Case Study 26-1 — Devon Wallace, Done Right (Start to Finish)

A fully worked subprime deal, from the first nervous hello to the refinance a year later. All figures are illustrative teaching numbers; Devon, Jordan, and Priya are composites. This is the deal the chapter builds — gathered here in one place so you can study the whole arc.

The setup

Devon Wallace, 23, walks the used lot at Summit Auto Group on a Thursday afternoon. His old sedan threw a rod two weeks ago. He's a month into a distribution-center job thirty minutes away that fires people for being late, and he's already been late twice catching rides. Two years ago, a different dealer put him in a $499 SUV payment he couldn't afford; it was repossessed after four payments. That repo, plus two collections and a thin file, put his score around 580.

His income: ~$2,600/month gross**, with about **14 months in the same line of work** (the current job is newer, but he has time in field). He has **$2,500 he can put down — money he's been saving precisely because last time he had none.

Jordan Banks, the salesperson (the reader's stand-in throughout this book), has been told by the desk to treat every special-finance deal as a chance to do the hardest thing in the business right. Priya Nair, the F&I manager, will structure and submit it.

What happens

Step 1 — Stakes before credit

Jordan doesn't lead with a car or a credit app. He asks what the car is for. Devon explains the job and the two latenesses. Jordan reframes it out loud: "This isn't about a car, it's about keeping a job you want to keep." Goal established: reliable + affordable, not flashy.

Then, gently, the credit question — "there's no wrong answer." Devon braces and admits the repo and the ~580. Jordan thanks him for the honesty and tells the truth: 580 means specialty lenders, a higher rate than he'd like, some rules about the car and the down — and that a deal done right can rebuild his credit toward a refinance in about a year. Devon's shoulders drop. Someone finally offered a path instead of a trap.

Step 2 — The right vehicle

Jordan starts from the lender's box and the affordable payment, not from a car Devon's eye lands on. He picks a clean, late-model used sedan priced $13,995** that books (wholesale) at about **$11,500 — within the subprime lender's age/mileage and value limits, cheap to insure, cheap to maintain. When Devon's gaze drifts to a $19,000 SUV, Jordan doesn't say "you can't afford that." He says: "That one's a great truck. For what you need — getting to work, every day, on a payment that won't stress you — this sedan is honestly the smarter buy. Let me show you why with the numbers."

Step 3 — Structure and submit

Priya builds the deal:

  Selling price ..............................  $13,995.00
  Sales tax (6%) .............................  +  $839.70
  Doc fee ....................................  +  $599.00
  Title / registration .......................  +  $401.00
                                                ───────────
  Subtotal ...................................   $15,834.70
  Down payment (cash) ........................  − $2,500.00
                                                ───────────
  AMOUNT FINANCED ............................   $13,334.70   ≈ $13,335

She submits with strong stips ready: 30 days of pay stubs (POI), a utility bill (POR), three solid references, proof of full-coverage insurance lined up, and the employer's HR line for verification. On the lender call, she advocates Devon as a good risk: "Steady W-2, 14 months in the same field, clean POI, three references, $2,500 down, 116% LTV, payment at 13% PTI." All true. All persuasive.

The lender approves at a 17.9% buy rate. Summit's consistent, disclosed subprime policy adds 1 point → 18.9% sell rate.

Step 4 — The payment, worked

Using the installment formula (Ch 22 §22.5), P = $13,334.70, r = 0.189/12 = 0.01575, n = 60:

   M = (13,334.70 × 0.01575) / (1 − 1.01575^−60)
     = 210.02 / 0.60978
     ≈ $344.43   →  ~$345/month

Checks against the caps:

Step 5 — The honest term trade-off

Priya shows Devon the choice rather than quoting only the lowest payment:

"We can get you to $311 at 72 months, but it costs you ~$1,700 more in interest and keeps you upside down longer — and we want you refinanced in a year. My honest rec is the 60. Your call." Devon takes the 60.

Step 6 — Twelve months later

Devon pays on time, every month. He budgets the insurance because Jordan flagged it on day one. By month ~13, his score reaches near-prime (~640). Priya's team reaches out: the ~$11,565** remaining balance refinances at **~9.9% over 48 months** → payment **~$293 — about $52/month less — for the same car. Devon is no longer upside down, and he has a year of "pays as agreed" on his report.

Eight months after that, his sister needs a car. She asks Devon where to go.

Analysis — what worked and why

• Stakes-first. Leading with the job (not the credit) reframed the goal to affordable + reliable and built trust with a customer primed for predation. The whole deal flowed from that reframe.
• Vehicle chosen from the box. Starting from the lender's limits and the affordable payment — not a car Devon fell for — produced a deal that funded on the first submission and a payment he could carry.
• Down payment as structure, not a grab. The $2,500 kept LTV at 116% (with room) and PTI at 13.3% (with room). That margin of safety is what made the deal both fundable and survivable.
• Honesty as method. Showing the term trade-off and recommending the option that served Devon is the chapter's ethic in action — and it's exactly what earned the refinance, the repeat, and the referral.
• The on-time payment was the product. The car was collateral; the affordable payment was the medicine. Orienting everything around "can he make this payment every month?" made every other decision right automatically.

The business result: a modest front-end deal that bloomed into a refinance, a second sale, a referral pipeline of rough-credit customers with almost no honest competition, chargeback-free income, and five-star reviews. Theme #3 (ethics are profitable) proven in the hardest place to prove it.

Discussion questions

1. Identify the single moment that set the tone for the entire deal. What would have happened if Jordan had led with the credit app instead?
2. The $2,500 down payment did four things at once. Name them. How would the deal have changed at $1,000 down?
3. Why did Priya show the term trade-off instead of quoting only the $311 payment? What does the predator's version of step 5 look like?
4. Trace the causal chain from "affordable payment" to "referral." Where could a single greedy decision have broken it?
5. Devon's rate was 18.9% — high. Was this deal still "good" for Devon? Defend your answer using the refinance outcome.

Your turn (mini-task)

Re-run Devon's deal with **$1,200 down** instead of $2,500 (keep everything else the same). Compute the new amount financed, the 60-month payment, the PTI, and the LTV. Does it still fit a 120% LTV cap? Write two sentences on whether you'd still recommend the 60-month term at the higher financed amount — and why.