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Old 02-28-2008, 10:38 AM   #1
XDCX
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Default 96 Month Long Loan Terms

I read a report that according to the J.D. Power and Associates' Power Information Network that the most common loan term is now 72 - 80 months.

What caught my attention was a quote from a Chrysler/Jeep Dealer in Texas that reported he has access to 96 month financing but doesn't write anything over 84 months.

I sure hope those 72 - 96 month customers have GAP coverage.

Are you seeing a shift toward longer term financing? Does your store limit the maximum term of the loan?

Here's a link to the new report: http://www.detnews.com/apps/pbcs.dll...802230333/1148
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Old 02-28-2008, 04:50 PM   #2
SHACOS
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I believe US Bank now has a 108 month loan (don't quote me). I seem to remember seeing something about that, but I can't find the article anywhere now.

I'm surprised the Texas dealer doesn't use the 96 month financing given all the negative equity Texas consumers seem to have.
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Old 02-28-2008, 06:02 PM   #3
okcarl
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We are looking to the future and limiting the terms we write to 72 mos. Even that takes our customers out of the market for too long. We have a strong push to lease our customers, our sales people are trained to go over leasing with everyone and a lease is penciled from the desk on every deal. I think many dealers feel that they will only see a customer once so you might as well get everything you can out of them. We have a very strong referral program and look to see our customers over and over.

Carl
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Old 02-28-2008, 07:37 PM   #4
XDCX
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Originally Posted by okcarl View Post
We are looking to the future and limiting the terms we write to 72 mos. Even that takes our customers out of the market for too long. We have a strong push to lease our customers, our sales people are trained to go over leasing with everyone and a lease is penciled from the desk on every deal. I think many dealers feel that they will only see a customer once so you might as well get everything you can out of them. We have a very strong referral program and look to see our customers over and over.

Carl
Congratulations - that takes a great deal of discipline but there's no question that limiting the term or leasing is ultimately in the customer's best interest.

That said, there aren't too many Dealers willing to take that position - especially now when the business climate is tough.
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Old 02-28-2008, 07:47 PM   #5
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Quote:
Originally Posted by SHACOS View Post
I believe US Bank now has a 108 month loan (don't quote me). I seem to remember seeing something about that, but I can't find the article anywhere now.

I'm surprised the Texas dealer doesn't use the 96 month financing given all the negative equity Texas consumers seem to have.
Can you imagine a nine year loan on a car/truck - that's insane. The customer would probably be in a negative equity position for eight years.

That reminds me of a story that happened at a Seattle dealership about 3 years ago. A few salesman started telling their customers that were too buried to trade that they would make arrangements to have the customer's vehicle stolen so the customer could file a GAP claim and erase the negative equity.

The illegal activity ground to a halt when one of the operatives tried to "fence" one of the stolen vehicles to an undercover police officer.
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Old 02-29-2008, 03:44 PM   #6
Rod Barajas
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Exclamation Damn! 96 MONTHS!

This the major reason I left being a Desk Guy at Ford after 3 years...I noticed at first that it was 48 months, then 60, then 72 and when I started writing 84 months contracts I saw the writing on the wall...Here at BMW the longest I roll on a New vehicle is a 36 Month Lease....With 24 Months being the norm...On CPO's I average around 60 months...The easier it is to get people back in my office is the best option in my humble opinion.
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Old 03-01-2008, 11:04 AM   #7
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Originally Posted by Rod Barajas View Post
This the major reason I left being a Desk Guy at Ford after 3 years...I noticed at first that it was 48 months, then 60, then 72 and when I started writing 84 months contracts I saw the writing on the wall...Here at BMW the longest I roll on a New vehicle is a 36 Month Lease....With 24 Months being the norm...On CPO's I average around 60 months...The easier it is to get people back in my office is the best option in my humble opinion.
That's a great observation and builds on Carl's point mentioned above.

These long term contracts are limiting the number of people that have the ability to purchase a new vehicle. How much negative equity can we bury in the next vehicle before the customer's maxed out?

Leasing is a great option - a 24 Month rotation would be awesome.
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Old 03-02-2008, 09:40 AM   #8
Bubba Louie
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I can't count the # of customers I have "CONVERTED" to 72 month financing from 75, 78, 84 or 96 month terms when they come back to our offices. The largest problem I have seen is the "greed" factor. Payment closes as we all know are essentially payment packing, but in our area to avoid that they send deals that have 145-205% front ends, with extended terms and low rates. But with Bayview as an example, you can't get carry, term and rate on ANY customer. The managers see 780 Beacon...automatically 6.95 on 158% carry @ 96 months. Easy deal. In corporate stores on the management side we are held accountable for the grosses, and they are driving the terms through the roof. And then to supplement the car count, we have the $2000/185000 mile whoopties they "retail" to small car dealers to pad their year over year goals.......one more car than last year to reach their bonus levels you know. The only dept in the dealership that this nonsense costs is F&I. Get some of that!
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Old 03-03-2008, 08:49 AM   #9
XDCX
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Quote:
Originally Posted by Bubba Louie View Post
I can't count the # of customers I have "CONVERTED" to 72 month financing from 75, 78, 84 or 96 month terms when they come back to our offices. The largest problem I have seen is the "greed" factor. Payment closes as we all know are essentially payment packing, but in our area to avoid that they send deals that have 145-205% front ends, with extended terms and low rates. But with Bayview as an example, you can't get carry, term and rate on ANY customer. The managers see 780 Beacon...automatically 6.95 on 158% carry @ 96 months. Easy deal. In corporate stores on the management side we are held accountable for the grosses, and they are driving the terms through the roof. And then to supplement the car count, we have the $2000/185000 mile whoopties they "retail" to small car dealers to pad their year over year goals.......one more car than last year to reach their bonus levels you know. The only dept in the dealership that this nonsense costs is F&I. Get some of that!
I imagine that what you describe happens in most stores - extending term to build gross.

I smiled when I read about retailing the "whoopties" a wholesaler to meet a unit bonus - that game has been played for generations.

Concerning term, sooner or later the insanity has to come to an end - how long can you stretch a payment on a depreciating asset?
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