We got deals! Leases!

December 30, 2011 5:20 PM

Car dealers have found a new way to profit from people with money trouble: leasing them hand-me-down vehicles. 'The deals are pitched to customers as the cheapest way to drive a used car off the lot, with the added benefit of an easy escape for those who can't keep up with the payments. Few customers are told about the advantages on the other side of the trade. Leases can allow dealerships to sidestep interest rate caps, and there are fewer financial disclosures rules than with a conventional car loan.' 'As with Buy Here Pay Here, the leasing business caters to the millions of Americans who have been forced by a sour economy to make do with less.'

'The dealers get a tax advantage: They can pay income tax on the sale over time, instead of in a lump sum upfront.

When payments are missed, repossession is a snap because the dealer still owns the car. And lease terms, unlike auto-loan payments, cannot be reduced by a Bankruptcy Court judge.

These benefits have led thousands of used-car dealers, including many in the lucrative in-house financing sector known as Buy Here Pay Here [Previously], to move into leasing, industry sources say.'

'Michael Yslas of Lakewood, who sells bowling equipment, wound up leasing a 2001 Chevrolet Silverado pickup after being turned down for several new-car loans because of unpaid medical bills that hurt his credit rating.

He came to regret the lease, saying the $1,500 upfront fee and monthly payments of $411.56 were excessive for a truck with 139,000 miles on the odometer.

"My thinking was that if I lose that truck, I lose my job," Yslas, 40, said of his initial decision.

His boss eventually helped him find a better deal on a car, but Yslas said that when he tried to cancel the lease, Coast to Coast Motor Cars in Costa Mesa pressured him to lease a Mercedes-Benz instead and harassed him with threatening phone calls when he declined.

Yslas filed suit in Los Angeles County Superior Court last month over the dealership's practices. The case is pending.'

posted by VikingSword (49 comments total)

I am honestly amazed it took them this long to think of this.
posted by Tomorrowful at 5:24 PM on December 30, 2011 [7 favorites]

Argh this makes me so GRAR! My credit union is getting some recognition these days for a fantastic auto-purchase program that includes financial education and vehicle maintenance training as part of the loan requirements. It is a really excellent program, especially since there isn't a great public transport system here. There are plenty of buy-here-pay-heres and "title loan" places around here and they make me really angry. How can you sleep at night fucking people over who have NO MONEY?!
posted by headnsouth at 5:30 PM on December 30, 2011 [5 favorites]

And the poor stay poor.
posted by spoobnooble at 5:31 PM on December 30, 2011

Link thing's not working for me, so just text:

http://www.latimes.com/business/buy-here-pay-here/la-fi-buy-here-pay-here-part1-storyb,0,4616431,full.story
posted by aerotive at 5:39 PM on December 30, 2011

aerotive, that story was the basis of an FPP here, and I gave credit to that in my [Previously] link. But yes, these should be read in tandem.
posted by VikingSword at 5:49 PM on December 30, 2011

I've never understood the leasing concept, either for a new or used car. Is the appeal that it's structured for people who can't pay upfront for a car or qualify for financing?
posted by computech_apolloniajames at 5:52 PM on December 30, 2011

It's not really that new of an idea, basically the leasing model moved downstream and with onerous penalties. Terrible rates for terrible cars for people with terrible credit.

On a macro level what's really abhorrent is that there are tremendous pools of cash that could be going toward (granted: high interest) car loans and generating 10x what a t-bill produces, even counting on defaults. That's bad too but at least people could theoretically own their car at some point. Wealth holders are more comfortable lending to businesses (who then use the vehicles to make money and pay back debt) or not lending at all and that's scary.
posted by 2bucksplus at 5:52 PM on December 30, 2011

I've never understood the leasing concept, either for a new or used car. Is the appeal that it's structured for people who can't pay upfront for a car or qualify for financing?

