Car manufacturer dealerships have the capability to offer financing backed by the company. This is not always the case for small dealerships that are not franchised. There may be manufacturer financing for the sale of new cars to qualified buyers, but financing from other lenders is limited. Pre-owned late model vehicles, older cars and trucks, and program cars have already depreciated to the point where re-sale value is greatly diminished.
If a buyer defaults on a loan, the lender may not break even from a repossession. The risks are not attractive to traditional lenders. A buyer with no credit history, less than stellar credit, or issues in the past only adds to the risks even at higher interest rates for the loans. Selling vehicles can be a problem for dealerships that cannot independently finance customers.
An indirect automobile financing company, Consumer Portfolio Services, has been working with dealerships to sell late model used vehicles to customers who may not otherwise qualify for financing. The company approves financing on a case by case basis and then purchases the contracts from the dealership. Established in 1991, the company allows dealership owners to attract new customers via first-time buyers and credit builder programs and build relationships with customers while selling more cars and trucks.
The opportunity to offer financing to a wider range of customers is becoming more and more relevant because most people today have had an issue with credit scores in the past. That college student who was irresponsible with credit cards six years age is now a young professional who requires reliable transportation to his new job. The young woman who went into debt over a bad relationship four years ago is now a married mother of two who needs a minivan.
Most people learn from mistakes and change behavior, so there is no need for them to keep paying for past mistakes. Transportation is an essential need in some locations rather than a convenient luxury. Rural areas often lack public transportation, working second or third shift may not align with the bus schedules, and not everyone lives near a coworker to carpool and split the cost of gas.