Thread: Financing a car

How much do you have into it? What are you going to do when he stops paying?

i have $8000 in it and i found out it cost $300 to repo the car.. i would require him to carry full coverage insurance and will be the lien holder on the title

Originally Posted by Runum

How much do you have into it? What are you going to do when he stops paying?

YOu Hire... The REPO TEAM


[ame=http://www.youtube.com/watch?v=xXMHdI8xt5Y]YouTube - Repo Wars[/ame]


[ame]http://www.youtube.com/watch?v=SN3K9OIDTLE&feature=PlayList&p=CADD3FC7295 522A3&index=17[/ame]

So 375 x 30 = 9750. 9750-8000 = 1750. It will take you 2 1/2 years to make $1750? Your profit is $700 a year. That's about 9% return annually. High risk of him trashing the car and stopping payments. Low return. Not my kind of deal. You have too much into the car.

oops, forgot the $1000 down. Now it looks better. Profit of $2750 over 2.5 years. I still think it's too much risk for the return. Just my taste.

what do you think of him going through bankruptcy.. i dunno much about how bankruptcies work, but would he be able to buy the car then sign bankruptcy and stop paying?

That is going to depend on state laws. As I understand it, in Texas you are allowed to keep your house and a car to get to work with. I would think you would have to continue to make the payments on the house and car after the bankruptcy. Not an attorney, just my opinion.

Originally Posted by mftps

here is the deal im currently working on..

selling a car for $9000 with $1000/down and $325/mo for 30 months.. i have a buyer who has a bankruptcy in progress and wants to buy this.. he said that they both work and have good monthly paychecks... doesnt have anything else as collateral..

What are your thoughts on this?

thanks, John

Personally, I wouldn't touch this. I wouldn't consider this to be a deal for ME. Too little upside for the risk you're taking IMO.

I take it this is the "deal" you were talking about in the mobile home thread?

Well, if you applied the same $8,000 to buying mobile homes, you could buy 2 mobile homes for $4,000 (in my area) each - sell them each for $500 down and payments of $295 a month for 39 months (or whatever).

So, let's compare the numbers:


CAR DEAL -

Total Investment: $7,000 ($8,000 - $1,000 down payment received)

Cashflow: $325 / month

Term: 30 months

Total Income: $9,750

Risks Undertaking: Guy defaults on loan = have to track down and repossess car (cars are highly mobile - guy could leave the state with it), then if car is trashed / depreciated after repossessing you may have to sell it for much less.


MOBILE HOME DEAL -

Total Investment: $7,000 ($8,000 - $500 x 2 down payments received)

Cashflow: $590 / month ($295 x 2)

Term: 39 months

Total Income: $23,010

Risks Undertaking: Guy defaults on loan = have to evict guy and repo the trailer (trailers aren't nearly as mobile as cars, so you probably won't have to worry about it leaving the state ). If trailer is trashed after repossessing, you can still sell it for basically the same terms and payments = $500 down and $295 a month for 39 months (or whatever). As a side note: If it's only 1 guy defaulting on the loan at a time (remember in this deal you have 2 of them), at least you have the income from the other guy still coming in.


Hope this information helps bring some light to the subjects for you, and explains my position on why I wouldn't consider the car deal to be a "deal" for me.

Just to put things into perspective...

Purchasing the car for $8300 ($8000 + $300 in repo fees), and then reselling for $1000 down and $325/month for 30 months, yields a return of 23.7%.

This is a great return, assuming it's completely passive and low risk.

As others have mentioned, it's not low-risk (and may not be completely passive, either). The question is, what happens when you get the car back? Will you likely be able to sell it again? For how much? How old is the car? What make/model? How quickly does this kind of car depreciate.

What I would do is put together the 5 most likely scenarios, and determine how much money you'd make/lose/yield in each of the 5 scenarios. Then apply a percentage to each as how likely that scenario is to happen.

Normalize the result, and you have your "expected value" on this deal...

I wouldn't touch it either. The "buy here pay here" car lots finance this type of buyer at about 30%/year. If I couldn't get that or very close, no dice. Too much risk and downside for you, with not nearly enough return.

well after trying to work something out with the buyer.. i decided to not go through with it!

he did not agree to let me pull his credit and said that he is layed off, only his wife works.. so i figured thats too much risk to deal with..

i have another buyer who said he can give $4000 down and pay off the car in about a year.. so i figured maybe i wont make a good profit, but i will have this car out of my hair after trying to sell it for 6 months..

more later..