Lots of high-end cars are sold this way (like BMWs, etc). I think the idea is you're so rich that you know you're going to upgrade in two years anyway, why go through the trouble of actually buying a car? I imagine it's somewhat less of a hassle.
posted by delmoi at 6:07 PM on December 30, 2011 [3 favorites]

Leasing really only makes fiscal sense if it is being done for business, because fleet cars turn over fast enough that the tax write off comes into play. In addition it may make sense when leasing high cost, fast depreciation vehicles, when the driver trades the car in every 18-36 months, because the user has a stable monthly cost, but bears none of the depreciation. (as I understand it.)

But for regular people, w/o good accountants, it seems a silly way to "get" more car than can actually be afforded. For poor people, this is just usurious rent-to-own, which is always bad fiscal juju.

Poor people getting fucked by the money men. Same as it ever was.
posted by dejah420 at 6:20 PM on December 30, 2011 [2 favorites]

Leasing = Renting

Useful in certain conditions, but not for everyone.
posted by blue_beetle at 6:25 PM on December 30, 2011

How can you sleep at night fucking people over who have NO MONEY?!

An acquaintance of mine who worked at a Rent a Center said something to the effect of "if I don't steal their money, someone else will."

I'm not about to give that any moral backing, but it was the justification used by those in that scumbag industry.
posted by Mister Fabulous at 6:48 PM on December 30, 2011 [3 favorites]

Sounds like a pretty smart business model to me.

People who patronize such a business do so because they have such shitty credit nobody else will give them the time of day. And/or they're ignorant. Either way, thems the breaks. In the case of Mr. Yslas, it might have been both. I mean, really, a $1500 non-refundable "down payment", plus $411/mo rental for a 10 year old high mileage pu?!?!The article makes him out to be something of a mark for making this deal. And unlike the previous post on Buy Here Pay Here dealerships, where actual unsavory practices did seem to exist, the pretext for outrage here is even more thin.
posted by 2N2222 at 6:58 PM on December 30, 2011 [2 favorites]

Let's see:

you lease your house from the bank for 30 years

you lease your transportation (new or used)

you lease your education (on borrowed student loans)

you lease your identity (assuming you're on Facesuck)

you lease your labor (interns, anyone?)

next: fuel? food? air? water?
posted by Vibrissae at 6:58 PM on December 30, 2011 [4 favorites]

The article makes him out to be something of a mark for making this deal.

Another word for mark is victim.

"if I don't steal their money, someone else will."

Given that his marks are people with poor judgment and/or nothing left to lose, he might want to be careful how loudly he repeats that justification.
posted by justsomebodythatyouusedtoknow at 7:09 PM on December 30, 2011 [1 favorite]

His boss eventually helped him find a better deal on a car, but Yslas said that when he tried to cancel the lease, Coast to Coast Motor Cars in Costa Mesa pressured him to lease a Mercedes-Benz instead and harassed him with threatening phone calls when he declined.

The part I've bolded is a cardinal sign of involvement by organized crime.
posted by jamjam at 7:11 PM on December 30, 2011 [5 favorites]

He came to regret the lease, saying the $1,500 upfront fee and monthly payments of $411.56 were excessive for a truck with 139,000 miles on the odometer.

This claim does not pass the straight-face test.

I currently have a lease (advertised, not special because of my good credit) on a brand-new hybrid for just a hair over $200/month with nothing down.
posted by pla at 7:17 PM on December 30, 2011

Vibrissae: Let's see:

you lease your house from the bank for 30 years

Actually, fixed-rate mortgages are a great deal. As structured in the US, you take out a loan, buy a house, and repay the loan over time. You keep all the upside if the house increases in value... all the bank gets to keep is the interest, which these days, isn't very high. And if your life goes sour and you stop paying the loan, the bank typically bears most of the financial risk.

Honestly, that's about as consumer-friendly as it gets, particularly in non-recourse states, where all the bank can do is take the house if you don't pay.

