Banks don’t knowing lend money to people that have real bad credit. What does a dealer accomplish by spending lots of money on advertising that brings people into his dealership with bad credit?
You may have heard of “purse seining”. It’s a method of commercial fishing that uses a huge net to encircle the fish. Tuna are commonly caught using this method but, in the process, thousands of other fish and marine animals are simultaneously trapped in this giant net. Porpoises, turtles, and other species of fish are scooped up along with the thousands of tuna that are caught in a single effort of purse seining. Environmental groups like Green Peace strongly oppose purse seining because so many “non-tuna” fish and sea mammals are killed in the process.
Nine out of ten respondents to ads like 100% Guaranteed Credit Approval, Credit Amnesty for All, All Credit Applications Accepted, Bad Credit is No Problem, No Credit Application Refused, or Bankruptcies and Foreclosures Are No Problem will be turned away. These people are being lied to and if they question the truth of the advertisement they will be told things like “We didn’t say we guaranteed we would accept your credit; we said your credit application”. Or, they might say, “We will approve your credit on this $30,000 new Jeep Wrangler if you will give us a $29,000 down payment.” They legally cover themselves in the fine print. This fine print is totally illegible in TV ads, undecipherable in radio ads, and requires a magnifying glass to read in newspaper ads. They are technically granting you credit approval even if the down payment they require is 99% of the price of the car.
Those nine out ten who are rudely rejected are the “fish” that are “accidentally on purpose” caught up in the giant net, the purse sein. About one out of ten who was lured into the dealerships by these lies does buy a car. But who are these ten percent, why do they respond, and how are they able to buy a car? They respond for the same reason the 90% who cannot get financed responded and these people are the reason the dealers continue to advertise like this. They fall into four categories.
The first category consists of those who merely “think” they have bad credit but really don’t. There are some people who have always had near perfect credit and when they get one or just a few credit blemishes, like one past 30 day payment, they assume that they have bad credit now. These people are thrilled when the dealer is able to obtain financing and often will agree to pay a higher or buy a car that they didn’t really want because they dealer had “done them a favor”.
The second category is the group that does have bad credit but also has ample cash. They would prefer to finance the car but can and will pay cash if they have to, and they quickly find out that they have to. This same person will put a much larger down payment down and finance such a small portion that the bank will approve the loan.
The third category is the group that is willing to falsify a credit application which is a federal crime. Often these kinds of people have visited several dealers and have learned exactly what facets of their credit caused them to be rejected. They will falsify these facets such as income being too low by fabricating 1040’s or paycheck stubs. Sometimes they will have someone with good credit front for them to buy the car. This is called a “straw purchase”.
The fourth category is the group who can be duped by the dealer into signing a credit application that the dealer has falsified. Now when I say “the dealer”, it is really the dealer’s agent, the Finance and Insurance Manager. The dealer may or may not what is going on. The buyer is just as guilty as the dealer if he signed the credit application but sometimes the Finance and Insurance Manager forges the signatures.
The 90% of the fish who are thrown back into the sea are forgotten about. Usually they aren’t even shown the courtesy of a phone call telling them that their credit was turned down. They leave the dealership with hope in their heart often calling repeatedly to find out if their loan has been approved. Usually their calls are ignored. This is the part that angers me the most. There are few things more sensitive than a person’s credit rating. How embarrassing and humiliating it must be to those poor souls who have already led their friends, neighbors, and relatives to believe their credit was approved and they bought and financed a car.
In many cases, they actually drive the car home but are called later demanding that the car be returned immediately because their credit was rejected. This practice is referred to as either the spot delivery or the yo-yo delivery. I wrote about this in a previous column, “Don’t Be Spotted or Yo-Yoed”.
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