Nowadays, consumers with poor credit seemingly have few opportunities to secure a vehicle. The only realistic option is by visiting a Buy Here-Pay Here dealership, although these customers also have to expect extraordinarily high interest rates. Furthermore, many consumers tend to believe that these particular dealerships are untrustworthy and unethical.
Now, as you’re about to read, some of these dealerships are in fact slimy, with many of the salesmen acting as crooks. We’ve provided several examples of egregious Buy Here-Pay Here practices below. While these examples are a bit worrisome, you shouldn’t assume that the entire industry is operating with this unethical logic. Rather, you should refer to these egregious examples as potential warning signs for when it’s time to finally pursue Buy Here-Pay Here financing…
Perhaps the most glaring example occurred in 2015, which involved a Buy Here-Pay Here dealership in North Carolina. The state and the Department of Justice filed a lawsuit against Auto Fare Inc. and Southeastern Auto Corp., citing the fact that the businesses “violated the federal Equal Credit Opportunity Act by engaging in a pattern or practice of “reverse redlining” by intentionally targeting African-American customers for unfair and predatory credit practices in the financing of used car purchases.” Obviously, this is as unethical as you can possibly get.
Essentially, the two dealerships allegedly boosted unjustifiably high car prices, interest rates, and down payments. The “unfair or predatory” practices were particularly focused on African Americans, with the dealership attempting to capitalize on these customers’ poor credit scores. The Department of Justice referred to prices and financing offers from similar dealerships, and the investigation found that the deals coming from Auto Fare Inc. and Southeastern Auto Corp. were extraordinarily higher.
“It is not only illegal, but also fundamentally wrong, to target borrowers of color for predatory loans and exploit their need for a car to do essential tasks such as getting to work,” said Assistant Attorney General Vanita Gupta of the Civil Rights Division (via AutoFinanceNews.net). “Combating discrimination in all segments of the auto lending market is, and will remain, a top priority for the Civil Rights Division. I am pleased that these dealerships have agreed to reform problematic lending and servicing practices and adopt policies that promote responsible lending. I hope that other buy here, pay here dealerships will evaluate their practices in light of this settlement.”
The two sides ultimately settled, with the dealerships promising to follow fair practices, including offering reasonable interest rates (with an accompanying requirement that the rates must not exceed 25-percent of a customer’s income). These businesses are also required to offer lower financing options to those with average credit scores.
“All consumers deserve to be treated fairly when they buy a car,” North Carolina Attorney General Roy Cooper said. “We hope this case sends a strong message that car dealers cannot use race when targeting buyers with overpriced cars and oppressive loans.”
There’s absolutely no way to avoid an unethical dealership. However, by shopping around for the best possible deal, customers can do their best to secure the best possible offer. Even if you are dealing with reputable businesses, it’s always a good idea to save as much money as possible.
Meanwhile, in 2016, the Arkansas Attorney General Leslie Rutledge filed a lawsuit (along with her office) against several local car dealers, claiming they were practicing “deceptive trade practices.” As ArkansasNews.com detailed, Automatic Auto Finance, Jorja Trading Company, and CashFish Motor Pawn allegedly boosted the prices of their cars and offered customers unprecedented interest rates.
In particular, the attorney general said that the Buy Here-Pay Here dealerships were targeting those customers who would surely default on their loan agreement, thus benefiting the dealership (and sending the customer into financial chaos). These dealerships were also accused of “reselling repossessed vehicles in a commercially unreasonable sale to create a significant deficiency balance; using prohibited collection practices to collect on that deficiency balance; and reselling vehicles to other consumers to repeat the scheme.”
Again, one of the best ways to remedy this issue is by shopping around for the best possible offer. Ludicrous interest rates will naturally accompany this type of industry. However, you shouldn’t be opting for a deal that you can’t afford, even if the monthly payments are relatively low. As a result of the high interest rates, you’ll end up wasting an extraordinary amount of money in the long run.
Finally, several Buy Here-Pay Here dealerships in Ohio were accused of wrongdoing back in 2012. According to Attorney General Mike DeWine (via OhioAttorneyGeneral.gov), these businesses weren’t only offering unfair interest rates and unfair car values. Rather, the businesses were also accused of “failing to notify consumers of payment due dates or the total cost of credit, and including an acceleration clause for consumers who defaulted, meaning the total amount consumers owed would be due immediately without notice to consumers.” These practices are in direct violation of Ohio’s Consumer Sales Practices Act.
This is an unfortunate situation, as many consumers might not recognize these issues until they’ve completed the deal. Fortunately, there are some ways to remedy the problem. Customers should consult any online reviews or testimonials before they opt for a particular dealership, as former customers should be pretty transparent when it comes to any issues with the business. Furthermore, it’s essential that you get any details of your impending deal on paper, and make sure you agree on a fair payment schedule to assure you’ll never be late. Ultimately, the best route is to only shop from reputable dealerships, but you can only determine a dealership’s reputation after having shopped around at multiple businesses.
Now, as we mentioned, you shouldn’t assume that every Buy Here-Pay Here dealership is unethical and untrustworthy. This is an unfortunate stigma that has accompanied this industry, but that doesn’t mean that these dealerships should be avoided altogether. Don’t be afraid of shopping around for the best possible deal and consider all your options before you make your decision.
