Used.
April 9, 2016 2:41 PM   Subscribe

Mother Jones profiles subprime lending in the used car industry:
Credit Acceptance makes its loans knowing that a large portion of its customers won't have the happy endings advertised in the promotional materials. The company operates on the assumption that it will collect only about 70 percent of the money it lends out—which means it will end up repossessing an awful lot of cars and suing those customers for the balance. As Wall Street banks clamored for more securities built on subprime auto debt, Credit Acceptance pumped out ever more paper, boosting loan volume by 23 percent in 2010 and 30 percent in 2011. (Growth has been slower in subsequent years due to increased competition, notes the company's 2014 annual report.) In the meantime, subprime lenders have boosted their average interest rate on used cars from 16 percent to nearly 20 percent annually, guaranteeing that more customers will default and end up with punitive court judgments and garnished wages.

Credit Acceptance Corporation was founded by used car magnate Don Foss, who commissioned a documentary about himself found here.

Washington City Paper was on this back in 1999.
posted by MoonOrb (55 comments total) 16 users marked this as a favorite
 
Yeah. This is kind of the consensus next shit show. The only positive I can offer up us that the total size is magnitudes smaller than mortgage lending, the structures used are pretty vanilla, and no one ever thought it was riskless the way they did with mortgages - basically because the underlying collateral has to decline in value.

When it blows up it'll look like other subprime credit debacles, not like the financial crisis.

Ironically the 99 story is actually the prior cycle that blew up shortly there after when thing like providian and the money store went bust
posted by JPD at 3:01 PM on April 9, 2016 [5 favorites]


The Don Foss documentary, despite being something he made about himself, was actually pretty interesting.
posted by ph00dz at 3:06 PM on April 9, 2016


If MoJo is right that rates are unconscionably high, then subprime car loans won't collapse. They'll only collapse if the rates are too LOW, and thus performing loans can't cover the losses from defaults.

The latter wouldn't surprise me -- because subprime car loans did so well in the financial crisis, capital has pursued subprime aggressively on the assumption it's a can't lose asset -- and that has a nasty way of ending badly.
posted by MattD at 3:10 PM on April 9, 2016 [2 favorites]


It'd be great if public transit in my town had twice the number of busses running. So waits were 15-30 minutes instead of 30 - 1hr.

To pay for it we could tax parking lots at a geometrically increasing rate, since they are a big blight on this town.

Instead, this town was built on the principle: Don't have a car? Fuck YOU!
posted by Heywood Mogroot III at 3:25 PM on April 9, 2016 [24 favorites]


Five years after opening his first lot, Foss launched Credit Acceptance. The new company handled financing and collections for the 17 dealerships he would eventually open in six states. The amount of interest he could legally charge customers was limited only by the laws of the state where the car was sold—when there was any limit at all.

It seems crazy to me that we have so little in the way of strong federal laws governing acceptable rates of interest and, perhaps more to the point, the process of securitization based on personal and consumer debt itself, which (and perhaps some more learned in economics will dispute this) seems less a risk than a guarantee of economic moral hazard, many of whose victims will be the same ones who got fucked by charge-what-you-want interest rate scamming in the first place.
posted by clockzero at 3:26 PM on April 9, 2016 [4 favorites]


If MoJo is right that rates are unconscionably high, then subprime car loans won't collapse. They'll only collapse if the rates are too LOW, and thus performing loans can't cover the losses from defaults.

There are variables besides the interest rate itself that determine the viability of the whole enterprise, I'm sure.
posted by clockzero at 3:27 PM on April 9, 2016


Clockzero, yes, there are ... but they all feed into the rate decision, because it's the rate that compensates you for the default rate and loss-given-default you estimate.
posted by MattD at 3:34 PM on April 9, 2016 [3 favorites]


Instead, this town was built on the principle: Don't have a car? Fuck YOU!

oh, you live in everytown USA, too?
posted by indubitable at 3:45 PM on April 9, 2016 [17 favorites]


It seems crazy to me that we have so little in the way of strong federal laws governing acceptable rates of interest and, perhaps more to the point, the process of securitization based on personal and consumer debt itself, which (and perhaps some more learned in economics will dispute this) seems less a risk than a guarantee of economic moral hazard, many of whose victims will be the same ones who got fucked by charge-what-you-want interest rate scamming in the first place.

