I work in subprime auto finance and the loans simply have a higher APR and fees to compensate for potential losses. If your credit is bruised you will pay a higher rate and a couple hundred in fees. If you have a credit score of 425 and you had a car repo...yesterday, then 2500 in fees and a 29.99 rate may be the best deal you car get. If you finance 7500 on a car with a 12000 book value even with bad credit you will get a decent rate and a low fee. Likewise if you are financing 15000 on the same car with slightly better credit you will pay a slightly higher rate and fee.
We dont operate in a vacuum, there are hundreds of finance companies and banks in this market in addition to dealers that finance the cars themselves. Bad credit high interest loans are generally for less than 10000 and are generally 24 to 48 months.
When a fee is charged what is actually happening is the dealer sells the customer a car and the bottom of the contract says 12000. We buy the loan for 10000, so there is a 2000 fee, but neither the dealer nor the customer actually pays a fee to us.
If that sounds like usery to you, remember finance companies go out of business all the time...
So you make the money by the interest on the 10K? And the dealer makes the 2K? I’m not sure if I follow you.