It's the anti-lease in most respects. You get the bulk of the benefit, they run the bulk of the risk.
posted by Malor at 7:32 PM on December 30, 2011 [8 favorites]

In Texas, the described transaction likely wouldn't be a lease since the Finance Code says that a "lease" is a sale whenever the amount paid in a retail installment contract is equal to or greater than the market value of the property purchased plus interest (even if the lease purports to be a lease because a final "acquisition payment" of a "token amount" is paid prior to ownership transferring).

The Article: Some leasing dealers admonish customers that if they don't keep up with payments, they could be arrested for possession of stolen property.

This is why every person ever engaging in a transaction of more than a few bucks should remember to never, ever accept legal advice from the other party signing the contract.

Sleazy transactions are sleazy, but outright lying about possible outcomes and repercussions is beyond nasty.
posted by fireoyster at 7:33 PM on December 30, 2011 [3 favorites]

when he tried to cancel the lease, Coast to Coast Motor Cars in Costa Mesa pressured him to lease a Mercedes-Benz instead and harassed him with threatening phone calls when he declined.

The part I've bolded is a cardinal sign of involvement by organized crime.

I worked in the high-risk car financing biz for a few years, very near Costa Mesa, in fact, and in my experience this is also a sign of a small car dealership that's run by a guy and his uncle and maybe cousin. I never saw any evidence that it went beyond that... but my job was to deliver checks and pick up contracts, so I could be mistaken.

I got out as soon as I could, but there are people who just thrive on it, who are perfectly happy making insane loans to people and then taking their cars if they can't pay. Their justification was always, "Hey, he wouldn't have a car if it weren't for us...", which was perfectly true, but it led to regarding desperately poor people as less than human.
posted by Huck500 at 7:46 PM on December 30, 2011 [5 favorites]

I currently have a lease (advertised, not special because of my good credit) on a brand-new hybrid for just a hair over $200/month with nothing down.

My guess is that Yslas doesn't have the credit score to get this deal.
posted by desjardins at 7:57 PM on December 30, 2011 [2 favorites]

Loans to the poor should be interest-free. Risk my ass, the high interest creates the risk.
posted by roboton666 at 8:00 PM on December 30, 2011 [4 favorites]

desjardins : My guess is that Yslas doesn't have the credit score to get this deal.

I considered that before posting, but seriously? at 140k miles, credit ratings aside, he fronted an amount in the same ballpark as if he simply bought it outright. And then he paid 1/4th to 1/3rd its value again every month for the lease? That just does not add up, no matter how bad a credit rating he has.


roboton666 : Loans to the poor should be interest-free.

And the motivation to make such loans would come from...?
posted by pla at 8:11 PM on December 30, 2011 [1 favorite]

I wonder if any folks could escape such a lease as unconscionable.
posted by exogenous at 8:11 PM on December 30, 2011

I think the idea is you're so rich that you know you're going to upgrade in two years anyway, why go through the trouble of actually buying a car?

I have a friend who leased cars for exactly that reason— he liked driving new-model cars, and said it worked out cheaper and less hassle to lease them for a year or two than to go through the process of buying and selling them all the time. Of course it'd be cheaper still to keep one car for ten years, but that isn't what he wanted to do.

(I assume the majority of car leasing is to companies who keep a fleet of cars and want to be able to change the size of the fleet and update the cars easily.)
posted by hattifattener at 8:24 PM on December 30, 2011

The dumb thing is that leasing a used car "should" be a pretty good deal. In theory, the lease payments you make are basically just paying for the depreciation on the car. Since most of the depreciation happens in the first year or so, a lease on a two year old car should be really cheap.

For a non-business, leasing is a low-hassle way to get yourself a new car every few years. The only real advantage is has over buying is that, if the car isn't worth as much after three years as you thought it would be, you get give the car back and it isn't your problem. If it is worth MORE that the buyout price at the end of the lease, you can turn around and sell it and pocket the difference.

If you compare the overall cost of leasing a new car for two years and then buying it at the end of the lease with a three-year loan with buying the same car on a five year loan it's usually a wash.

Conversely, if you compare a two-year lease with buying a car on a five year loan and then selling (not trading in but selling it private party) it at the end of two years it will probably be a wash as well. With a lease, you have an out if the car depreciates faster than expected because, lets say, they had issues with "unintended acceleration" or something similar.