Isn't it funny how the people who demand that the Bible be the sovereign law of the land never seem to be upset about usury?
posted by Pope Guilty at 3:48 PM on April 9, 2016 [59 favorites]


Same as it ever was.
posted by sneebler at 4:04 PM on April 9, 2016 [3 favorites]


Yeah. This is kind of the consensus next shit show.

No. 40% of student loans are in some kind of non-conformance. That clusterfuck of shit is going to hit the fan first and hit much harder.
posted by Talez at 4:10 PM on April 9, 2016 [21 favorites]


This stuff makes me so upset...

Worse was near the end of the article, where the author notes that by adding clauses to the loans that require all disputes to go to arbitration, the class-action mechanism which (somewhat) curtailed the worst excesses is no longer available.

The experience of the low income woman who made over 100 phone calls to get the title to a car she was paying 24% interest rate on but could not drive legally because she was never given the title... she (eventually) got her day in court, but without the ability to launch class-action suits, how many lawyers are going to take up arms against a giant corp like Santander or Capital One in arbitration?
posted by bumpkin at 4:12 PM on April 9, 2016 [5 favorites]


Clockzero, yes, there are ... but they all feed into the rate decision, because it's the rate that compensates you for the default rate and loss-given-default you estimate.

You said earlier that a whole class of loans would become, in aggregate, structurally untenable only with a low interest rate. I was pointing out that this isn't necessarily true, because (among other reasons) there are certain interest rates that would be so high that they would simply cause excessive defaults. It might be a problem for bondholders, but what do the financing companies care? Once you own debt, you practically own that person and potentially their family's wealth, especially if they're not White. They won't go broke, even if a huge number of their customers do.
posted by clockzero at 4:21 PM on April 9, 2016


Constitutional amendment: Any debt is repaid as soon as the borrower has paid double the amount borrowed. Fees and charges count towards this amount.
posted by Talez at 4:23 PM on April 9, 2016 [38 favorites]


I've had a number of employees who were in the subprime car loan cycle. They get a loan, pay for a while, things happen and they stop paying until the car is repoed, and then they go back to the buy-here-pay-here car lot and restart the cycle. It seems like a random crapshoot whether the cars are decent or lemons, but when they are lemons they say it is easier to stop paying and have them repoed than try and get them fixed.

It's strange to watch individually, but societally this is a real blight.

Isn't it funny how the people who demand that the Bible be the sovereign law of the land never seem to be upset about usury?

The bible is full of things like anti-usury rules, and I wish they got even a tiny fraction of the attention that goes into the usual moral crusades.
posted by Dip Flash at 4:27 PM on April 9, 2016 [9 favorites]


Constitutional amendment: Any debt is repaid as soon as the borrower has paid double the amount borrowed. Fees and charges count towards this amount.

This would outlaw a 30 year mortgage at a rate above roughly 5.3%.
posted by zachlipton at 4:27 PM on April 9, 2016 [19 favorites]


Exactly. Just another version of carrot and stick.
posted by Smart Dalek at 4:36 PM on April 9, 2016 [1 favorite]


Financing companies care about default on their securitizations, because issuers of defaulted securitizations tend not to be able to sell new securitizations, and they tend to get the pants sued off them. (Something we've seen in spades relating to subprime mortgage securitizations.)

That said, I was speaking from a knowledge of the subprime market others may not share.

Basically, securitized subprime* works like this:

Borrower's income determines his payment -- nobody is lent more than they can relatively easily repay on their current job, and down-payments are generally zero.

The risk-seeking or risk-aversion of the asset-backed securities market determines borrower's interest rates. The risk here is (a) borrowing losing his job and (b) used car prices collapsing. The more aggressive the market is, the less protection investors get against either of these things.

Borrower's payment and borrower's rate mathematically determine how much car he can buy, and he buys it.

