Generally speaking, you must have better credit in order to get “outside financing” which is basically a car loan from a dealership that works with traditional banks. “In-house” financing is when the dealership – usually a buy-here pay-here dealership like Country Auto – acts as the bank and lends the money to a customer. The loan is made here, and so are the re-payments.
For outside car financing, the credit score to get a car loan must be at least good (670 to 739) to great (800 and up).
At a conventional dealership, you’ll wait for a long time while the sales team shops around the banks for the loan that fits the customer -- they talk to a bunch of different banks and come back to the customer with a monthly payment and interest rate depending on their down payment.
At any time after that loan to the customer is made, the dealership can sell it to another bank. In other words, they sell your “note.” The dealership gets rid of your debt to them and gets paid by whoever bought the note.
Normally, when a note is sold, the original lender notifies the borrower. They tell you the loan was sold, who the new lender is, and where you need to send payments. It is not illegal to sell notes. The terms of your loan won’t change; but it’s illegal to change the interest rate or the monthly payment required.
Customers think they are going to be dealing with a local dealership when they buy a car, and that they can go in and talk to them face-to-face or one-on-one any time they need to. But if the dealership sells the note, that is eliminated.
Usually the loan is sold to some big company out from back East. Instead of waiting three or four years for the note to pay out, the dealership gets their money right up front. Usually it's like 80, 90 cents on the dollar. So they don't get all the money, but they're taking a lump sum right now, instead of waiting three years, four years, five years to get the money back that they loaned the customer. And if you ever do call in to the new loan company for some reason, they don't know who you are. And you don't know who they are. It can get really, really distant. No personal service.
And another thing to understand with outside financing and selling customer notes is that the dealer who is going to sell off that note doesn’t have to worry about the car staying running. They don't have to worry about anything past the day of the sale. They sold it to you. Once they sell you the car, they get paid from the bank, and they're done with you. They have no motivation to keep that car running, to stand behind it, to do anything for you. They're just down. They wash their hands of it.
You go in and tell them your budget says you can have a $300 car payment; but they put you in one to test drive for $500 -- and they do a good job of selling you on buying that car. They don't have to care if you can afford those payments, because six months from now or a year from now they’ve already got their money so they couldn’t care less. Their goal is to sell you the car today.
But Country Auto is in-house. We finance the car for you – we don’t use an outside bank. And we work to keep you in a car that fits your budget. We take all that in because we care. We want people to be able to pay off their loans. We don't get paid until the car gets paid. We never sell notes.