So long as you're in the right situation and you do the math, leasing can be a good deal. It "should" be an even better deal to lease a used car.
posted by VTX at 8:33 PM on December 30, 2011 [1 favorite]

I considered that before posting, but seriously? at 140k miles, credit ratings aside, he fronted an amount in the same ballpark as if he simply bought it outright. And then he paid 1/4th to 1/3rd its value again every month for the lease? That just does not add up, no matter how bad a credit rating he has.

This is the thing that confuses me. I had terrible credit at one point, after recovering from a bankruptcy, so I can relate, but I think a big part of escaping poverty is knowing when to walk away from a bad deal.

It seems to me that where people like this guy get hung up is that they are dumb. I don't mean that in a moralizing way - like they deserve to get ripped off; they don't. and I've certainly had my bouts of idiocy...

I mean that getting that loan was an objectively bad decision, and that should have been apparent to him from the outset. I get that people in his position don't have many options - I know from experience - but alternatives do exist.

I guess the point that I am trying to make is that if you believe people should be free, it follows that they should have the freedom to be dumb. I'm all for making the terms easily understood and the fine print crystal clear - there should be transparency above all else - but if the dude wants to lease a car for what amounts to 37% interest, well... A fool and his money and all that should apply.
posted by Pogo_Fuzzybutt at 8:52 PM on December 30, 2011 [2 favorites]

I currently have a lease (advertised, not special because of my good credit) on a brand-new hybrid for just a hair over $200/month with nothing down.

As others have noted, the advertised rates presuppose your good credit. This is how advertising works, and not just for leasing. I'm not sure what your employment situation is, but if you have good credit and are not utterly dependent on an automobile for your employment (ie, you can get public transportation or can carpool etc.) there's an entire world of pain that you may never have even realized exists.

A good friend spent a couple of years as a rep for a distribution company, and his job required him to provide his own transportation to deliver some of the product. When he managed to get the job, it wasn't just a matter of getting a ride to work -- hauling stuff from site to site was his work. He not only needed a vehicle that could do that, he needed to have it every single day and he needed it immediately, or he couldn't make money. Period. End of story. He was incredibly fortunate in the he was able to borrow a car for a short period of time while he tried to find permanent transportion, but he didn't have the luxury of hunting around for a good deal on a used car.



at 140k miles, credit ratings aside, he fronted an amount in the same ballpark as if he simply bought it outright. And then he paid 1/4th to 1/3rd its value again every month for the lease? That just does not add up, no matter how bad a credit rating he has.

The used car market went through a significant squeeze for a couple of years; I had family members who hunted for a year plus change to find a used car that wasn't a complete piece of trash. They had very good credit. On my wife's side, family members with poor credit and no cash reserves literally had to beg friends for 15-20 year old hand-me-down sedans. I'm not sure if it was regional, specific to their situation, or what.

I have a used sedan that has the same number of miles as the truck in question. It's older. And its value, currently, is apparently about $3500. I'd run some careful numbers before glibly asserting that the guy was just dumb and that the numbers don't "add up."
posted by verb at 8:56 PM on December 30, 2011 [7 favorites]

I guess the point that I am trying to make is that if you believe people should be free, it follows that they should have the freedom to be dumb. I'm all for making the terms easily understood and the fine print crystal clear - there should be transparency above all else - but if the dude wants to lease a car for what amounts to 37% interest, well... A fool and his money and all that should apply.

While this is true in some respects, the problem is that it also exists in a world of highly politicized and moralized value judgements about people, the work that they do, and the money that they possess or do not possess. If, for example, "walking away from a bad deal" means not getting a job that requires transportation... and you've burnt through your unemployment benefits... what's the option? People shouldn't panic when they're drowning, either. That just makes them drown faster.
posted by verb at 8:59 PM on December 30, 2011 [5 favorites]

Did the LA Times try to find Lease Here Pay Here dealerships that had reasonable rates? Were any found? Or, did they just go with the piss-yellow spin?
posted by Ardiril at 9:00 PM on December 30, 2011

If, for example, "walking away from a bad deal" means not getting a job that requires transportation... and you've burnt through your unemployment benefits... what's the option?

