If the lender declines or counters your subprime customers for a particular vehicle,
that doesn't mean that they won't finance them for any vehicle. The lender may simply want less risk.
That's where your LTV sheet comes into play. Take a quick look at your LTV sheet and find a vehicle
that has a higher ACV then check with the lender to see if this better LTV vehicle will turn their
decline or counter into an approval. How do you build the LTV sheet? Well popular dealership
softwares, one example would be vAuto, do this for you. They typically have a way to sort by
highest to lowest ACV value, or your sales manager may already keep such a list that you can use. If
your dealership does not have the software and your sales manager does not keep such a list,
it may be up to you to book out each car find the value and build your own
First thing you'll see on this side is a chart it's going to list a stock number,
your make of the vehicle, your model of your vehicle, your sale price & your book out. And
then over here you'll have an LTV calculator which can help you determine the LTV if you
don't want to you know use your brain power at that moment. Okay so let's do an example:
We're gonna put a stock number in let's say it's...it doesn't matter what it is but let's
say it's a Ford Escape. Let's sell it for how about $14,995. Now we've got to get our book
out right? Our book out goes right there. Our book out is the ACV, the actual cash value of the car,
the market value of the vehicle okay? And the way most dealerships get that, most banks prefer
you to get that is by using NADA retail or loan values. So we're going to go over to Dealertrack
which does all of our book outs for us. We're going to enter the options on the car. It has fog
lights, navigation, parking & keyless entry. Or to click "calculate" and it's going to give us the
NADA trade value, which is $12,300. So now that we have that, we can go over & we can put our $12,300
right there. Now our book outs already in there, $12,300 and our Amount Financed. How do we get
our Amount Financed? Now the number one mistake students make with this LTV sheet is they assume
the Sale Price is the Amount Financed. That's two different things okay? But how do we get
our Amount Financed? Well you're going to use your dealerships DMS software, whatever it is. In this
case we're going to be using Dealertrack, okay? We're going to take our sale price of $14,995.
Let's say our customer's putting a $1,000 down. Now after taxes and fees and so forth
their amount financed comes to $15,432. That's when you add $14,995, $1,199.50 for taxes,
$237.50 for fees and then you take away the $1,000 down you get $15,432 for your Amount Financed.
So over here $15,432 and you'll see our LTV calculation is 125%.
Again your bookouts $12,300, your amount financed $15,432 and your LTV calculation is 125%.
Now some of you may be asking "Well why did they include the sale price in here if it's not
included in the chart? Why not just put the amount financed in this in this column right here?"
Well the answer is simple. Because depending on what the customer's putting as a down payment,
depends on what the amount financed is. For example this customer had a $1500 trade with
this vehicle. Now the amount financed is $13,812. You have to go back over here...$13,812 and now
the LTV is 112%. It's a big difference, it's a 13% difference. So it wouldn't make sense to put
the amount financed in this column because it's going to change for each and every customer. How
much money they're putting down, whether there's a trade, whether there's negative equity etc. So
the point of putting the sale price and the book prices, you can quickly see whether you're going
to be in a good equity position regardless of how much the customer is putting down.
For example:
This Jeep Grand Cherokee: the sale price is $19,900 and the book is $20,100. So as long as
the customer is putting down enough money for taxes and fees, you're going to be under 100%
because the book is more than what you're selling it for. So you already know that
the bank's gonna like this car. As long as a customer can afford it,
as long as their income's high enough, the bank's gonna like this car because
the value of the car when they drive off a lot is more than what they owe the bank. So if the
bank had to repossess it, if they had to take it back, if it we're to get into an accident, they're
definitely going to get their money back okay? And that's the real importance of this LTV sheet.
You're going to want to put cars on here that either book for more
than you're selling them OR look close to what you're selling for.
For example: $12,300 book and $14,995 sell price that's pretty close especially
considering if a customer is putting a $1000 or $2000 down
you're gonna be almost even okay? All right hopefully that makes sense.
If you have any questions feel free to put a comment down below and we will explain
further. But otherwise go ahead and download this free LTV sheet right below this video.