Entitlement or Priviledge?

I am consistently amazed at customers who come in thinking that, despite the fact that their last vehicle was just repo'd, they want to get another loan without putting any money down. It seems that these customer believe that credit is a right, or entitlement, and that regardless of their past credit history, or lack thereof, they shouldn't have to put any money down in order to get a loan.

Well, I've done some research on this matter, and to no one's surprise, the Founding Fathers were very explicit on the rights we bestow on our citizens. Freedom of speech, religion, assembly and such were all spelled out very clearly. But no where in the Constitution could I find a reference to the right to "buy now and pay later".

I tend to believe that credit is a relatively new concept. Folks in colonial America may have had credit arrangements, but they were more likely than not between merchants and customers that knew each other first hand. Long relationships had already been established, and credit, as it was, was limited in depth and term. Small amounts for short terms, until the harvest, or the sale of a horse, or some other transaction would occur, to make good on the debt incurred. It made sense, since there was little mobility in those days, and it wasn't hard to find someone who owed you money. You rode out to their farm and asked for repayment, whether it be cash or collateral didn't matter.

Today, banks lend at more than an arms length from a customer. Few, if any of our customer actually meet the people who are loaning them the money, and so lenders look for some commitment on the part of these customers with regard to the loan. There is no "right" to credit, it is really a privilege that must be earned. Stability and ability are fine attributes in an applicant for a loan, but far too many lenders learned the hard way that, simply because a customer looks like they can afford the payment, that doesn't necessarily mean that they WILL pay them. A commitment to or "customer participation" in the loan won't insure that the payments will be made, but at least the lender knows the customer has a stake in the game. I often tell my customers that their credit challenges can be overcome with a significant commitment on their part to the transaction.

The lack of a satisfactory payment history shouldn't preclude a customer from getting a loan, it just means that they have to prove that they will actually make the payments. For too many years, auto credit was a three strike deal - regular finance, special finance, and last but not least, buy here pay here. Customers knew that they could simply stop paying on their current loan and go down the street and get another car with little problem. Lenders were flush with cash and eager to over extend credit to folks who shouldn't have gotten it. Now we all are paying the price.

There is now guaranteed right to credit. Maybe I need to right the "Credit Challenged Bill of Rights"? Kind of like the Miranda rights you hear on all those cop shows and movies. Hmmm...