New Car Dealers are intentionally interfering with Subprime finance contracts and BHPH Loans by selling cars to individuals currently driving a financed automobile and NOT taking the car in trade

A typical Monday morning at the dealership. This time there's two of them. Good running cars sitting in front of the building with no plates. Keys tossed in our payment drop box with no notes or explanations. Cars that belong to good customers, with accounts in good standing and excellent payment histories. Calls to these customers usually go unanswered...at least for awhile. Reference calls and credit checks reveal that these customers were shopping for new cars.

Eventually we get most of these customers on the phone and the story is always something along the lines of. "I wanted a new car but the dealer told me I owed too much on my trade." 

"The dealer (or salesperson) told me to drop it off to you."

"They didn't tell me it would be a repo!"

"I just wanted a new car and my credit score is 650 now."

"You were charging me too much for a 10 year old car."

These are all typical responses when we do finally get these customers on the phone. These occurrences are not isolated to our dealership or our area. This is a widespread and growing problem that subprime finance companies and BHPH's are facing in the current economy. 

Getting a new car loan is easy. Do you have a 600 score and decent payment history on your current car loan? Approved! Major players in auto loans including large banks and captives are buying deals and NOT stipulating trades of open autos. Some dealers will call for a payoff, try to negotiate for a settlement, and then threaten us "This customer will just drop his car off to you if you don't lower his payoff by 50%".  This puts me in a tough position. Do I lower payoffs and take charge off because I'm being bullied by the New Car Guys? Do I stand firm and take more cars back hurting us and the customer? 

My current plan of attack in these situations has been to demand to speak to my customer when the payoff call comes in. The message I want to convey  is simple:

• Do not allow this dealership to sell you a car without taking your trade
• You are getting approved for a new car BECAUSE you paid me as agreed and raised your credit score
• Dropping your car off to me now WILL be a repo and WILL affect your credit. You might get a car now, but at what cost to your future?
• I will give you a small break on your payoff but if this dealer doesn't get you in a car, come see me and I will try to help you

If I'm lucky, my customer gets the message. If their deal doesn't get done, I can send them to a dealer that I trust and help them get done. If their deal does get done I get a nearly full payoff on the account and the customer is reaping the rewards of their improved credit.

The big problem is the other dealers. The ones that don't call. The first indication I have that my customer was trying to buy a new car is when their vehicle shows up on my lot, no plates. The customer more often than not doesn't believe me when I tell them that this will appear as a repo on their credit. Their credit score that they have spent the last year or two rebuilding will take a huge hit and this will affect their future buying power. 

Some dealers are more malicious than others. Sometimes it comes down to individual salespeople. Grizzled veterans knowingly reaping the rewards of the current lending economy to make an extra buck now, knowing that these customers will never be repeats because their credit will be worse in three years than it is now.

This is a serious issue. I have spent hours lamenting over the fact that our customer base has been reduced by the willingness of lenders to give large new car loans to customers with marginal credit histories. Now, not only have I lost the upper tier of my customer base, but some of the best customers that I do have on the books are being led to believe that a new car purchase is a wise decision regardless of the future effects. 

What can we (subprime/BHPH) industry) do to combat this growing problem? Do we just wait until the portfolios of the large lenders start to tank and they turn off the approval faucet? Cease and desist letters have gone unanswered and unheeded. Are lawsuits really necessary here?