Investors do fine unless unemployment and used car price declines exceed the implied insurance against them by way of interest rate.

(*the buy-here, pay-here corner of subprime financing, usually not securitized, works quite differently. Here, down-payments are comparatively large, cars are often sold above market value, and cars are old enough that they depreciate very slowly. As a result, lenders actually don't care about your ability to repay because they make a profit if you default -- you put down $1500, the car costs $400 to repo, and they resell it for $500 less than your paid = $600 profit. This market is basically a tax on the very unfortunate or very dumb.)
posted by MattD at 4:44 PM on April 9, 2016 [8 favorites]


This would outlaw a 30 year mortgage at a rate above roughly 5.3%.

They should be thankful we don't have a septennial jubilee like in biblical times.
posted by Talez at 4:48 PM on April 9, 2016 [10 favorites]


This would outlaw a 30 year mortgage at a rate above roughly 5.3%.

So there we have it. No amendment needed, just a simple bill.
posted by j_curiouser at 5:05 PM on April 9, 2016 [5 favorites]


MattD -name me a subprime lending business that saw tons of capital flow into it that didn't eventually blow up?
The problem is going to be collateral. Either used car values decline - probably because Saar rolls over, or the other way they've been making this thing work is increasing tenor -let's see how good they are at predicting the value of a 9 year old car they financed when it was four years old.

Just walk into a dealership - I asked a luxury dealer about financing a new car just to see if that might make sense - his standard term was 72 months. Which is kinda nuts relative to history.

Also risk aversion for these things is as you point out at a very low level.
posted by JPD at 5:18 PM on April 9, 2016 [1 favorite]


I mean there are some absolute pirates doing this stuff right now.
posted by JPD at 5:21 PM on April 9, 2016 [1 favorite]


Watch yer tongue, landlubber. Us pirates had nothing to do with this mess.
posted by Faint of Butt at 5:34 PM on April 9, 2016 [2 favorites]


I can't wait until people figure out that all these solar panels people are installing on their roofs aren't their own, and they figure out exactly how much this will actually cost them at the time they go to sell their home. Used cars are how you steal from the poor. Student debt is how you steal from those starting out. Solar panels are how you steal from the established middle class. And of course, retirement communities are how you steal from those that are 55+.

Your cohort determines how you will be stolen from.
posted by Nanukthedog at 6:09 PM on April 9, 2016 [17 favorites]


They should be thankful we don't have a septennial jubilee like in biblical times.

Is a world where none but the rich can buy a home because banks cease giving mortgages because they can't make a profit on it really a better place?
posted by Candleman at 6:48 PM on April 9, 2016 [8 favorites]


Is a world where none but the rich can buy a home because banks cease giving mortgages because they can't make a profit

screw private profit. print the money used to fund mortgages and new construction/rehabs.

https://research.stlouisfed.org/fred2/series/MBST

in my book the renting out of SFHs is a net social bad and we should tax it away, reducing the 1%'s ability to parasite in housing like they do now.
posted by Heywood Mogroot III at 8:09 PM on April 9, 2016 [3 favorites]


I can't wait until people figure out that all these solar panels people are installing on their roofs aren't their own, and they figure out exactly how much this will actually cost them at the time they go to sell their home.

OK, I'll take the bait: how are homeowners making improvements to their property analogous to students getting ripped off on loans or used car buyers getting ripped off by loans? If I were to add a deck or a finished basement to a home I own, I'm either increasing my convenience of ownership or increasing the value of the home for resale. Why don't you consider solar panels a capital improvement?
posted by The Pluto Gangsta at 8:10 PM on April 9, 2016 [4 favorites]


and I'll answer the response since I'm here now.

http://watchdogwire.com/california/2014/12/19/how-solar-leases-scam-the-homeowner-and-solar-contractors-keep-the-subsidies/

http://www.motherjones.com/environment/2016/01/green-energy-rec-rooftop-solar-panels

(most (?) panels have been subsidized by someone and thus aren't owned by the homeowner)
posted by Heywood Mogroot III at 8:13 PM on April 9, 2016 [2 favorites]


