Company: CPSS
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001683168-25-001548
Chunk: 9

Company: CONSUMER PORTFOLIO SERVICES, INC.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 1
Chunk 9
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 if the dealer breaches its
representations or warranties. There can be no assurance, however, that any dealer will have the willingness or the financial resources
to satisfy their repurchase obligations to us.

Contract Funding

For automobile contracts that
we purchase from dealers, we require that the contract be originated by a dealer that has entered into a dealer agreement with us. Under
our direct lending platform, we required the customer to sign a note and security agreement. In each case, the contract is secured by
a first priority lien on a new or used automobile, light truck or passenger van and must meet our funding criteria. In addition, each
automobile contract requires the customer to maintain physical damage insurance covering the financed vehicle and naming us as a loss
payee. We may, nonetheless, suffer a loss upon theft or physical damage of any financed vehicle if the customer fails to maintain insurance
as required by the automobile contract and is unable to pay for repairs to or replacement of the vehicle.

Our technology and human expertise
provides for a 360-degree evaluation of an applicant’s employment and residence stability, income level and affordability, and creditworthiness
in relation to the desired collateral securing the automobile contract. This perspective is used to assign application and structure allowances
and limits related to price, term, amount of down payment, monthly payment, and interest rate; type of vehicle; and principal amount of
the automobile contract in relation to the value of the vehicle.

Specifically, our funding
guidelines generally limit the maximum principal amount of a purchased automobile contract to 125% of wholesale book value in the case
of used vehicles or to 125% of the manufacturer’s invoice in the case of new vehicles, plus, in each case, sales tax, licensing and, when
the customer purchases such additional items, a service contract or a product to supplement the customer’s casualty policy in the
event of a total loss of the related vehicle. We generally do not finance vehicles that are more than 15 model years old or have more
than 200,000 miles. The maximum term of a purchased contract is 78 months, although we consider the program, amount financed, and mileage
as significant factors in determining the maximum term of a contract. Automobile contract purchase criteria are subject to change from
time to time as circumstances may warrant. Prior to purchasing an automobile contract, our funding staff verify the customer’s employment,
income, residency, and credit information by contacting various parties noted on the customer’s application, credit information bureaus