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How do banks/lenders deal with ADM?


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I'm curious whether or not lenders loan amounts beyond MSRP...



Yes! Lenders loan above MSRP all the time. How do you think people are able to trade when they have $10k - $15k negative equity?


Most lenders will loan 120% - 140% of invoice on new vehicles.


So a vehicle that has a dealer invoice of say, $42k then you could borrow from $50,400 (120%) to $58,800 (140%)


Wells Fargo says they will go to 165% with a FICO of 720+


So they would loan up $69,300 on an invoice amount of $42k.


It all depends on the buyer as to how good their credit is, debt to income, time on the job, time at current residence, monthly income, etc. and the lender.


So a qualified buyer can finance over MSRP with no problem.

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I would never borrow an ADM even if they would, thats asking for trouble if you ask me.



Same for people trading with negative equity, yet that is over 80% of all buyers with a trade in. They keep trading to soon and they keep repeating it until they end up so deep into a vehicle and they can never get out of it! This is another reason in my opinion why cars sales are down and continue to decline every year.


People get so buried they are forced to keep their cars longer and longer where repeat sales get spread farther and farther apart before people can trade again.


I can't tell you how many times I see people trying to trade out of their vehicle and roll $10k - $20k of negative equity onto a new vehicle.


The sadest part is when you try to talk them out of it and explain how they would end up so deep into the new vehicle and will be stuck in it for a minimum of 6 years before ever being able to trade out again, they get mad and then bad mouth you about it. Then they find a dealer that will gladly bury them deeper and they think that dealer is the greatest and your dealer is crap! Of course, that is in the beginning until they try to trade again and then finally understand what you were trying to tell them and warn them about! Then the dealer that buried them becomes the dealer that ripped them off and took advantage of them. See it all the time!

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