"I can't wait until people figure out that all these solar panels people are installing on their roofs aren't their own, and they figure out exactly how much this will actually cost them at the time they go to sell their home. "

Huh. I'm curious about this because I have a friend that sells 'em and he tried to get me into it (and I told him that I don't have the emotional fortitude to deal with sales jobs right now). The way their contract works is: The company installs and owns the solar panels, and will do the maintenance on them, as well as replacing them if new, more efficient models come out. In general, the panels produce more electricity than a household needs, and (here in California) the power companies buy electricity from surplus sources — especially if it's green. So the solar panel company sets a rate per kwh that they'll pay for any surplus electricity, which right now (IIRC) is just below what the power company would pay if you for your surplus. They also set a minimum monthly payment, though if you're not producing much surplus the payment (again, IIRC) is trivial. The solar company is between break even and a small loss for their investment, but they're betting that over the course of the 30-year agreement that the rates that power companies pay for surplus electricity will go up. If those rates go up, the company keeps paying the homeowner the rate that they agreed now, allowing them to profit from the appreciation while the homeowner benefits mostly based on the amount of surplus they produce rather than the increased rate.

It seems fair enough, with more of the risk on the side of the solar company.
posted by klangklangston at 8:23 PM on April 9, 2016 [2 favorites]


Heywood's links are great and lay out the first part of how solar panels - while a great idea - are not good under the current installation plan paradigm. The other part to understand is exactly how the company makes money - because it's key.

Energy prices peak during the summer - and I mean the minute by minute prices - not the prices that consumers pay. This is a key fundamental to understand. Next is that you don't generate power that goes to your house. Generally it goes to the grid, you are reimbursed credits, and the grid transmits back to you. you produce peak power during the summer months. Now, imagine if you would, a company with virtually no land but a hell of a lot of infrastructure that they use (which the land owners actually lease). At the absolute peak of the market, they are transmitting power onto the grid at premium rates - and also charging a premium for it since it is "green power" to boot. You as a consumer do utilize a portion of this (well, as I said, the credits - not really the power), but the actual value of your power is far greater than the power you are paying for - because chances are you are utilizing it at a slightly offset time (peak time is business hours, and covers business usage, the secondary homeowner spike in the evening is still less of a draw than daytime rates). I'm not even getting to the part where we've moved to a model where you are paying for what you produce as opposed to what you use (wrap your noggin around that for a minute). Understand along the way that the current model has twice the energy being transmitted on the line (as now it leaves your house and comes back to it) and that's eventually going to lead to a whole host of other infrastructure issues... point being... it sounds fair, it sounds reasonable - but understand - there is no loss on the part of the solar company. They have people willingly giving them prime sun real estate while charging them for it.

Yes, like any electric company, they need technicians to service their plant, and that means that when there is a problem, they can contain the problem. What does that mean? that means that if you have a service problem, only your power is not going onto the system, and a technician can be routed (slowly) to your home. If you aren't transmitting power back onto the grid (and it is just being shunted to waste), you aren't accruing credits, and effectively you are paying full price for your electrical usage. Do the math: now it is a utility that now has a small localized outage, the problem can be self-contained and they can minimize labor costs by keeping them to their most desirable hours. Piece by piece - this is a model that minimizes cost for the business, covers its client expenses by charging the client, capitalizes revenue on the price of the power, and basically ensures that they will recoup their entire investment from the homeowner by effectively preventing them from selling their home until they are right side up on their solar panels (follow the links from Heywood to understand that critical piece of the puzzle). Really, its fucking brilliant. These guys are just as Scammy McScamenstein as the financial sectors business model.

Full disclosure: I have currently bought into the scam. I know it for what it is. Despite this, the part of my brain that wants to be green did this. Because, at least in 20 years - when the panels are shit - I'll own mine.
posted by Nanukthedog at 8:53 PM on April 9, 2016 [9 favorites]


print the money used to fund mortgages and new construction/rehabs.