Find a cheaper car ? Look, he's paying 400+ per month on his car. If he's got a job that covers that, and food, and rent, and everything else, then for 1500 bucks he can buy a 2 beaters that will last the three months to double his down payment and he might get lucky and go 6 months and triple it. Or something.

Point is, there are always alternatives. It's getting a car, not the Kobayashi Maru.

And again, I know from being there - I fought like hell to get out of that hole. It's hard. Way harder than it should be - I fully agree. The Deck is Stacked. And like you said - "People shouldn't panic when they're drowning, either. That just makes them drown faster." And harder to save, too.

And yet, they do just that.
posted by Pogo_Fuzzybutt at 9:50 PM on December 30, 2011 [3 favorites]

And again, I know from being there - I fought like hell to get out of that hole. It's hard. Way harder than it should be - I fully agree. The Deck is Stacked. And like you said - "People shouldn't panic when they're drowning, either. That just makes them drown faster." And harder to save, too.

And yet, they do just that.


This isn't the story of someone who tried to save him, however. This is the story of a business that saw a drowning man and sold him a life vest full of sand.
posted by verb at 10:03 PM on December 30, 2011 [6 favorites]

Malor: Actually, fixed-rate mortgages are a great deal. As structured in the US, you take out a loan, buy a house, and repay the loan over time. You keep all the upside if the house increases in value... all the bank gets to keep is the interest, which these days, isn't very high. And if your life goes sour and you stop paying the loan, the bank typically bears most of the financial risk.

Honestly, that's about as consumer-friendly as it gets, particularly in non-recourse states, where all the bank can do is take the house if you don't pay.

It's the anti-lease in most respects. You get the bulk of the benefit, they run the bulk of the risk

Malor, the American housing market was a good deal up until about 1970. After that, the returns to labor for both men and women started to go into decline. The returns to capital (for lenders), by comparison, increased (and continue to increase, on a relative scale).

I have had close friends - including well before the boom - lose their homes to a bank. One person who was especially close to me lost her home, owing only $5K in property taxes and back mortgage payments. She never asked for help, and by the time I found out it was too late. I don't see that as a risk share.

I also don't see a risk share in the way that mortgages are structured, with interest being paid *first*, and principal scaling in only after some years. Where's the risk in that. If anything, it's a hedged risk in favor of the bank.

As far as what the bank gets to keep, interest rates have historically not been as low as they are now. Banks made out like bandits, over decades, on fixed rate mortgages.

I don't see where the "deal" is. I'm not a libertarian, but I having watched what financial institutions have done to American capital, I'm slowly coming around to the libertarian position on banking, and the Fed. In fact, I think we could do very nicely with a "National Bank". We don't need private commercial banks. They don't offer service; they are completely risk averse (think about it), and they have screwed with our laws to make rapacious lending practices and service overcharges legal.

Another thing: just look at the crappy quality of housing that gets built. Who finances that? Why aren't houses built with generations of use in mind? Seriously, the entire housing ecology is screwed, and financed by people who purchase policy-making in America. There may have been a time when a mortgage was a "good deal" for the average Jane, but that situation is no longer universal - in fact FAR from it.
posted by Vibrissae at 10:33 PM on December 30, 2011 [4 favorites]

This isn't the story of someone who tried to save him, however. This is the story of a business that saw a drowning man and sold him a life vest full of sand.

Not even. This is a business very much in the practice of saving a drowning man. Not for the sake of saving hopeless causes, of course. It exists because other, more respectable businesses will definitely leave these folks to drown without any consideration. They serve a function for people who need to take a shitty deal because the alternative is drowning.
posted by 2N2222 at 11:22 PM on December 30, 2011

This is weird. It feels like I'm agreeing with malor and pla.

