How do third-party banks issue car loans?
I have gotten a letter of credit from my credit union stating the maximum amount I can finance. Of course I don't show  the dealer the letter until after we have finalized the deal. I Then return in 3 business days with a cashiers check for the purchase price.  In one case since the letter was for an amount greater then the purchase price I was able drive the car off the lot without having to make a deposit. In another case they insisted on a $100 deposit before I drove the car off the lot. I have also had them insist on me applying for their in-house loan, which was cancelled when I returned with the cashiers check.  The procedure was similar regardless If I was getting a loan from the credit union, or paying for the car without the use of a loan. The letter didn't say how much was loan, and how much was my money.  Unless you know the exact amount, including all taxes and fees,in advance you can't get a check in advance. If you are using a loan the bank/credit Union will want the car title in their name. I have had it two way now: I got pre-approval from my credit union which just so happened to be one of the bigger vehicle lenders in the metro area.  What I found out was that the dealership (which was one of the bigger ones in the metro area) had a computer system that looked up my deal with the credit union. Basically, I signed some contracts and the CU and the dealership did whatever paperwork they needed to without me. I bought a used car and drove it off of the lot that night, and I didn't ever go back (for anything financial) Both my wife and her sister received blank checks that were valid up to a certain amount.  In the case of my sister in law, she signed the check, the dealership called to confirm funds and she drove off. In the case of my wife, she ended up negotiating a better deal with dealer finance, but I was assured she only had to sign the check, get it verified and drive the car home.
Banks can't simply make loans in the void. This is how the cash flow works, generally:  1. Depositers *add* cash into the bank. The Bank now has cash. 10% of that cash is held on *reserve* per law. This cash is held on the balance sheet as an *asset* (cash) *and a liability* (demand deposits).   2. Someone requests a loan. The loan is funded from the non-reserved cash of these deposits. This results in a lessening of an asset (cash), and the creation of a new asset (loan).  3. Traditionally, as the debtor pays back the loan, the interest is distributed in some sort of split between the bank and the depositors. This means cash in from the loan and interest, and a liability (deposits) also go up.  4. Alternatively, while the above still happens, the bank can *securitize* the loan and sell that to investors. Investors then get access to the loan and its income, and the bank collects a fee. However, this means more cash on hand for the bank to originate additional loans without going near the reserve requirement.   If a bank extends too many loans and its reserve is threatened, it must borrow either from the fed or from other banks. These loans must be paid back. Generally these are public companies set up to do some particular thing and get revenue from use.  And yes, the elected representatives signed the municpalities on to these things.   If you co-sign a loan, sooner or later you may have to pay up. "They don't actually need to. They accept deposits for historical reasons and because they make money doing so, but there's nothing key to their business that requires them to do so. Here's a decent summary, but I'll explain in great detail below. By making loans, banks create money. This is what we mean when we say the monetary supply is endogenous. (At least if you believe Sir Mervyn King, who used to run England's central bank...) The only real checks on this are regulatory--capitalization requirements and reserve requirements, which impose a sort of tax on a bank's circulating loans. I'll get into that later. Let's start with Why should you believe that story--that loans create deposits? It seems like a bizarre assertion. But it actually matches how banks behave in practice. If you go borrow money from a bank, the loan officer will do many things. She'll want to look at your credit history. She'll want to look at your income and assets. She'll want to look at what kind of collateral or guarantees you're providing that the loan will be repaid. What she will not do is call down to the vaults and make sure that there's enough bills stacked up for them to lend out. Loans are judged based on a profitability function determined by the interest rate and the loan risk. If those add up to ""profitable"", the bank makes the loan. So the limiting factor on the loans a bank makes are the available creditworthy borrowers--not the bank's stock of cash. Further, the story makes sense because loans are how banks make money. If a bank that was short of money suddenly stopped making loans, it'd be screwed: no new loans = no way to make money to pay back depositors and also keep the lights on = no more bank. And the story is believable because of the way banks make so little effort to solicit commercial deposit business. Oh sure, they used to give you a free toaster if you opened an account; but now it's really quite challenging to find a no-fee checking account that doesn't impose a super-high deposit limit. And the interest paid on savings deposits is asymptotically approaching zero. If banks actually needed your deposits, they'd be making a