Automobile paper - Posted by Larry

Posted by Larry on April 04, 2000 at 15:35:23:

lots of food for thought, thanks John

Automobile paper - Posted by Larry

Posted by Larry on April 01, 2000 at 17:56:47:

I’ve been looking into doing some automobile paper deals for a number of reasons, including the fact that there seems to be a lot available where I live as well as their being less costly to purchase. Can anyone with experience in buying auto paper share any insights specific to auto paper that could be helpful? In particular I’m interested in your experience in terms of risks relative to RE paper, special things to look out for, etc. Logically it seems to me that auto paper would tend to be more risky (ie a greater likelihood of default as well as greater difficulty in collecting the collateral in a resaleable condition in case of default). Is there such a thing as insurance for people buying auto paper or making loans to buy autos, similar to PMI? What do you use as a standard for measuring protective equity on an auto paper deal – Kelly Blue Book wholsesale prices? TIA

Re: Automobile paper - Posted by John Behle

Posted by John Behle on April 04, 2000 at 14:02:26:

There are good profits in auto paper for those that know what they are doing and HUGE risks for those that don’t. I don’t like any collateral that can drive away. Many people get seduced over into auto paper because of the high yields and then lose money.

NEVER finance a dealer or rely on any of their prices or information. Used car dealers are notorious for double financing cars, running away with the funds or creating ficticious loans. Never fund based on the paperwork - see the car, check the VIN numbers, check the condition, run your own credit on the buyer, use your own forms and above everything else - establish value yourself. With NADA and Kelly Blue book on the web now, it is easy to establish car values, check for lemons or cars that have been totaled and then rebuilt. This is one of the major ways some used car dealers make their profits. For example, a car is flood damaged and written off by the insurance company. They clean it up and it never works right.

Another example is where the car has been totally wrecked and then rebuilt with frame straighteners, etc. Many times the never run right, track straight or are even highly dangerous.

Some car dealers have even gotten investors to loan against car titles where the car no longer exists.

It’s a potentially risky business. I know many people that have lost their shirts. Fortunately all we lost was a green Jaguire XJ6. Others we’ve financed have been a pain in the neck. We considered a deal on a truck recently - until I thought about the payor’s profession - Police officer. Ya, sure, I’m going to go repo a car from a heavily armed cop :slight_smile:

Re: Automobile paper - Many thanks David, Jim, Sean (nt) - Posted by Larry

Posted by Larry on April 02, 2000 at 23:06:45:


Re: Automobile paper - Posted by David Alexadner

Posted by David Alexadner on April 02, 2000 at 20:49:54:


I would look into buying or creating Mh paper, They dont just drive them off and can offer some of the same advantages I think your looking for.

David Alexander

Re: Automobile paper - Posted by Jim Davis

Posted by Jim Davis on April 02, 2000 at 03:29:52:

I agree with Sean 100% you should at a min broker auto paper first to get a good handle on it first because their are a lot of crooks out their and many investors have lost a lot of money.
Auto Paper is a good niche to work from a broker and investor standpoint(thro the yeilds are droping), which is why we are active in this niche.
So I say get your feet wet with brokering these types of notes first, get a comfort level and slowly move to the investor side of the house.

Repossession - Posted by Sean

Posted by Sean on April 01, 2000 at 21:53:04:

You should first learn the procedure for repossession in your state. I don’t think anyone goes into buying real estate notes without knowing at least a little about foreclosure. You should be prepared to recover your collateral.

You should also learn about skip tracing, or find a company that will do it for you inexpensively. I have used and they offer skip tracing as one of their services.

As a side note they can also give you someone’s Social Security Number. That’s useful for when you don’t have it, but would like to run a credit report on a payor. Plus they have a success guarantee. If they can’t get you the information then there’s no charge to you.