Michael Yslas of Lakewood did not 'wind up' renting this truck. He signed a contract. It was, apparently, a shit contract. One which he probably shouldn't have signed. Can you not just buy a shitbox truck for $1500 (or even 2 grand, and borrow the difference of one-month's payment for one month?)?

I reckon you could get a running ute here for that, and everything not made of kangaroo is cheaper in the US than here.

Poor people being taken advantage of is a bad bad thing, but daft people being taken advantage of is never going to stop.
posted by pompomtom at 12:59 AM on December 31, 2011 [1 favorite]

They serve a function for people who need to take a shitty deal because the alternative is drowning.

Bullshit. There ARE viable alternatives, through credit unions, through nonprofit programs, all over the place. But the alternatives are under the radar because they don't advertise, and that's because they don't make huge profits charging desperate people usurious interest rates and fees.

So yes, the poor people are suckers because they don't know they have options. Profiting off of their desperation is fourth circle of hell behavior.
posted by headnsouth at 5:33 AM on December 31, 2011 [4 favorites]

I'm slowly coming around to the libertarian position on banking, and the Fed. In fact, I think we could do very nicely with a "National Bank". We don't need private commercial banks.

One of us has misunderstood the Libertarian position on banks, I think.
posted by Horace Rumpole at 6:51 AM on December 31, 2011 [1 favorite]

Michael Yslas of Lakewood did not 'wind up' renting this truck. He signed a contract. It was, apparently, a shit contract. One which he probably shouldn't have signed. Can you not just buy a shitbox truck for $1500 (or even 2 grand, and borrow the difference of one-month's payment for one month?)?

That's what I was referring to earlier - I have had friends and relatives who were not, in fact, able to do that. There have been times when the regional situation was such that they simply could not find used transportation for that dollar amount -- it took them weeks, actually months, of hunting. It is unlikely that he had the option of telling his employer to keep the job open for him while he hunted for a car.

Not knowing the precise availability of automobiles in his area at the time that he purchased the truck, I can't say there were no other options -- there probably was something he could have done, but he may not have been aware of it. As headnsouth points out, most of the alternatives are under the radar. Credit Unions, for example. Witness the recent Bank of America/Move to a Credit Union thread here on MetaFilter. A bunch of highly connected internet savvy folks on MeFi were left asking each other for advice on how to find local credit unions, and many discovered there simply weren't any around them. The fact that options exist where you are does not mean that options exist everywhere. And for those who don't have access to those options, things can be scary indeed.


Poor people being taken advantage of is a bad bad thing, but daft people being taken advantage of is never going to stop.

Perhaps not, but the question is whether 'daft' and 'desperate' are the same thing. One of the strangest things about our culture in the past several decades is the re-branding of predatory business behavior as 'self defense.' Businesses do not give out loans as an act of kindness: they do it because it is profitable. They have successfully argued that in order to "defend" themselves from bad loans, they should be able to charge higher and higher interest rates, larger and larger penalties, etc. to people who are least able to pay and have few other options.

I guess I'm just saddened by the lack of compassion towards people who lack a range of choices. Even if there is not a specific legal remedy that could prevent this from happening in the future, simply brushing the poor off as "daft" or stupid because they didn't hunt for a better deal/pull themselves up by their bootstraps/walk away from the bad job/etc strikes me as rather retrograde.
posted by verb at 6:51 AM on December 31, 2011 [8 favorites]

Building on what verb said, these kinds of rates might be possible because there aren't as many used cars around as there used to be, and they cost more:

http://www.cato-at-liberty.org/as-used-car-prices-soar-clunkers-are-missed/

...is from a right-wing partisan blog, but

http://m.journaltimes.com/news/local/article_37d89b78-b026-11e0-a086-001cc4c03286.html

Says the same thing. Especially if this guy needed a pickup truck for his job, he might not have had another choice.
posted by subdee at 7:16 AM on December 31, 2011 [1 favorite]

"How can you sleep at night fucking people over who have NO MONEY?!"

