By on February 25, 2008

images_sizedimage_023213451.jpgWhat starts out as the [now] usual report on the huge number of high-risk sub-prime car loans– "According to Power Information Network, 1.85 of the 9.6 million customers in 2006 who leased or financed a new car were subprime borrowers or consumers with weak credit"– suddenly swerves towards Uh-Oh Town. The CBS5.com report highlights BMW Financial lease holder Vivian Snyder. A salesman inflated Snyder's income ($2500) on her credit application by 150 percent. The reporter then secured the loan application and discovered that "Snyder's income had been changed once again – from $6,000 to $8,600, this time without her knowing. An "8" had been placed before the "6" and "0"s tacked at the end." When confronted, Freemont, CA AutoNation General Manager Larry Long claimed the change had been made in Snyder's presence, and then blamed BMW Financial for approving the lease. "We have investigated this matter internally," Bimmer spokesmouth Martha McKinley insisted. "And we are satisfied that BMW Financial Services acted appropriately at all times during the application and credit review process." Yes, well, AutoNation eventually ate the lease and "according to consumer advocate Rosemary Shahan with Consumers for Auto Reliability and Safety the practice is common. 'This is an epidemic of loan applications being falsified. In fact, the model for the meltdown we're seeing in real estate and home mortgage lending was auto lending.'" [thanks to buzzlightyear for the tip]

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24 Comments on “Car Loan/Lease Fraud Making a Bad Situation Worse...”


  • avatar
    timoted

    Sounds like BMW has some ethics training to do for their sales staff.

  • avatar
    olddavid

    Maybe the number of iffy loans is large, mostly due to what I would call “aggressive” money practices by the lenders, but this income “inflation” has been going on since the days of Hall-Dobbs and the advent of debt/income ratios. I would actually speculate that as long as there have been “credit terms” this practice has occurred. Remember, the “Loan Arranger” is out there to give all the sub 600′s that marvellous 5% money…….per month. If this is the biggest “abuse” you can find today, I would think the credit people can rest easy.

  • avatar
    guyincognito

    Sweet, maybe I can afford a new M3..

  • avatar
    tdoyle

    OK, folks. Who hasn’t inflated their income EVER on a credit application. Oops, am I alone here?

  • avatar
    plee

    As a former auto salesman with about 25 years in the business, I can recall many instances where a “finance manager” would alter the income on a credit statement in order for the application to be looked on more favorably. This has been going on for a long time and no doubt ended up hurting a lot of people who were stuck with a payment they could not really afford. So many times the customer’s wants exceeded his needs and many dealers are all too willing to help them commit to an unwise loan.

  • avatar
    jaje

    tdoyle – I’ve never inflated my income on an application. If you have to do that then you maybe taking on too much debt.

  • avatar
    AKM

    Vivian Snyder had strong credit and was not classified as subprime, but she is one of many consumers who can’t afford the car she leased. Snyder drove a brand new convertible BMW with a MSRP listed at approximately $100,000.

    Most consumers can’t afford it, and neither could Snyder. That’s because the monthly lease payment was $1,300. It ate up half her income which was a $2,500 disability check. “I made a mistake by driving off with the car. I thought my situation would change. I thought I’d be able to go back to work soon and make my usual salary. You always hope things will get better. I didn’t realize I was getting such a bad deal. They added all these extras knowing it would be difficult for me to make the payments already. I’m greatly embarrassed, I should have looked over the lease better.”

    I.e. I am a complete moron who’s day-dreaming!
    A $100,000 convertible? That gotta be an M6! With a $2,500 a month disability check. Incredible…

  • avatar
    brettc

    Why are people so stupid? $1300 a month is what my mortgage costs. A car payment should never be that much money. Situations have changed, that’s for sure, although they haven’t changed in the direction that all these geniuses expected.

    And if you’re inflating your income on a credit app, then you’re part of the problem. Maybe you can go live with this stupid woman in her BMW.

  • avatar
    creamy

    that’s why you can’t trust anyone who loans you money – as a consumer in this society you HAVE to do your own homework. auto salesmen, mortgage brokers, real estate agents (even buyer’s agents), school loans, investment firms, etc. – all have their own agenda and that agenda rarely means doing what is best for you.

  • avatar
    KixStart

    tdyole: “Who hasn’t inflated their income EVER on a credit application?”
    creamy: “… you HAVE to do you own homework…”

    I’ve never done the former because I figured the LENDER was doing the latter. I’m fairly certain I was always asked for my employer’s address. I presumed that they’d check my income figure (and everything else).

    If I was lending money, I’d sure as heck check on the applicant’s claimed income.

    In the case at hand, shouldn’t SOMEONE get prosecuted? Snyder, for one. The salesman for conspiracy. And there appears to be someone else involved, too. Probably the in-house finance guy.