You realize that there are many cascading consequences of printing money, right? As well as removing profit from banking? It's fun to think of "easy" fixes to problems to complex problems like banking if you ignore side effects, but we might as well posit coming up with viable fusion energy at the same time, because that's about as practical as saying we can just print money to solve a problem or declare jubilee years and things are guaranteed to get better.
posted by Candleman at 9:00 PM on April 9, 2016 [3 favorites]


You realize that there are many cascading consequences of printing money, right?

Try telling that to Kuroda, LOL.

because that's about as practical as saying we can just print money to solve a problem

thing is, per my FRED chart above, the Fed printed $1.8T between 2009 and 2014 to fund mortgages.

That's 6 million mortgages (@ $300k apiece) in just 5 years!

https://research.stlouisfed.org/fred2/graph/?g=46Qx

shows the population is up 40% since 1980 yet housing starts are down 20%.

fwiw, I'm not a big fan of unguided helicopter-money MMT for the reasons you sorta mention, but I think MMT that increases the capital stock in our country would be on balance a good thing.

Same thing if this MMT was used to fund more public transportation investment / operations, too.

We really need to get away from the scarcity-of-capital mindset. We're choking on capital surplus now. Problem is the 1% have 80%+ of it, this is like the brutal endgame of a Monopoly game.
posted by Heywood Mogroot III at 9:20 PM on April 9, 2016 [3 favorites]


It's not just Credit Acceptance; I'm in the middle of one of these right now and the lender is one of the biggest names in the financial sector. I like the line from the article about how "They were total cowboys, making things up as they were going."

The dealer people lied straight up about my income, stating that it was quadruple what it actually is to get me a loan from the finance company without my permission (like I'd have actually given it!) and hid the "credit application " at the bottom of the stack of contract documents for me to sign after the sales contract. They asked me for permission to apply on my behalf for credit - I figured there was no way they were going to actually be able to get credit given my rating and income - I never dreamed they would lie about such a thing. Not only that, the car has serious defects, none of which were disclosed to me and which reduced the book value drastically. The lender is stuck and so am I. They lent money on a car that hasn't got nearly as much value as the dealer represented to them, and neither of us have much recourse. I went back to the dealer to confront them about this and they joked about it. They treat contract law as a trap, as a game of hot potato. This is a Big Three dealer with a franchise, not some buy here pay here operation. I've reported it to the lender, and they appear to have taken an interest in investigating, but I am not sure what is going to happen. The dealer people appear to have the impression they will be doing this with impunity. It was a well practiced scheme; they'd obviously done it before.

This is going to blow up just like subprime did after the housing bubble burst. This was a "liar loan". No one made the slightest attempt to verify my income. I wasn't even asked for a pay stub.
posted by cybrcamper at 9:51 PM on April 9, 2016 [10 favorites]


You realize that there are many cascading consequences of printing money, right?

There really isn't a single one that couldn't be managed with well designed regulatory mechanisms. We already just print money, and money is only an IOU for goods and services--a debt note on the commonwealth--in the first place. The problems with just printing enough money to meet the real needs of a nation's economy are only psychological/sociological/political. All spending is debt spending of one sort or another.
posted by saulgoodman at 10:51 PM on April 9, 2016 [1 favorite]


CYbercamper, as an aside, you might want to consider calling your state legal bar for a free referral to an attorney.
posted by SecretAgentSockpuppet at 10:52 PM on April 9, 2016 [6 favorites]


MattD -name me a subprime lending business that saw tons of capital flow into it that didn't eventually blow up?

Auto INSURANCE financing. Same rate of usury, no collateral or repo necessary. They stop making monthly payments, you just cancel their coverage. They come back in, rewrite the policy, and get hit for origination fees all over again. Lather, Rinse, Repeat.
posted by mikelieman at 12:19 AM on April 10, 2016


1) need the capital coming in
2 ) you pay an origination fee on your auto insurance?

Can't compare households to starts it's a stock and a flow - need to compare to housing stock - where because the last boom was so big we really aren't that far off of long term levels. Starts are too low but your version is a bit misleading.
posted by JPD at 4:43 AM on April 10, 2016


While we're dreaming of general-purpose predator-mitigation amendments, how about a default ban on binding arbitration in contracts? if you're not an incorporated entity, you can't enter into such an agreement, no matter what you've signed.
posted by strange chain at 5:15 AM on April 10, 2016 [6 favorites]


2 ) you pay an origination fee on your auto insurance?