Hrm. I'm pretty sure that about 70% of all new jobs fall under that category lately...
posted by markkraft at 7:25 AM on December 31, 2011

It's really more like: "If I don't screw somebody over today, I won't be able to sleep tonight."
posted by telstar at 7:52 AM on December 31, 2011

> I've never understood the leasing concept, either for a new or used car. Is the appeal that it's structured for people who can't pay upfront for a car or qualify for financing?

The reason that people lease a car is the payments are cheaper. It is hyperbolic discounting.

The people who run these businesses can be amazingly arrogant concerning what they think they can get away with. William J. Jefferson, felonious former LA congressman made his first million peddling rent-to-own couches and television sets to poor people in New Orleans. He got busted after Hurricane Katrina borrowing a U.S. Coast Guard helicopter to recover coolers filled with 100 dollar bills from his house. (That's the way I heard it--the wikipedia page has the helicopter but no coolers filled with hundred dollar bills.)

A few days after Hurricane Katrina hit, Jefferson used a National Guard detachment to recover personal effects and belongings from his home.
posted by bukvich at 9:07 AM on December 31, 2011

This is why schools should teach consumer math. Teach people how to look at interest rates and do some scenarios about value. How to shop for the best value.

There's a dearth of used cars because cash-4-clunkers got a lot of old cars off the road. So a lot of people with limited choices are even more limited.
posted by theora55 at 2:10 PM on December 31, 2011 [1 favorite]

Michael Yslas of Lakewood did not 'wind up' renting this truck. He signed a contract. It was, apparently, a shit contract. One which he probably shouldn't have signed. Can you not just buy a shitbox truck for $1500 (or even 2 grand, and borrow the difference of one-month's payment for one month?)?

No and no.

First of all, $1,500 is no longer the base price of decency for a used auto, at least not in the Southeast, East Coast, Midwest or Mountain West U.S. (places where I have bought used cars in the last 20 years). It's more like $3,000-$4,000 if you want a car that won't collapse straight into shit a month after you buy it. And that's private party sales, not dealer. I just pulled the craigslist for my area for trucks costing $900 - $1,500, private party only, and got 3 pages of crap. There might have been 3 trucks in the whole list I'd even call on, and only one I'd go to see, and I probably wouldn't buy that one. And I know how to buy used cars. Who knows if this guy does? Furthermore, a Chevy Silverado is not a compact truck, it's a full-size pickup, which is what he needs to sell bowling equipment. Big trucks cost a lot.

And no, he can't borrow the money. Poor people know other poor people, and if they knew anyone with any cash money, they'd have already burnt that bridge.

What he really needs is a friend who knows how to negotiate the auto auction, which is the place that negates all the claims I've made above. However, if he had a friend like that, he wouldn't need a full-size truck to sell bowling gear. He could flip used cars.
posted by toodleydoodley at 3:42 PM on December 31, 2011

From Barbara Ehrenreich's Nickel and Dimed:

It strikes me, in my middle-class solipsism, that there is gross improvidence in some of these arrangements. When Gail and I are wrapping silverware in napkins - the only task for which we are permitted to sit - she tells me she is thinking of escaping from her roommate by moving into the Days Inn herself. I am astounded: How can she even think of paying between $40 and $60 a day? But if I was afraid of sounding like a social worker, I come out just sounding like a fool. She squints at me in disbelief, "And where am I supposed to get a month's rent and a month's deposit for an apartment?" I'd been feeling pretty smug about my $500 efficiency, but of course it was made possible only by the $1,300 I had allotted myself for start-up costs when I began my low-wage life: $1,000 for the first month's rent and deposit, $100 for initial groceries and cash in my pocket, $200 stuffed away for emergencies. In poverty, as in certain propositions in physics, starting conditions are everything.

Poor people are not dumb (okay, some are, the same way some middle class or rich people are dumb, but they're not dumber as a whole.) They're not irrational. And they're not naive; even if they can't calculate compounded interest (and judging by the comments here, I think a lot of posters here would be surprised by the level of financial literacy among low-income people; when financial trickery starts to directly affect your ability to eat, you get savvy, quickly), most are well aware that if something looks too good to be true, it probably is.

