Buy Here Pay Here - Neatorama

The LA Times has a three-part series on used car dealers who make a great profit on old cars sold at high interest rates to people who can't afford them, but have little choice.

In this little-known but fast-growing corner of the auto market, dealers command premium prices for road-worn vehicles and finance the sales at interest rates that can top 30%.

In a kind of financial alchemy, they have found a way to turn clunkers into cash cows and make money off the least creditworthy customers: the millions of Americans who are stuck in low-paying jobs, saddled with debt and unable to qualify for conventional auto loans.

For most of those people, having a car is the only way to stay employed, and they'll accept almost any terms to get one.

Buy Here Pay Here lots sold nearly 2.4 million cars nationwide last year, up from 1.3 million a decade ago, according to CNW Marketing Research.

The mechanics of the business are laid out in the first part, and there is a link to today's followup, with the conclusion to be posted on Thursday. Link -via Metafilter

(Image credit: Lorena Iñiguez Elebee)

Key phrase in the article:
"About 1 in 4 buyers default"
Whenever I see articles like this, my first reaction is "Oh no, some do-gooder wants to cut off one of the few remaining ways that poor people can access credit".

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Interesting article.
There's nothing new about this business model. Outrageous usury in the used car market has been around for decades.
Parents, teach your kids about this. Show them how to avoid getting caught in this trap.

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Its typical. The people who can LEAST afford the High Cost & interest rates get charged them both. But what are they supposed to do? A regular bank or credit union will not give them a loan. If they need a car to get back & forth to work. They are stuck. I know this myself, since I pay a higher rate because of some bad financial decisions made years ago. But I live 30 miles from work and mass transit in St. Louis barely exist. so that is not an option.

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There are these things called bicycles ....

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Bicycles work for short distances, not 30 miles in St Louis, in the winter.

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Bicycles aren't too good for dropping off the kids at day care, either.

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I think the mistake for most of these people is buying a used car on credit period. You can get a reasonable used car for a couple thousand if you look, and a drivable one for less than a thousand if you're desparate. That's an amount you can save up for in a reasonable amount of time, and if you can't save up that amount, you shouldn't own a car, because you won't be able to afford the cost of owning it (gas, registration, insurance, saving for basic maintenance/repairs).

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The lesson is, then, don't make bad financial decisions.

The payday loan business is also frightfully usorious.

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I think we have the market cornered on these lots in Memphis. We have literally HUNDREDS of them, toting the note on cars and repoing them at an astounding rate.

You can also rent-to-own large wheels and tires for your TTN car as well...

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Ms.C what about scooters? I've been in the south Pacific island and have witnessed entire families 'with' shopping all piled up onto a 150cc scooter.. quite a sight, but it was effective and made for very economical travel for these families ;-)

Mind you no one was wearing helmets, not even the infants! :-o

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bicycles and mopeds are great if you have good weather year round. I live in North Dakota where a typical winter will drop a good few feet of snow and temps that are sometimes in the -40 degrees. It is not possible to use another form of transportation like a bus either. My city just started a new bus route, but it goes no where near where people work unless that happens to be the mall.

I am broke, but I am not stupid. I buy all my cars second, third, and sometimes fourth hand. They sometimes don't last too long, but I don't pay for interest and I don't have to worry about it getting repoed.

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Oh, geez. All the whining from people who can't afford cars, don't like the bus, and don't live near their work.

I hear violins.

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