lot more of effort to get them. I mean, they won't turn up their noses; your deposited allowance is a couple basis points cheaper to the bank than borrowing from the Fed; but banks seem to value small-potatoes depositors more as a source of fees and sales opportunities for services and consumer credit than as a source of cash. (It's a bit different if you get north of seven figures, but smaller depositors aren't really worth the hassle just for their cash.) This is where someone will mention the regulatory requirements of fractional reserve banking: banks are obliged by regulators to keep enough cash on hand to pay out a certain percentage of deposits. Note nothing about loans was said in that statement: this requirement does not serve as a check on the bank making bad loans, because the bank is ultimately liable to all its depositors for the full value of their deposits; it's more making sure they have enough liquidity to prevent bank runs, the self-fulfilling prophecy in which an undercapitalized bank could be forced into bankruptcy. As you noted in your question, banks can always borrow from the Fed at the Fed Discount Rate (or from other banks at the interbank overnight rate, which is a little lower) to meet this requirement. They do have to pledge collateral, but loans themselves are collateral, so this doesn't present much of a problem. In terms of paying off depositors if the bank should collapse (and minimizing the amount of FDIC insurance payout from the government), it's really capital requirements that are actually important. I.E. the bank has to have investors who don't have a right to be paid back and whose investment is on the hook if the bank goes belly-up. But that's just a safeguard for the depositors; it doesn't really have anything to do with loans other than that bad loans are the main reason a bank might go under. Banks, like any other private business, have assets (things of value) and liabilities (obligations to other people). But banking assets and liabilities are counterintuitive. The bank's assets are loans, because they are theoretically recoverable (the principal) and also generate a revenue stream (the interest payments). The money the bank holds in deposits is actually a liability, because it has to pay that money out to depositors on demand, and the deposited money will never (by itself) bring the bank any revenue at all. In fact, it's a drain, because the bank needs to pay interest to its depositors. (Well, they used to anyway.) So what happens when a bank makes a loan? From a balance sheet perspective, strangely enough, the answer is nothing at all. If I grant you a loan, the minute we shake hands and you sign the paperwork, a teller types on a keyboard and money appears in your account. Your account with my bank. My bank has simultaneously created an asset (the loan you now have to repay me) and an equal-sized liability (the funds I loaned you, which are now deposited in your account). I'll make money on the deal, because the interest you owe me is a much higher rate than the interest I pay on your deposits, or the rate I'd have to pay if I need to borrow cash to cover your withdrawal. (I might just have the cash on hand anyway from interest and origination fees and whatnot from previous loans.) From an accounting perspective, nothing has happened to my balance sheet, but suddenly you owe me closing costs and a stream of extraneous interest payments. (Nice work if you can get it...) Okay, so I've exhaustively demonstrated that I don't need to take deposits to make loans. But we live in a world where banks do! Here's a few reasons: You can probably think of more, but at the end of the day, a bank should be designed so that if every single (non-borrowing) depositor withdrew their deposits, the bank wouldn't collapse or cease to exist." An auto title loans are typically utilized by those that wish to obtain a funding with bad credit rating or no credit in any way. An auto-mobile title lending frequently called a vehicle title lending or merely title funding as well as pink slip funding’s. You merely should have a vehicle that is paid off or nearly paid off and also you could make use of the auto title as security to obtain the cash money you require, enabling you to continue driving your vehicle while paying your loan.   Get Auto Car Title Loans Ontario CA and nearby cities Provide Car Title Loans, Auto Title Loans, Mobile Home Title Loans, RV/Motor Home Title Loans, Big Rigs Truck Title Loans, Motor Cycle Title Loans, Online Title Loans Near me, Bad Credit Loans, Personal Loans, Quick cash Loans   Contact Us: Get Auto Car Title Loans Ontario CA 3045 S ARCHIBALD AVE H 299,  Ontario, CA 91761 909-321-5737 atlontario@gmail.com http://getautotitleloans.com/car-and-auto-title-loans-ontario-ca/ The buyer can get another cosigner or you can sell the car to pay off the loan. These are your only options if financing cannot be obtained independently. I see this as less conspiratorial than the housing market shenanigans because auto manufacturers really have no other choice but to make financing easier because if they didn't, they wouldn't be selling many cars and trucks.   The 2008 financial meltdown happened mainly because of derivatives. I don't know of any packaged bonds or CDOs made up of auto loans with credit default swaps riding on their backs.  So, a wave of defaulted auto loans just means that it will become a buyers market for used cars - if not another signpost of general American economic collapse. Most 0% interest loans have quite high interest rates that are deferred. If you are late on a payment you are hit with all the deferred interest. They're banking on a percentage of customers missing a payment.  