It is, as verb says, a problem of options. It's extremely difficult to hold down a full-time job in LA without a car (actually, I'd say it's easier for middle-class and affluent people, who can generally afford to live closer to the major job centers or mass-transit arteries, or get jobs where telecommuting or working from home is an option.) So if your car fails on you, you have to get a new one. The "smart" middle-class option is to take out a loan, or scrape together a few thousand dollars and either put some money down on a new car or buy a new one outright.

But of course, that presupposes that either you have a few thousand dollars that you can spend, or that you have the credit and/or collateral to get a loan with an interest rate that you can afford. If you have neither, things start to look more grim. You still need that car, because you still need a job, but if you're living hand-to-mouth, you start looking for other options. You know--because, after all, you're poor but not stupid--that this isn't a good option, the same way paying $50/night for a motel room isn't a good option, but the alternative is much worse.

It's hard to understand this if you have more options (the Ehrenreich excerpt above is one of my favorites, because it so potently illustrates this blind spot.) It's convenient, too, to allow ourselves to believe that wealth comes mainly from making the "right" choices, because it's terrifying to contemplate the possibility that even doing everything "right" could still leave you impoverished and desperate. The point where things get really bad is when we start allowing one group of people the option to exploit another group's lack-of-options for profit.
posted by kagredon at 3:44 PM on December 31, 2011 [7 favorites]

Sorry, that should be "buy a used one outright." at the end of the second paragraph.
posted by kagredon at 4:12 PM on December 31, 2011

computech_apolloniajames wrote: I've never understood the leasing concept, either for a new or used car. Is the appeal that it's structured for people who can't pay upfront for a car or qualify for financing?

For a new car, leasing can make sense for a certain class of buyers, especially if the manufacturer is offering a subsidized money factor or residual value and/or the vehicle in question depreciates more slowly than average. They can also be completely horrible, same as a loan.
posted by wierdo at 8:49 PM on December 31, 2011

Also, in the interest of hard data, I trawled through used car ads in his area. While the situation may have worsened since he looked for his car, but I can't even find any large trucks in the mileage range that was described. The lowest any of them go is the $9000 range, and those are decade-old trucks with 100,000 miles.
posted by verb at 6:36 AM on January 1 [2 favorites]

Bullshit. There ARE viable alternatives, through credit unions, through nonprofit programs, all over the place. But the alternatives are under the radar because they don't advertise, and that's because they don't make huge profits charging desperate people usurious interest rates and fees.

So yes, the poor people are suckers because they don't know they have options. Profiting off of their desperation is fourth circle of hell behavior.

I suspect unless you know the circumstances this guy lives under, you're not in a position to say he has any alternatives. Sure, credit unions are nice. but even they are not in a position of making overly risky loans. Don't assume the guy was too stupid to know any better.

Profiting off high credit risk people is often the best way for high credit risk people to work themselves out of the high credit risk .

Also, in the interest of hard data, I trawled through used car ads in his area. While the situation may have worsened since he looked for his car, but I can't even find any large trucks in the mileage range that was described. The lowest any of them go is the $9000 range, and those are decade-old trucks with 100,000 miles.

This makes his decision to use the lease even more sensible at the time. If he had no means of affording a $9k used pickup, and he needed a pickup, then the crappy deal lease was a very viable option.
posted by 2N2222 at 6:15 PM on January 9

There's a difference between profiting off poor people and fleecing them.

Profiting: The issuer of the Hooter's Mastercard.
Fleecing: Payday lenders, the vast majority of buy here pay here lots (lease or loan), rent-to-own shops, and the like.

One limits their risk by charging a high, but not punishing, interest rate and keeping credit lines low. The other limits their risk by charging as much as possible as quickly as possible so that even if the original loan is never paid back they still profit from the fees and 35% interest.
posted by wierdo at 6:49 PM on January 9