Profits & ROI: Lending $$ on Car Titles
Title loan business profits.
Before you invest any more time in considering a car title loan business start-up, let me explain how much MONEY you can make!
Let’s begin with a real transaction. We have equity in California stores. We offer payday loans, car title lending, scrap gold buying and tax services.
In one of our California title loan locations, a new customer walked-in requesting a title loan on his truck. We determined the “low-book” value of his collateral was $15,000. We loaned $3000 at 9% per month ($270/month) for 36 months with zero pre-payment penalty. If this customer chooses to, he’ll pay us a total of $9720 in fees AND will still owe us $3000 in loan principal.
What’s the worse case? Our borrower doesn’t pay us back the $3000. We call our repo guy and he picks up the truck. He delivers it to the auction. The auction company cleans it up and sells it for us. We get a check from the auction for $12,500. We add on our repo fees, auction fees, late fees… and send our truck owner the balance. All we did is pick up the phone!
You really don’t need to read any further to grasp the profit potential in the title loan industry.
If you’re interested, I delve DEEPLY into PROFITS in our “Title Loan Manual” here: http://www.AutomobilePawn.com
Once you get rockin & rollin, it’s not a huge leap to make 100+ title loans via one store or website.
100 title loans averaging $3000/ea = $300,000 “on the street.”
$300,000 X 9%/month = $27,000/month in gross fee income!
As you can see, deduct for 1.5 employees, rent, phones, software… AND YOU”RE MAKING SERIOUS MONEY!
You will read a daily newspaper somewhere and stories like these will appear:
A single mom, Amy Poormom in Iowa, received a $350 auto title loan for 14 days, paid only the interest portion 8 times with no portion applied to the principal, in total paying $977.
An auto mechanic in Tyler, Texas paid $1211 in interest and fees over 11 months; only having reduced the principal balance by $15.
Burdened by medical expenses, Amy Poormom applied for and received a $500 auto title loan secured by her 1995 Ford Taurus. This was a loan for 30 days and specified a loan fee of $30 per $100 borrowed. Amy renewed (paid only the interest/fee of $150) for 12 months. At this point Amy had paid a total of $1800 in interest/fees while still owing a balance of $500.
Of course, the “mean” car title loan company repossessed Amy’s car (which she needed for work) and sold it for $750 at an auction. Now Amy can no longer get to work. Amy lost her job. Worry and stress put her in the hospital. Now, the hospital is suing her for non-payment; she has no job so she has no insurance.
What is not mentioned or even considered is that Amy Poormom needed the initial title loan because no one in her family was willing to provide her with the $500 she needed for tires and brakes on the car. The auto title loan company actually enabled her to gain another 12 months to get her life back on track. It could be said that had the auto title loan company not come to her aid and provided some hope for Amy, the ultimate outcome would have come earlier. Perhaps the family should have performed an intervention to help her with her crack habit?
Ok, if you’re reading this you may think we are getting carried away. But these are real-life events.
ENOUGH OF THIS! If you’re so inclined, make some serious cash and use your profits to give back to your community any way you see fit. (Note that Warren Buffet owns MANY mobile home parks. He makes a LOT of money with them. He takes a LOT of heat because of the way they are operated. Warren gives $$$ back…)
Back to title loan business profits.
States and provinces having specific auto title loan statutes and fee structures typically prescribe 3% – 30% per month on the principal loaned; 25% being the average in the USA. Thus, a $1500 loan for a 30 day time period could yield total interest payments of $45 to $375 with no portion applied to the principal. Thus, if after 6 months, the consumer continues to “roll-over” this loan they will have paid as much as $2250 in fees/interest. The balance due would remain $1500!
$500.00 borrowed for a 30 day term will typically cost $125 including miscellaneous fees. The actual range is roughly $75 to $190 depending on the state/province and the exact circumstances of the borrower.
After you enter the title loan business, you’ll be pleasantly surprised by the number of customers who will have a late model Lexus or Mercedes. It’s amazing how many people receive settlements and use the proceeds to purchase a new luxury car. Later they experience cash-flow problems and need your help. And they have the car titles!
Even in a state like Florida where the title loan statutes prescribe an interest rate of 30% per annum, it’s a simple matter to put $250,000 “on the street” in auto title loans. This would yield a gross of $75,000/year versus a CD earning $15,000. By the way, Florida title lenders are very creative. They add on road service fees, application fees, up-front loan matching fees… achieving SUBSTANTIAL ROI’s.
Title loan clients may not be totally bereft, but they are in trouble and are willing to borrow money at interest rates dwarfing those of a conventional bank loan; ranging from 17 percent a month (204 percent APR) on $500 or less to 10%, 20%, 30% percent a month on more than $5,000.
“Your job is your credit” rings very true in our industry. We have a Texas title loan operator having 300 people bringing him $40 per week. That’s $12,000 per week! If the car breaks down, he has it fixed and adds it to their loan.
A great number of auto title loan lenders add on several fees to improve their ROI’s and provide incentives to their clients to pay on time. These include but are not limited to:
* A $15 fee if a collection letter must be mailed to the consumer
* A $25 returned check fee Late fees (5% is typical)
* Should a collector be sent to their door, a $50 to $100 fee is imposed
* Deficiency fees are collected should a sale of the vehicle yields less than the amount owed.
Alright. If you found this interesting, PLEASE TELL ME: Jer@AutomobilePawn.com
And, if you’re ready to jump into the Title Loan Industry,
GO HERE and invest in our 300+ page “How to Start a Title Loan Business Manual.”