$400 to $1,200—or more—and average close to 10 percent of the car’svalue.
Twenty-percent down payments are the norm on a “sub-sub” loan. Theterm of the loan is usually limited to 36 or 48 months, and there are often (^)
limits on how old and/or how many miles the vehicle can have on it.Westlake, for example, limits mileage to 80,000. Basically, the lender is (^)
expecting 40 percent or more of these loans to end in a repossession, sotheir goal is to make sure the amount they loan is less than the wholesale (^)
value of the car, so they can dump it at auction without losing much moneyif the buyer stops making their payments.
This big down payment is referred to as “collateralization” of the loan. Don’tforget, the bank will have earned an origination fee and 21-percent interest
for some period of time, even if the car is repossessed. The key here forthem is equity; if they have enough, they’ll approve most people. The
minimum is 10 percent down of the car’s clean trade-in Blue Book value(usually the lower of NADA or Kelly Blue Book prices). In this situation, they (^)
often want more; the rest is absorbed into bank fees, profit and rate markupfor the dealer.
“advance” (i.e. offer) more than 90 percent of trade-in value to theTIP: It is important to know that such lenders will often^
dealer, but the dealer does not have to disclose the approval amount.