As crazy as title may sound, it's true.
When you buy a vehicle for inventory, you put out a fair amount of cash, let’s say $3,000. When you sell the vehicle, you receive a down payment of $1,000, for example, on a sales price of $7,000.
The Retail Vehicle Installment Sales Agreement is completed with an amount financed of $6,500 including TTL. With a 21% APR, and a term of 36 months, a monthly payment of $244.89 results.
You would have cash on the street of $2,000 which would clear up in a little over 8 months by collecting payments. In the meantime, you are in a deficit position on the sold vehicle.
If you were to sell that same loan to a buyer through Agora, you could expect a bid of up to 90% of the principal value!
For this example, let’s assume you have received a reasonable bid of 75% of the remaining principal amount.
That is a 56% gain (336% annualized rate) after only 2 months following the sale!
You would have also received the down payment of $1,000 and two customer payments for a total of $1,490.
With that $6,166 in the bank, you’re ready to purchase 2 additional vehicles, repaint your building, or take a trip to Las Vegas!
Jim has served in the subprime auto finance industry for over 25 years. Jim has written dozens of industry related articles and currently serves as the SVP of Finance at Agora Data, Inc.