*I* don't. Least I've never seen it broken out on the finance contract side. See at this point it's not really the insurance policy, but rather the finance contract for the policy.

Long about 10 years ago the major figured out that there was money in poor people, and they started writing assigned-risk, too.
posted by mikelieman at 5:54 AM on April 10, 2016


This is going to blow up just like subprime did after the housing bubble burst.

The thing with "subprime" and the wider suicide lending in general was that it was a SIX TRILLION monetary injection into wider economy,

https://research.stlouisfed.org/fred2/graph/?g=46ZI

a ~$1T/yr flow into the middle class that got the country out of the "jobless recovery" in time for the 2004 election.

It pushed up home prices (2004-2006 via 'tulip mania') , pushed up employment, pushed up wages, pushed up consumption and investment, in a virtuous cycle until the housing appreciation finally stopped and all the suicide loans dependent on this continued valuation increase started defaulting.

The housing boom/bubble gave us the recovery of 2003-2007. This sub-prime auto thing is more marginal in the scheme of things.
posted by Heywood Mogroot III at 8:14 AM on April 10, 2016 [3 favorites]


In my mind, the APR calculation goes like this:

Shitty credit, mid 20s/30s: 10% APR

Applicant is planning on buying a 10 year old BMW M3 or 6+ year old S-class: 12%

Applicant plans to make car "hella flush" or says words "stance nation" with a straight face: 16%

Alternatively, if S-class, applicant claims to know some "dope rims" that will make the car "tight as hell": 16%

Applicant is trading in 1994 Camry with no muffler: 18%

Down payment in cash: 20%

Mismatched bills: 22%

---

Yeah, I stereotype a bit when it comes to cars. :P

Kidding aside, yeah no shit the bubble's gonna pop. The question will be how many of the good lenders is it gonna take out. Anyone doing in-house financing is IMHO irrelevant since they come and go all the time. I'm just curious how exposed the big boys *really* are, or if they learned from the housing crisis. (Yeah, I know. I'm an optimist...)
posted by -1 at 10:13 AM on April 10, 2016 [1 favorite]


I'm also curious about how eager lenders seem to be to eat major negative equity on a new car deal. I mean... I've heard of folks getting a zero-down loan for a new car (GM cars in particular for some reason) with > $6K negative equity in their trade. So even factoring in incentives and such, well before depreciation they're deep in the hole. That kinda makes me wonder what sort of shenanigans are going on in the finance office to make something like that happen... 'cause from here it seems more than a little risky.
posted by -1 at 10:21 AM on April 10, 2016 [2 favorites]


I've never been comfortable with places advertising "no credit? bad credit? no problem!", so the OP kind of backs that up.

Still, I haven't quite figured out whether buying modest cars with cash and driving them into the ground makes us sensible... or cheapos who will never enjoy the prestige of having a sweet ride.

Of course I do appreciate that it's different now for young people starting out. But some of their vehicle choices... one young guy I worked with received a $14k settlement when his paid-for midsize car was T-boned. Instead of looking for something like a one or two-year-old Civic or Corolla, or putting the $14k towards a new one of those... he's hunting for an off-lease Lexus for $30k ... I don't get it.
posted by Artful Codger at 10:42 AM on April 10, 2016


Still, I haven't quite figured out whether buying modest cars with cash and driving them into the ground makes us sensible... or cheapos who will never enjoy the prestige of having a sweet ride.

I don't think it's right to look at it from the perspective of what other people think of you because somebody will always have reason to complain. What works for you guys? What do you value? My wife and I travel frequently, we eat out a lot and we don't have kids because we like that lifestyle. It works for us.
posted by Talez at 10:45 AM on April 10, 2016


I'm also curious about how eager lenders seem to be to eat major negative equity on a new car deal. I mean... I've heard of folks getting a zero-down loan for a new car (GM cars in particular for some reason) with > $6K negative equity in their trade.

