4 ms·

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 sev

by 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.
  - dimmke 6y ago
    Most regular consumers don't have access to those kind of car auctions - they're for dealerships. I also think they get bought in batches then shipping is paid for in one sum. It's not accessible to end customers. These auctions are where your car gets sold after you trade it in to a dealership or sell to Carfax, so a Nissan dealership doesn't have to worry about trying to sell a 2013 Chevy Malibu themselves. And the trade in value you get is usually low enough that they aren't in danger of not making a profit. Then they get purchased by various entities, sometimes Carvana, sometimes normal brick and mortar dealerships that specialize in selling used cars and also poverty industry buy here pay here lots. For what it's worth, I purchased a car in cash from one of those buy here pay here lots once. I had sold a car and needed something cheap to get around in for a while. It was a really bad experience all around - the car they sold me was a total lemon, even though the Carfax was pretty clean and the model had a reputation for being reliable. They misrepresented stuff (A/C had a serious leak) They also tried to get out of even the most basic obligations they had (Paying $20 to get the emissions checked - where I live the car has to pass that test and dealer has to pay for it.) If you need a cheap ride, I'd 100% go with buying from a private seller over going to one of those places. I'm glad to have an experience like that - it really makes you realize how bad things are when you don't have any power in a situation. And why it's so important to have the government step in and say "no, you can't do that." Which our country doesn't have nearly enough of.
  - effingwewt 6y ago
    Happens every day. In my case, I didn't know better. Story time. I was a young 20 year old with a brand new baby and a decent job. My prior car was a beater and constantly broke down. I went to a 'dealership' thinking I'd get a better car, and hey, it's 'buy here pay here'! I was looking at a really good condition crown victoria. It was a family sedan, had one prior owner (a winter texan), who had kept all the paperwork for every oil change and service done. The down payment? 4500. The bi-weekly payments? 250. So, 4500 down, 500/mo for I believe 6 years. The kelly blue book value of the crown vic? 4500 in mint condition. So not only had I paid them the full value of the car, as a down payment, but they were getting me for ~6 years of payments, so had I paid the minimum and let the loan ride the full 6 years, I would have ended up paying ~$36k US for a $4500 car. When I met someone who knew cars and prices, he informed me how badly I was being ripped off and to pay off the principal asap to get out from under the loan. Of course this was made complicated when they sold my loan. If the company I bought the car from was bad, the company they sold my note to was the Devil himself. Constantly threatening repossession, beyond rude, calling friends and family ('just references not co-signer, it would be illegal to contact them abiut financial matters!'-more bullshit. So, it's a combination of desperation, ignorance, and youth I guess, and neither my ex-wife nor I having people to turn to for advice back then. As an aside there were no smart phones yet, so it wasn't as though I could search this stuff while on-site. I just couldn't have imagined as a young man that someone could be so incredibly unscrupulous. All of the above is especially true during tax season when they make 99‰ of their money. Edit to add- want some weekend fun? Grab the KBB app (wrapper sucks actual website is better), head to the poor side of town to buy here pay here's, and check the vehicle's down payments against the KBB max value =)
geoduck14 6y ago
BHPH model is NOT the same as getting a subprime loan from a bank or credit union. Very few cars are sold via BHPH. Also, many states require that repossessed cars are sold at auction, and the proceeds go towards the balance owed (aka the poor person who borrowed the money). Usery laws are complex, and it is difficult to know why the lady in this article got a loan for 20%. That is unfair and I feel bad for her.
- gjs278 6y ago
  because she is stupid. she probably doesn’t even know what a competitive interest rate is. there’s no magic or system against her, they just offered her an absurd number and she said yes. many such cases.

by hakfoo 6y ago

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.
- dimmke 6y ago
  Most regular consumers don't have access to those kind of car auctions - they're for dealerships. I also think they get bought in batches then shipping is paid for in one sum. It's not accessible to end customers. These auctions are where your car gets sold after you trade it in to a dealership or sell to Carfax, so a Nissan dealership doesn't have to worry about trying to sell a 2013 Chevy Malibu themselves. And the trade in value you get is usually low enough that they aren't in danger of not making a profit. Then they get purchased by various entities, sometimes Carvana, sometimes normal brick and mortar dealerships that specialize in selling used cars and also poverty industry buy here pay here lots. For what it's worth, I purchased a car in cash from one of those buy here pay here lots once. I had sold a car and needed something cheap to get around in for a while. It was a really bad experience all around - the car they sold me was a total lemon, even though the Carfax was pretty clean and the model had a reputation for being reliable. They misrepresented stuff (A/C had a serious leak) They also tried to get out of even the most basic obligations they had (Paying $20 to get the emissions checked - where I live the car has to pass that test and dealer has to pay for it.) If you need a cheap ride, I'd 100% go with buying from a private seller over going to one of those places. I'm glad to have an experience like that - it really makes you realize how bad things are when you don't have any power in a situation. And why it's so important to have the government step in and say "no, you can't do that." Which our country doesn't have nearly enough of.
- effingwewt 6y ago
  Happens every day. In my case, I didn't know better. Story time. I was a young 20 year old with a brand new baby and a decent job. My prior car was a beater and constantly broke down. I went to a 'dealership' thinking I'd get a better car, and hey, it's 'buy here pay here'! I was looking at a really good condition crown victoria. It was a family sedan, had one prior owner (a winter texan), who had kept all the paperwork for every oil change and service done. The down payment? 4500. The bi-weekly payments? 250. So, 4500 down, 500/mo for I believe 6 years. The kelly blue book value of the crown vic? 4500 in mint condition. So not only had I paid them the full value of the car, as a down payment, but they were getting me for ~6 years of payments, so had I paid the minimum and let the loan ride the full 6 years, I would have ended up paying ~$36k US for a $4500 car. When I met someone who knew cars and prices, he informed me how badly I was being ripped off and to pay off the principal asap to get out from under the loan. Of course this was made complicated when they sold my loan. If the company I bought the car from was bad, the company they sold my note to was the Devil himself. Constantly threatening repossession, beyond rude, calling friends and family ('just references not co-signer, it would be illegal to contact them abiut financial matters!'-more bullshit. So, it's a combination of desperation, ignorance, and youth I guess, and neither my ex-wife nor I having people to turn to for advice back then. As an aside there were no smart phones yet, so it wasn't as though I could search this stuff while on-site. I just couldn't have imagined as a young man that someone could be so incredibly unscrupulous. All of the above is especially true during tax season when they make 99‰ of their money. Edit to add- want some weekend fun? Grab the KBB app (wrapper sucks actual website is better), head to the poor side of town to buy here pay here's, and check the vehicle's down payments against the KBB max value =)

geoduck14 6y ago

BHPH model is NOT the same as getting a subprime loan from a bank or credit union. Very few cars are sold via BHPH. Also, many states require that repossessed cars are sold at auction, and the proceeds go towards the balance owed (aka the poor person who borrowed the money). Usery laws are complex, and it is difficult to know why the lady in this article got a loan for 20%. That is unfair and I feel bad for her.

gjs278 6y ago
because she is stupid. she probably doesn’t even know what a competitive interest rate is. there’s no magic or system against her, they just offered her an absurd number and she said yes. many such cases.