One of the most difficult purchases a person of low income or poor credit can attempt is for a new or good pre-owned car. Most auto dealers are not that eager to advance credit to someone with a less than stellar history or score in that regard. After all, creditors prefer someone who is a good risk. That is understandable enough. Financing a car purchase is quite a risk for a financial broker under most circumstances. Loaning money to those persons considered a “bad risk” is usually a losing proposition for the financial agency involved.
And yet, most persons who have been tagged as a “bad risk” are actually hard-working individuals who pay their bills promptly, avoid large debts, and are stable in their life situations. For these persons, that poor credit score usually comes down to a run of bad luck years ago, or one financial reverse that changed everything. They’ve been rebuilding their lives step by step and are trying to fully get back on their feet. And during that time, the need for a new car or a newer car than the one they’ve got may crop up. But then, a poor credit history often serves as a roadblock to any car purchase other than a junker off a corner fly-by-night used car lot.
That’s where Consumer Portfolio Services Inc. comes into the picture. CPS helps people in this position. They are a specialty finance corporation. They provide an indirect channel for automobile loan financing for persons with a challenging credit reputation. They do this through the purchase of retail installment contracts from established auto dealerships for good-condition late model vehicles and a small percentage of new vehicles. In essence, they buy auto purchase securities. Clients deal with them the same way they would with any finance broker or the auto dealership under normal circumstances.
In this way, persons are able to buy a decent car despite having a bankruptcy or a repossession in their past, or with a limited credit history. They benefit not only by being able to buy that car but also to establish a decent credit history by making regular payments. For investors, CPS monetizes these credit risks, turning them into profitable assets that amount to a multibillion dollar portfolio. And for auto dealers, CPS offers another avenue of retail sales to take advantage of and thereby increases their own revenues with little to no risk involved.