John Oliver took the buy here, pay here industry to task in a big way on a recent episode of Last Week Tonight. The results were, per John Oliver, hilarious and statistically alarming. First of all, let’s agree that you can’t paint an entire industry for the sins of a few crappy dealers. Or, in Oliver’s words, the idea of car dealerships directly lending to their customers, “theoretically, is a good thing.” However, Oliver’s mini-expose, partially in follow up to the investigation done by The LA Times makes it hard to see whatever good might actually be out there.
Let’s just look at some of the facts shared in this segment. First of all, when you consider that 86% of Americans commute by automobile, you can already see the opportunity for shady business dealings. When there’s a critical need, there is critical opportunity for the wrong types of transactions to take place and that, essentially, is the problem. We need cars in order to work and without them, we’re screwed. So, no wonder so many consumers are feeling the pain of buy here, pay here promises turned sour.
According to Oliver’s statistics, the average interest rate connected to buy here, pay here loans is 19%, with the maximum reaching 29% – likely higher, in some cases. Not surprisingly, one in three of these consumers will default on their loan, often quite soon after signing the paperwork. A general projection puts default at seven months following the loan agreement; however, a later portion of the segment, once again involving the 2008 Kia Optima tracked by The LA Times, shows that repossessions take place even as early as one month later.
As if repossessions weren’t bad enough for those who experience them, there have been some repossession nightmares resulting in more than a lost car. One woman reportedly returned to her car to find both it, and her 9-month old baby within, missing.
Lender Systems is a company that installs a beeping device within these vehicles, and the beeping kicks in when payment is due. Get this – it continues throughout the day until midnight, or some other predetermined time set by the lender. At that point, if the bill hasn’t been paid, the car will not operate. Seems dangerous, particularly if you’re using your car as a family vehicle. After all, emergencies always seem to happen well after the sun has set, so it’s a wonder worse stories haven’t emerged as yet.
At the end of the day, Oliver makes it clear that this is big business, a la the housing lending bubble that crippled the market and impacted the economy as a whole. According to some of the attorneys interviewed, consumers who have recently declared bankruptcy are prime targets for buy here, pay here and other subprime auto loans.
Yeah, there are some good guys out there, but it is always in your best interest to know who you’re dealing with. And, it’s also in your best interest to laugh whenever possible, which is why you should check out Crazy Johnny and Crazy Jimmy’s buy here, pay here car lot as featured on Last Week Tonight.