    If BMW Financial Services isn’t supporting criminal charges here, I can only presume it’s because they don’t want the books inspected very closely. Or at all.

  • avatar

    I managed to lease a 2006 BMW Z4 with an income of next to nothing (I was still in school). BMW didn’t care, as long as I made the payments. I haven’t missed one yet.

    Point being, they’ll lease to ANYBODY.

  • avatar
    timoted

    A lender may ask for your employment information however, they may not actually verify employment and/or salary unless there is a “red flag” on your credit report or a high debt to income ratio or something else based on the lender’s own criteria that would dictate verification.

  • avatar
    ttac2000

    The other articles on this story mention that she put $30,000 from savings as a down payment on the lease as well. The salesman and F&I guys who wrote this deal should be canned (or maybe sued/arrested etc), but this woman needs to share the blame. What a moron.

  • avatar
    Stephan Wilkinson

    Isn’t the whole point of renting a car–sorry, I mean “leasing” it–that people can drive cars they otherwise can’t afford? Yeah, I know there’s the occasional situation where it makes sense taxwise as a business-use vehicle, but I think that’s rare.

    So what’s new here, other than the dimensions of the dumbness?

  • avatar
    timoted

    The real issue here is that if you’re that dumb with your finances then there is always going to be someone around to help you part with your cash. Other than first payment and security deposit down, you don’t put cash down on a lease.

  • avatar
    Lumbergh21

    Plenty of blame to go around. The local loan officer for falsifying the application. Ms. Snyder for being complicit in the falsification of her income as well as wanting what she couldn’t afford and breaking the law to get it. And, BMW financial for not verifying the income, which is easy enough to do. If they had called her employer they could have told them over the phone that she was out on disability.

  • avatar

    I am shocked simply shocked that a dealership or its employees would be so deceptive and less than truthful with the lenders simply so that they could make more money at the expense of the bank.

    Seriously ya know if your business regularly lies and cheats with one group of people (customers) in order to make more money why would anyone assume they would suddenly revert to being honest and forthright and forgo making money by being honest with a bank when they can simply lie and make more money?

  • avatar
    morbo

    I too am shocked that car dealers aren’t the paradigms of honestly and integrity their profession has worked so hard to achieve.

    So if 20% of the new car loans last year are sub-prime, and the average new car costs $25,000, and lets say a third (conservatively) of the sub-prime car loans go bad, that’s 13.6 BILLION in bad car loans coming, not counting what it will do to residuals of the remaning stock of cars whne these puppies go out at fire sale prices.

    Time for me to start looking for that 2-3 years old Mustang convertible I want.

  • avatar
    KixStart

    Whoa! I didn’t read the other stories… The buyer put $30K down on the lease??

    You know, with $30K cash, you can get a Miata and keep maybe $5K for gas money. Waving cash might get the price reduced. Or you might find an inducement in there, somewhere for a low-interest loan and then make the payments out of your cash stash.

    Especially if you, like, you know, don’t have a job.

  • avatar
    Landcrusher

    This is yet another systemic failure caused by paying people to lie to you and then pressuring them to do it a lot. The agents involved were all likely on quota, and got paid the more they lied with little or no consequences. Even if they could never get a job with a lender ever again, they probably did not care. They likely believed they were expected to lie, or they were just playing the game with a boss who had lied to them in the first place. It all becomes a game where the people actually lending the money are so far from the transaction that they haven’t a chance not to be cheated.

    It’s now going to break our economy in little pieces while we figure out that we can’t have all the profit being sucked out of lending by fat cats in New York.

  • avatar
    Landcrusher

    BTW, TDoyle, I have never inflated my income to borrow money. Which is likely why I have never had a problem paying back loans.

  • avatar
    bjcpdx

    If you can’t afford to pay cash for a car, you can’t afford it.

    There, I said it. Buy something used with green. I realize that if everybody operated this way, the automobile industry would cease to exist. But the fact remains that paying interest on a depreciating liability (a car is not an “asset” or an “investment”) is not good business sense. So if you must finance, start at that point and take the shortest term you can with as large a down payment as you can. Don’t even get me started on leasing.

    Another reason for not padding your income is because it’s um… ILLEGAL?

  • avatar
    Lumbergh21

    The agents involved were all likely on quota, and got paid the more they lied with little or no consequences.

    Sounds suspiciously like Fannie Mae.

  • avatar
    Lumbergh21

    If you can’t afford to pay cash for a car, you can’t afford it.

    That’s how I’ve tried to live my life; though I did see a good deal on a used 240sx several years ago when I was looking for a car and did borrow $4,000 to buy it. I also paid back the $4,000 in less than a year (~$600 per month).

    So if you must finance, start at that point and take the shortest term you can with as large a down payment as you can.

    That’s how my wife and I bought our house. 15 year mortgage that we are on a pace to have paid off in ~seven years.


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