Quote:
Originally Posted by wtwo3
Again I think you're not understanding.
Let me put this another way. The biggest risk is what's unknown, regardless of metric category. A debt-to-income of 100% isn't a risk... you know why? cause it'll get denied. It's manageable risk because it's KNOWN. When you apply for credit, the lender calculates your debt-to-income. You then either meet the threshold or you don't. Simple as that. Unless you're hiding debt off the books, it's a known variable. I'm not talking about what metric impacts your credit score the most on credit karma.
Lack of credit history presents a completely unknown variable into the underwriting decision. BMW is choosing to give out loans with limited credit history in order to compete in this segment, and as such that is undoubtedly the biggest level of risk attributed to THIS segment.
You're also misrepresenting the basis of BMWs additional requirements of 45% debt to income and automotive payment to income of 20%. Those figures are actually higher than what auto lenders typically look for. Lenders typically look for a ~36% debt-to-income ratio for traditional auto loans. So they're giving more leeway to college grads assuming they'll have higher debt to incomes (mainly because incomes of recent college grads are typically significantly lower). Which is the opposite of your original basis of "college grads have a high chance of low debt to income".
As for the cost of the program. I'm saying it doesn't cost them anything to "offer" it. It doesn't have any inventoriable costs associated with it nor developmental costs. The $1,000 is NOT an up-front cost as you mentioned. It's a post-sale incentive. The very nature of offering it is to increase sales in that particular segment. If college students were clamoring to purchase a BMW, THAT'S when BMW would be incentivized to NOT offer the program. You can draw parallel to the current automotive climate vs. the climate 4 years ago. There was a lack of interest in cars, and that's when BMW offered the highest incentives. Now that everyone wants a car, many of those incentives are reduced or completely eliminated.
|
Totally off topic - just wanted to add my stupid 2 cents in here - again totally off topic - I have been a customer of BMW Financial for 16 years in 2024. I have owned 8 BMWs - during this time - there were moments I had very weak credit but solid down payments and was approved. When I asked why - they said I have never missed a payment plus $5,000 to $10,000 down each and every purchase helps. I am pointing out that credit at times has nothing to do with approvals. I just put $70,000 down on my M4 (but also had good credit) - I heard a down payment of 20 to 30% or more - gets you a GUARANTEED APPROVAL.
