When the car gets repossessed, the bank takes the loss. The dealer should be smart enough not to "recourse" a car loan, and put himself on the hook when the customer defaults. In fact, when the car gets repo'ed, the bank usually wholesales it through the local dealer auction...where the dealer snaps it up for considerably less than what's owed, and gets to make another profit off the same car. The bank, in turn, sues the customer who'sin default for the difference between what was owed on the loan and what the car brought at auction...plus "expenses," of course. So the customer still has to pay the bank what's left of the loan minus the wholesale price, pluss "expenses".
The dealer takes NONE of the risk. He made his percentage when he got the bank to buy the "paper" on the car initially, and then he buys the car back at wholesale, and gets to sell the "Paper" on the next buyer as well. The dealer NEVER takes the fall, unless he also does on-the-lot financing...in which case the downpayment usually pays for what he has in the car, and the rest of the payments are profit.
That's why bank fees are so high...because they take the risk, and the customers who DIDN'T default get to pay for the ones who did.
But the car dealer doesn't take any "lumps" for a default, unless he's a total idiot.
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Today's Featured Article - The Tractor Parade: Story of a Case SC - by Bernie DeLon. On a early fall morning back in 1994, I opened the newspaper and happened to spy an article about a local antique tractor club having their annual show that weekend.
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