Used Cars

[pjdevereaux2003]

I am curious why do new car dealers generally leave the low priced used car market to independent dealers? I used to be a lender with a large national finance company, specializing in lending to buy-here, pay-here dealers. We had several large dealer chains that were making an absolutely killing in this market. I had one client with an $8 million portfolio of loans netting $2 million+ every year.

Why don't more dealers pursue this?

[ADP TM]

Most dealers have the wrong idea about low line used cars. Also, having worked at a lender, you know finance companies typically dont loan less than $5k on used vehicles. Plus the problem of mileage and condition. (Read: LTV) Most are high mile later model vehicles, with options. Not rental cars. Lenders dont know what their worth. And they typically have issues that the dealer believes should be addressed, for liabilities sake. You must have a good flow of new car trade ins, say, as a large volume franchised dealer. These are not cars you can go buy at an auction and run through the shop!
[This message has been edited by ADP TM (edited 03-09-2006).]

[This message has been edited by ADP TM (edited 03-09-2006).]

[texaslp]

The biggest reason is the consumers expectations. When buying from a new car dealer-they seem to forget that they are buying a used car-no matter how old it is, what the mileage is and regardless of the price. The headaches(and expense) of comebacks is the biggest problem.

[pjdevereaux2003]

Interesting comment about the comebacks. In our store more than half the unit volume came from our Economy Corner which had older, higher mileage stuff but that had passed state inspection. All cash, no financing and strictly AS IS. We never had a problem with these customers. It was the customer who bought a front line used car but wanted to save a few bucks so they bought it as is, which of course means "as is except for when something goes wrong."

[texaslp]

The low-line used car situation might depend on your location-I was in New Orleans when we had a lot of problems with people not understanding what "as is" or "used" car meant-but then many of them didn't think it was a big deal if their check bounced either.