Understanding Special Financing Options for Auto Dealerships

What Your Dealership Needs To Know About Special Financing Options

More and more dealerships have begun offering special financing to help borrowers with poor credit qualify for auto loans. Some even label themselves as “special finance dealerships” to specifically attract customers seeking a more lenient credit approval process.

What is special financing, and how might this work in your car dealership? Here’s what you need to know.

What Is Special Financing?

Special financing refers to loans catered to car buyers who may not be eligible for traditional loans due to poor credit histories. This may include borrowers who:

• Have had a vehicle repossessed
• Have been through bankruptcy
• Have very low credit scores
• Otherwise present a high risk to lenders

Auto lenders need to balance risk and reward when offering bad-credit auto loans. Because these borrowers pose a higher risk to lenders, these loans often carry higher interest rates and stricter repayment terms than traditional auto loans.

How Special Financing Works in Auto Dealerships

Borrowers who need special financing often go through a slightly different lending process than those who qualify for traditional loans. Typically, a traditional customer would first find a car they are interested in on your lot, then apply for financing. But borrowers with bad credit usually need to apply for special financing first, then choose a car that fits the criteria of the loan they qualify for.



Some dealerships offer in-house financing options, while others work with third-party lenders to provide them to customers.

Common Borrower Requirements for Special Financing

When customers with subprime credit come to your dealership, presenting them with a guide to auto loans and special financing options can help them understand the general process of how financing might work for them. While terms will vary depending on the lender and the customer’s financial picture, borrowers often need to meet the following requirements to qualify for special financing:

• Down payment: Many special financing lenders require a down payment for the vehicle purchase. This demonstrates that the borrower has at least some cash to purchase the vehicle and reduces the loan amount required.
• Minimum monthly income: Borrowers may need to meet a monthly income requirement of $1,500 to $2,500. Showing that they have income is important for demonstrating their ability to repay the loan.
• Debt-to-income ratio: Borrowers may also need a debt-to-income ratio of 45% to 50% to ensure they have enough income to make monthly payments.
• Personal references: Some lenders even require personal references who can vouch for the borrower’s responsibility.

While these terms are more generous when compared to traditional lending options, they may still be prohibitive for some customers. Exploring all available financing options with customers is important for helping them understand whether purchasing a vehicle from you is feasible.

Offer Special Financing Through Edge Financial Services LLC Today

Providing special financing options in your dealership is a great way to expand your target customer base and make purchasing a vehicle more accessible to those with less-than-ideal financial histories. The importance of funding solutions for dealers cannot be overstated, as approximately 80% of vehicle purchases are financed in the U.S.

At Edge Financial Services LLC, we offer flexible financing options for car dealerships like yours. We specifically cater to customers with challenged credit who may not qualify for traditional loans.



Contact us today to speak with one of our knowledgeable team members.