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I'm curious about the economics of that market segment. How often can the seller repossess a car successfully (I assume these devices makes it way easier to do

I'm curious about the economics of that market segment. How often can the seller repossess a car successfully (I assume these devices makes it way easier to do so). And how often is the vehicle in a good enough condition that it can be resold? Repossession has a cost, but how many months are required to be able to repossess and turn a profit by then reselling the car?

rtkwe 6y ago
> And how often is the vehicle in a good enough condition that it can be resold? Kind of an implicit assumption in that question that just because the owner is missing payments and has bad credit they're dirty or the car is beat to hell. Any ways there's markets for cars in every shape between pristine and just on the usable side of totaled. > how many months are required to be able to repossess and turn a profit by then reselling the car? They can sell it to an intermediary or send it to auction pretty quickly.
- geoduck14 6y ago
  >They can sell it to an intermediary or send it to auction pretty quickly. In many cases, the court requires it goes to auction to demonstrate it was sold "at market value". Lenders don't really like to repossess cars - we are in the business of putting people IN to cars, not taking them OUT.
throwawayboise 6y ago
They don't rely on reposession to make a profit. That threat is just a stick to keep the loan payments coming in. They make their profit by selling the car for a hefty markup in the first place, and with usurious interest rates. So they take a $1,000 car from auction, sell it for $3,500 or $4,000 at 18% interest, with a loan structured so that all the principal is paid at the end, it doesn't take long for them to be in the black even if they have to repo it.
- hakfoo 6y ago
  Actually, from what I understand, the Buy-Here-Pay-Here car dealership model frequently revolves around the assumption the car will be reposessed and resold several times. https://www.latimes.com/projects/la-fi-buyhere-payhere/ https://www.latimes.com/projects/la-fi-buyhere-payhere/
  - effingwewt 6y ago
    It's worse. They typically charge the vehicle price as the down payment, so anything else paid is profit. Every time they repo a car they get this money paid to them again. On top of that, they will lie about the 'buy here pay here' and will sell of your auto loan to a loan shark company, who will then try to add more fees/interest/anti-consumer clauses after the fact. I dealt with this myself once, and will never do so again. Also, they tried to penalize me for paying early to get out from under them, and refused to send my title until I threatened to sue with all my voice recordings of every phone call. They tried to say I could only pay advance payments, not pay down my principal, and tried to extend my contract length two years after purchasing my loan without my consent or knowledge, despite having a written contract forbidding the car lot from selling my loan.
    - FooBarBizBazz 6y ago
      > They typically charge the vehicle price as the down payment, so anything else paid is profit. Wait. If the borrower could afford that down payment, and that's what the car cost originally, then why couldn't they have just bought a similar car outright from a similar seller? Is this purely a matter of ignorance being exploited?
      - hakfoo 6y ago
        I'd suspect some of it is access and perception. You might be able to find a similar car at the same price in a private-party deal, but it would entail skimming newspapers/websites and then finding transportation to each seller's home to see one vehicle. In contrast, you can probably get a bus to a scummy dealership located on a main commercial street and see dozens of lemons at once. I also suspect there's a perception of legitimacy from a dealer-- that a private-sale vehicle could be faulty, but one being sold commercially can be assumed roadworthy.

rtkwe 6y ago

> And how often is the vehicle in a good enough condition that it can be resold? Kind of an implicit assumption in that question that just because the owner is missing payments and has bad credit they're dirty or the car is beat to hell. Any ways there's markets for cars in every shape between pristine and just on the usable side of totaled. > how many months are required to be able to repossess and turn a profit by then reselling the car? They can sell it to an intermediary or send it to auction pretty quickly.

geoduck14 6y ago
>They can sell it to an intermediary or send it to auction pretty quickly. In many cases, the court requires it goes to auction to demonstrate it was sold "at market value". Lenders don't really like to repossess cars - we are in the business of putting people IN to cars, not taking them OUT.

throwawayboise 6y ago

They don't rely on reposession to make a profit. That threat is just a stick to keep the loan payments coming in. They make their profit by selling the car for a hefty markup in the first place, and with usurious interest rates. So they take a $1,000 car from auction, sell it for $3,500 or $4,000 at 18% interest, with a loan structured so that all the principal is paid at the end, it doesn't take long for them to be in the black even if they have to repo it.

hakfoo 6y ago
Actually, from what I understand, the Buy-Here-Pay-Here car dealership model frequently revolves around the assumption the car will be reposessed and resold several times. https://www.latimes.com/projects/la-fi-buyhere-payhere/ https://www.latimes.com/projects/la-fi-buyhere-payhere/
- effingwewt 6y ago
  It's worse. They typically charge the vehicle price as the down payment, so anything else paid is profit. Every time they repo a car they get this money paid to them again. On top of that, they will lie about the 'buy here pay here' and will sell of your auto loan to a loan shark company, who will then try to add more fees/interest/anti-consumer clauses after the fact. I dealt with this myself once, and will never do so again. Also, they tried to penalize me for paying early to get out from under them, and refused to send my title until I threatened to sue with all my voice recordings of every phone call. They tried to say I could only pay advance payments, not pay down my principal, and tried to extend my contract length two years after purchasing my loan without my consent or knowledge, despite having a written contract forbidding the car lot from selling my loan.
  - FooBarBizBazz 6y ago
    > They typically charge the vehicle price as the down payment, so anything else paid is profit. Wait. If the borrower could afford that down payment, and that's what the car cost originally, then why couldn't they have just bought a similar car outright from a similar seller? Is this purely a matter of ignorance being exploited?
    - hakfoo 6y ago
      I'd suspect some of it is access and perception. You might be able to find a similar car at the same price in a private-party deal, but it would entail skimming newspapers/websites and then finding transportation to each seller's home to see one vehicle. In contrast, you can probably get a bus to a scummy dealership located on a main commercial street and see dozens of lemons at once. I also suspect there's a perception of legitimacy from a dealer-- that a private-sale vehicle could be faulty, but one being sold commercially can be assumed roadworthy.