Inequity/Negative equity of Customer trade-ins is an every day occurrence in Dealerships that I see today. I am starting to see deals stacking higher in F&I offices on rehashes particularly around the amount financed and term.

Is this a trend being seen nationwide by others where Dealers are asking for more money and longer terms and being rejected?

Are we heading for an inequity/negative equity perfect storm? If we keep pushing longer terms for a need of a lower payment, If used car values continue to decrease due to glut of used cars, and Lenders tighten buying conditions of new loans, What Happens to Sales?

Leases have been the biggest hedge to inequity, and put the customer in a new position usually 36 to 42 months down the road. If Leases dry up what do Dealers and Customers do?

On retail if you maximize a retail deal and carry amount financed to 120% or higher and go extended terms how are you helping the customer for future sales in 36 or 42 months? Today's data that I look at shows 20% of deals are over 6% APR. and 72 months or higher in term. If a Dealer loses 20% or more amount financed or 20% of their sales will they survive today?

I may be in the only business that hedges against inequity/negative equity that I know of right now in retail sales, biweekly budgetary payments. On average we see $2,000 to $3,000 difference in payoff at 42 months versus an institutional loan.

Dealers need to consider educating Customers and help themselves by hedging against inequity/negative equity, or their opportunities may dry up for future sales at a rate that is unsustainable. If you can think of another alternative I am open to learning from others.

Guy Manasse

First Equity Payment