Also, this is popular in furniture/car sales because it's a way to get people to buy who otherwise wouldn't, they made money on the item sale, so the loan doesn't have to earn them money (even though some will). Traditional banks/lenders do make money from interest and rely on that, they would have to rely on fees if interest were not permitted. I've had many home loans, and all have been sold to a big bank.  They have certain rules about how much insurance you need to have, but I've never had one buy insurance on my behalf - they always send letters telling me I need to increase the insurance.  They do say that if I don't get enough insurance, they will do it for me, but this has never been necessary. The car dealership doesn't care where you get the cash; they care about it becoming their money immediately and with no risk or complications. Any loan or other arrangements you make to raise the cash is Your Problem, not theirs, unless you arrange the loan through them. An auto title loans are typically utilized by those that wish to obtain a funding with bad credit rating or no credit in any way. An auto-mobile title lending frequently called a vehicle title lending or merely title funding as well as pink slip funding’s. You merely should have a vehicle that is paid off or nearly paid off and also you could make use of the auto title as security to obtain the cash money you require, enabling you to continue driving your vehicle while paying your loan.   Get Auto Car Title Loans North Hollywood CA and nearby cities Provide Car Title Loans, Auto Title Loans, Mobile Home Title Loans, RV/Motor Home Title Loans, Big Rigs Truck Title Loans, Motor Cycle Title Loans, Online Title Loans Near me, Bad Credit Loans, Personal Loans, Quick cash Loans  Contact Us: Get Auto Car Title Loans North Hollywood CA 11604 Sylvan St # 7, North Hollywood, CA 91606 424-343-2256 nhautoloans@gmail.com http://getautotitleloans.com/car-and-auto-title-loans-north-hollywood-ca/ "Your arrangements with the bank are irrelevant. Whoever is named on the title of the vehicle owns it. If she is the ""primary"", then I assume her name is on the title, therefore she owns the car. If you drive off with the car and it is titled in her name, she can report it stolen and have you arrested for grand theft auto unless you have a dated and signed permission in writing from her to use the car. Point #2: If a car loan was involved, then you didn't ""purchase"" the car, the bank did. If you want to gain ownership of the car, then you need to have her name removed from the title and have yours put in its place. Since the bank has possession of the title, this will require the cooperation of both your girlfriend and the bank." There is no rule that says the dealer has to honor that deal, nor is there any that says he/she won't.  However, if you are thinking of financing through though the dealership they are likely to honor the deal. They PREFER you finance it. If you finance it through the dealer the salesman just got TWO sales (a car and a loan) and probably gets a commission on both. If you finance it through a third party it makes no difference to the dealer, it is still a cash deal to them because even though you pay off the car loan over years, the bank pays them immediately in full. "They aren't actually. It appears to be a low interest rate, but it doesn't cover their true cost of capital. It is a sales tactic where they are raising the sticker price/principal of the car, which is subsidizing the true cost of the loan, likely 4% or higher. It would be hard to believe that the true cost of a car loan would be less than for a mortgage, as with a mortgage the bank can reclaim an asset that tends to rise in value, compared to a used car, which will have fallen in value. This is one reason why you can generally get a better price with cash, because there is a margin built in, in addition to the fact that with cash they get all their profit today versus a discount of future cash flows from a loan by dealing with a bank or other lending company. So if you could see the entire transaction from the ""inside"", the car company would not actually be making money. The government rate is also so low that it often barely covers inflation, much less operating costs and profit. This is why any time you see ""0% Financing!"", it is generally a sales tactic designed to get your attention. A company cannot actually acquire capital at 0% to lend to you at 0%, because even if the nominal interest rate were 0%, there is an opportunity cost, as you have observed. A portion of the sticker price is covering the real cost, and subsidizing the monthly payment." This is normal with the dealer's financing.  To add more details to littleadv's answer, what happens is when you get the financing through the dealer, at first, they will try to do the loan on your behalf with local banks in your area. This is why you see several hard inquiries; one from each back. If none of these banks wants to take the loan, then dealer's financing entity will take the loan. This was my exact experience with Hyundai. In addition, don't get surprise if you start receiving letters saying that your loan was rejected. The dealer will send the loan requests simultaneously, and some of the banks might deny the loan. This also happened to me, and I have been owning my car for around a year. Still, make sure that the letters matches with the credit inquiries. "At one point in my life I sold cars and from what I saw, three things stick out.  