An ideal auto-loan process involves dealerships forwarding enough customer financial information to lenders so that they are reasonably assured they'll get their money back.
But dealers and lenders have different agendas.
The dealer wants to sell a vehicle, and not get blocked by too many financial obstacles.
The lender wants to know something about a potential borrower, especially if it is someone with a subprime credit rating.
That's where lending “stipulations” comes into play. Stipulations are collected by dealers showing customer payback wherewithal in the form of such things as references, evidence of an established residence and proof of income and employment.
Some dealers are better than others is providing such information to lenders.
Dealers by nature will take the path of least resistance when trying to arrange financing for a vehicle sale, says David Kelly, director of credit operations for Eastern Automotive Group, with dealerships in Maryland and Virginia.
“We try to gather as many stips up front before a test drive,” he says, but some dealerships consider that “too much to ask.”
Reviews are mixed from lenders as to how well dealers do in providing enough stipulations. Two finance executives addressed that at a recent F&I Management and Technology conference in Las Vegas.
“Most dealers are good about getting stips in on time,” says Kyle Birch, executive vice president of dealer services at AmeriCredit Corp., specializing in subprime lending. “Most dealers understand subprime.”
But loan information is sometimes missing, says Paul Rule, national customer business manager for Chase Auto Finance's Custom Vehicle Group.
“A fair amount of contracts don't come in with all the stips,” he says.