Indirect Auto Lending

parking lot, cars, vehicles-3339509.jpg

Indirect Auto Lending
Posted by: Arnold Soto Jun 3 2004, 09:36 AM
I am looking for software to calculate dealer reserve for indirect auto lending. Can someone please point me in the right direction?
Posted by: loanuniverse Jun 3 2004, 05:40 PM

This is not my area of expertise, but it gives me a chance to speculate and being that I like to do that here it goes.

First, for the benefit of those not familiar with the term, my understanding of “dealer reserve” in indirect auto financing is the difference between what the consumer pays and what the actual lender charges. For example, XYZ lender might be willing to finance someone with a 650 credit score at 6.00% for 48 months, but the dealer’s finance guy negotiates a loan with a 8.00% interest rateĀ {this is the reason why is a good thing to go into the negotiation with a pre approval from a lender as leverage}. In this example, the lender will be willing to pay more for this loan and the dealer will get a premium when selling it to the lender. And yes, it is unfortunately legal.

Now for my feedback to your question:

I think this is too specialized an area to find an off the shelf solution. If I were in your shoes, I would contact my lender to see if they have something that they provide to the dealers that they buy their paper from.

However, I seriously suspect that you are going to have to end up building your own solution with the help of a spreadsheet. The ideal resolution would create a spreadsheet that would import the matrix from the lender and calculate the “dealer reserve” from the amount that is being charged to the consumer. This will probably not work if you are dealing with several lenders, and just thinking of doing something like that gives me a headache.

I think that the best way to do it would be to do it in a case by case basis, and just input the numbers in a couple of places. Anyway, I am sure that the premium paid is changing all the time due to fluctuations in the interest rates, so a couple of formulas in the spreadsheet template should do the trick.

Good luck and hope this helps.
Author: Commercial Loan Underwriter