Unless the other dealership was in the same network, eg ABC Ford of City A, and ABC Ford of City B, they never had possession of that truck. So, no REAL application for a loan could be sent in to a bank, just a letter of intent, if one was sent at all. With a letter of intent, a soft pull is done, most likely by the dealership, where they then attached that score to the LOI that the bank has an automated program send back an automatic decline, an officer review reply, or a tentative approval (eg tier 0,1,2...8). The tentative approval is just that, Tentative. Sometime after a lender has a loan officer look at the full application, something prompts them to change their offer. They have internal guidelines, but lets say an app is right at the line for 2-3 of the things they look at, they chose to lower the credit tier or decline the app. The dealership then goes back and looks at what other offers they had. Let's say they had a Chase offer at 3.25% and a CapOne for 5.25% they would say you're approved at 3.5%, they make their money on the .25%. But after Chase looks into the app and sees that, let's say you have been on the job for actually 11 months and not 1 year, and you said you made $50,000, but your 1040 shows $48,200, and you have moved 6 times in the last 5 years. They comeback and say no he is not a tier 2 but a tier 3 @ 5.5%. They switch to CapOne and say your rate has in fact gone up to 5.5%. Ultimately you never had a loan to start with - only a letter of intent. The other thing could be that the dealership finance manager looked at your credit score and guessed they would offer 3.5%, when they sent in the LOI it came back higher than he thought. Or he was BSing you, so if you price shopped while they looked for a truck you wouldn't get far. They didn't find that Truck, or it was not what they thought it would be. If a dealership sees a truck in inventory at another dealer they call and ask if it's available, if they have it, and it's not being used as a demo for a sales manager, they agree to send them something else for the trade, a car, or truck or whatever. A transfer driver of some sort hops in that trade, drives the 30 minutes - 6 hours away and comes back so you can sign the Real Application, TODAY! while you're excited about your new truck and willing to do whatever you need to do to get it. Because they said it would take 2-5 days to ""Ship"" it tells me it wasn't available. Time Kills Deals, and dealerships know this: they want to sign you TODAY! Some dealerships want ""honest"" money or a deposit to go get the truck, but reality is that that is a trick to test you to make sure you are going to follow through after they spend the gas and add mileage to a car. But if it takes 2 days+, The truck isn't out there, or the dealer doesn't have a vehicle the other dealership wants back, or no other dealership likes dealing with them. The only way it would take that long is if you were looking for something very rare, an odd color in an unusual configuration.  Like a top end model in a low selling color, or configuration you had to have that wouldn't sell well - like you wanted all the options on a car except a cigarette lighter, you get the idea. 99.99% of the time a good enough truck is available. Deposits are BS. They don't setup any kind of real contract, notice most of the time they want a check. Because holding on to a check is about as binding as making you wear a chicken suit to get a rebate. All it is, is a test to see if you will go through with signing the deal. As an example of why you don't let time pass on a car deal is shown in this. One time we had a couple want us to find a Cadillac Escalade Hybrid in red with every available option. Total cost was about $85-90k. Only two new Red Escalade hybrids were for sale in the country at the time, one was in New York, and the other was in San Fransisco, and our dealership is in Texas, and neither was wanting to trade with us, so we ended up having to buy the SUV from one of the other dealerships inventory. That is a very rare thing to do by the way. We took a 25% down payment, around $20,000, in a check. We flew a driver to wherever the SUV was and then drove it back to Texas about 4 days later. The couple came back and hated the color, they would not take the SUV. The General Manager was pissed, he spent around $1000 just to bring the thing to Texas, not to mention he had to buy the thing. The couple walked and there was nothing the sales manager, GM, or salesman could do. We had not been able to deliver the car, and ultimately the dealership ate the loss, but it shows that deposits are useless. You can't sell something you don't own, and dealerships know it.  Long story short, you can't claim a damage you never experienced. Not having something happen that you wanted to have happen is not a damage because you can't show a real economic loss. One other thing, When you sign the paperwork that you thought was an application, it was an authorization for them to pull your credit and the fine print at the bottom is boiler plate defense against getting sued for everything imaginable. Ours took up about half of one page and all of the back of the second page. I know dealing with car dealerships is hard, working at them is just as hard, and I'm sorry that you had to deal with it, however the simplest and smoothest car deals are the ones where you pay full price."