No shenanigans. They roll the balance in. If they're making payments it means they're good for payments. They're not putting 18 or 20% down so they don't have access to 0% APR offers.

It's literally free money to roll the balance in. You're stealing the money from some other chump who lent them money.
posted by Talez at 10:50 AM on April 10, 2016


The way their contract works is: The company installs and owns the solar panels, and will do the maintenance on them, as well as replacing them if new, more efficient models come out.

Coming in late, but I would encourage your friend to re-check his contract on that last point. I don't think these companies' model works if they are out there reinstalling panels. I know the largest of these companies expects the same panels to be on people's roofs for thirty years.

The MA attorney general has been after subprime auto lenders for a while now. So has New York's. These days, the state AGs (the activist ones, anyway) will often move into issues before the feds do, and with a more explicitly consumerist intent. Support your local AG!
posted by praemunire at 10:53 AM on April 10, 2016 [1 favorite]


Instead, America was built on the principle: Don't have a car? Fuck YOU!

Fixed
posted by Beholder at 10:55 AM on April 10, 2016 [1 favorite]


Instead, America was built on the principle: Don't have a car? Fuck YOU!

In suburban Boston (495 and Rt 2) I just made a 4.2 mile round trip drive to go to my favourite sandwich shop. It's also the closest sandwich shop. Without a car I'd be 110% fucked in this area. There's sure as hell no bus. The T is basically to get you to Boston and Logan.
posted by Talez at 10:58 AM on April 10, 2016


I've been seeing ads for "LoanMe" - the terms of the loans vary (substantially) by state.

One of the loans is for $3100 paid back over 36 months at an APR of 139%.

There are a few more that are a bit worse - $10600, APR of 100% 84 months payback at $900/month - for a total of only $75600.
posted by Death and Gravity at 11:07 AM on April 10, 2016


Longpostguy (sfw, but it's 4chan) on /o/ provides some on the ground tidbits of terrible decisions everyone involved in used-car buying makes.
posted by wcfields at 11:50 AM on April 10, 2016 [1 favorite]


I'm also curious about how eager lenders seem to be to eat major negative equity on a new car deal. I mean... I've heard of folks getting a zero-down loan for a new car (GM cars in particular for some reason) with > $6K negative equity in their trade. So even factoring in incentives and such, well before depreciation they're deep in the hole. That kinda makes me wonder what sort of shenanigans are going on in the finance office to make something like that happen... 'cause from here it seems more than a little risky.

I have not heard of anyone with a loan to value of over 100% getting a 0% financing deal, but in general GAP insurers will cover up to 150% LTV, so by extension, most auto financing also tops out at 150% LTV.

Being able to roll previous balances into new financing is basically the only way you can make it possible for people to buy a new car with a 6-7 year loan, then convince them to trade it in for a new one 3 years later when they "get bored".
posted by antimony at 8:43 AM on April 11, 2016


> "America was built on the principle: Don't have a car? Fuck YOU!"

Technically, that's only in the Declaration of Independence, not the actual Constitution.
posted by kyrademon at 9:21 AM on April 11, 2016 [5 favorites]


antimony: "Being able to roll previous balances into new financing is basically the only way you can make it possible for people to buy a new car with a 6-7 year loan, then convince them to trade it in for a new one 3 years later when they "get bored"."

The link I posted above from Longpostguy is essentially what the horror stories involve. Someone underwater on a car they made a bad choice in buying, making another bad choice in buying another car and being "doubley" underwater.
posted by wcfields at 11:10 AM on April 11, 2016


I live in one of the few cities that has decent public transit. I haven't had a car in 8 years. I may never own a vehicle. It seems like such a trap.
posted by domo at 3:47 PM on April 11, 2016


Death and Gravity: “There are a few more that are a bit worse - $10600, APR of 100% 84 months payback at $900/month - for a total of only $75600.”
I have a friend who, when discussing buy-here-pay-here car dealerships, will reliably make the joke, "500 dollars down. 500 dollars a month. 500 months."
posted by ob1quixote at 7:08 PM on April 11, 2016 [1 favorite]


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