance companies or dealers are crushing the subprime customer GETTING PERSONAL Th e articles next target was naturally the dealers themselves And why not Aft er all they wield tremendous power and force buyers to sit through an interminable wait while they seek fi nancing Th en they hit them with loans that far exceed the retail value and may have negative equity rolled in Th e bigger the size and rate of the loan the bigger the dealers profi t right Th e article singled out a particular salesperson who worked for an independent dealer in Queens He was indicted on grand larceny charges aft er he allegedly defrauded 23 car buyers on refi nancing schemes As I said in the beginning yes there are bad apples in our industry just as there are bad doctors lawyers engineers and journalists Regarding the other statements Huh Lets assume the authors gathered their data from lawsuits fi led against dealers Lawsuits fi led by dealers are much harder to come by In my 18 years as a dealer principal we seldom brought action against a customer We only called the lawyer when a customer refused to pay a debt and only as a last resort Anyone can pore through court records and fi nd suits and judgments against dealers Th at doesnt mean they were all guilty or that the rest of us are guilty by association What about the millions of very happy subprime customers who make their payments every month and refer their friends and family to their dealer As for the interminable waits and the wielding of tremendous power spare me As a dealer and a trainer along with everyone else working SF deals we know that subprime deals are not quick work Th e typical submittal subprime auto fi nance companies requires stips to prove who the people are where they live what they earn and so on More oft en than not they dont show up with all those documents in hand Also the proliferation of websites such as FakePayStubOnline com means that dealers and managers must be increasingly thorough in verifying every document And most transactions take place in the evening and on weekends so their places of business are oft en closed making verifi cation that much more diffi cult Th en comes the unusual insurance Well GAP is hardly unusual so lets move that out of that column Credit life and disability appears on few subprime loans these days but if I were borrowing it would be a great product Th e cost is based on someone almost half my age and in average health With cancer cervical fusion and cardiac arrest on my record it would be a steal Th e authors may also have been referring to vendors single interest coverage Th is is a limited policy that protects the lienholder in case the vehicle is damaged or destroyed and the borrowers insurance has lapsed or falls short Some very very deep subprime fi nance companies occasionally require this coverage and some might describe it as unusual despite its utility So lets give the authors the benefi t of the doubt here despite the fact that they didnt see fi t to extend the same courtesy to us Had this article appeared on the Times op ed page or even the cover of the National Enquirer I wouldnt be so sensitive But to give placement and credence to this piece with the plain intention of rattling the cage of the money markets and fi nancial institutions on Wall Street is just plain wrong It isnt criminal but it is dangerous at least in my opinion Lets discuss it at Industry Summit in Las Vegas If you are there be sure to stop me and say hello Until then great selling Greg Goebel is the CEO of DealerStrong and the industrys leading special finance trainer since 1989 He is an 18 year former dealer principal and a highly sought after speaker author and consultant GGoebel@ AutoDealerMonthly com ISTOCKPHOTO COM MILOSCIRKOVIC