Interesting addendum to the buy-here-pay-here discussion


#21

The problem is that interest is part of the debt. Immigrants that arrived here a few years ago had a hard time with this concept. They also had a hard time with paying for profit. I don’t dispute the unfairness or excessive nature but that is why instead of coddling people, they need to be educated.

The difference with car loans versus the housing loan crisis is that there is not a federal agency ready to buy the auto contracts the next day. Not the same thing at all. And I wouldn’t necessarily assume that everyone taking out an 8 year loan on a $70,000 truck, is living beyond their means. Not something I would do but think about a 2% 8 year loan on a vehicle being kept for ten years? Is this a good time to pull money out of stocks to pay a truck off early?

At any rate I have worked with some of these people and part of the issue is that all their lives they have never dealt with the formal systems in society. Maybe don’t trust them or maybe don’t know or is just not something they deal with. So if they buy a house it is on a contract for deed with the owner instead of a bank. Car loans are at the lot. You’d have to get a lawyer to do bankruptcy so they aren’t about to do that. And so on. Life on the fringes. culture culture culture.


#22

I agree. People just expect to be coddled these days and that isn’t OK either. These predatory loans are bad as well. I think loans on cars that cost as much as a house are a bad idea. $80,000 can buy you a decent small house around here. That will retain value while a car will be worth very little in short order. The most expensive cars are often the WORST about this.

A guy at the local Autozone told me he was looking for some decent $1000 or less cars. I had some ideas for him. The next time I was in there he was in a 10 year old BMW 7 series. He paid $1000 for it. That was probably close to a $100,000 car when bought new. He said he has had plenty of these and really enjoys driving them. The issue is that when ANY little thing goes wrong it becomes uneconomical to repair. He then just sells them for parts, often at or near what he paid for it running, and moves on down the road to the next one. It seems the guys who work at parts stores always come across the best deals on used cars. Look at how little that $100,000 car is worth in 10 years. That is nuts if you ask me ad a terrible waste of money. I understand this is quite common with cars that start out expensive. They depreciate the fastest.

I know people who go through cars all the time but they never buy new because they know that they will lose so much money when they get sick of it and trade it every few months to a year. I know one guy who used to do this and actually make a decent amount of money. The DMV finally sent him a letter saying he needed to apply for a dealer’s license if he bought and sold more than X cars per year. He cut back a tad after this. He enjoyed getting a new (to him) car all the time but was smart enough to understand that buying new wasn’t the way to do this.

Yes, I have had to deal with those living on the fringes and now try to avoid this. They are the ones who want to make a payment plan for some tiny amount of money and then don’t pay. Even if they do, the extra effort just makes it not worthwhile for me. They don’t want to play by the rules of society overall and that is why they are where they are.

Unfortunately it seems that every industry is full of scams these days. I was talking to a realty agent and he was telling me there is a way for scammers to look up people who are LIKELY involved in property transactions. I guess there is some way to track this and see who is buying or selling property. Of course people are all stressed because everything is so hectic during these transactions. The scammers will call them and say they owe like $500 for some title or deed fee and many people just pay it without question.

In my line of work (computers), it is the tech support scam. These are pure scum and total predators as well. There is no pretense about helping people. It is just about taking their money and not providing any product or service. Basically there are many ways these work but I see two the most frequently. The one I have been seeing in recent weeks the most is a pop-up telling people to call a phone number displayed IMMEDIATELY or else something terrible will happen. People actually do this and pay them $1000 or more quite frequently. The other are phone calls saying they are Microsoft and you need to give them access to your computer to fix some problem. Once they are in, they install a bunch of malware and backdoors and the hook is set for the scammers. I personally see about $100,000-120,000 sucked out of the local economy each month due to these scams and I am only one guy. I can’t imagine just how much is going out and there are people I come across who are completely unaware they have been scammed until I tell them.

They say that half of all phone calls are basically fraudulent these days. https://www.washingtonpost.com/technology/2018/09/19/nearly-half-cellphone-calls-will-be-scams-by-report-says/?utm_term=.45f3a994c7ce That is a sad commentary on our times if you ask me but I feel is is probably dead on accurate. Can anyone make an honest living anymore? I have one poor guy who keeps falling for these scams. I have warned him over and over. I have a big strip of paper with BRIGHT RED BOLD TEXT reading “IF ANYONE CALLS IT IS A SCAM!” on both the upper and lower bezel of his laptop. I even took away his administrative rights to his own computer so it would be harder for them to get in. He keeps calling me and tells me he has allowed them in again. Not only does he do this, he gives them account numbers for TWO bank accounts each time so he has to go to the bank and file a fraud claim, then get all new account numbers and contact everyone because he has new accounts. I lost count of how many times he has done this but it is easily 12-20 times so far. I keep telling him how to stop this but he keeps doing it.

Scams in general seem to be a huge problem these days. I wonder when it will ever stop. I fell for the HomeAdvisor scam myself. I thought this would be a good way to pickup jobs for my business but it was also just a scam. I had to file a fraud report and get a new debit card number as well. There is a class action against this company as well. I didn’t end up paying them anything so didn’t participate myself but would have had they come after me.

Here is information on the TitleMax class action: https://www.titlemaxclaim.com/

People need to be educated about what they are getting themselves into and most of this stuff, whether is be bad car loan, or straight up scams, wouldn’t be an issue.


#23

Interesting that someone brought up the price of new trucks / vehicles. I’ve wondered if there’ll be a car debt economic crash. I’d love a new truck, and could afford the payments. I don’t have any debt right now. But I refuse to pay half of what my house cost new on a vehicle. My dads the same way. I’m sure he could easily pay cash for a new truck, but he refuses to pay $50-60k for a truck. But as long as people are willing to pay that much and finance them for 6 or 7 years, I guess the prices will climb.

If the car payment balloon does burst, I wonder if they’ll lower the price of the new vehicles?


#24

My first notice of BHPH car lots was due to a customer being ripped off and a cut throat loan company becoming involved. An illiterate man had made all the payments on time and had money order receipts to prove it but because he delivered his payments to the car lot and slipped them under the door after he got off work and didn’t understand the notice mailed to him that the payments should be delivered to the loan office he got stuck. The car lot had been late delivering the payments to the loan office and that resulted in penalties that accumulated and of course the result was the car was about to be repossessed. It was a really pitiful situation that I will never forget.


#25

From the article…

The first example; That $3390 down payment on the Blazer in the first example would have bought a decent running car in 1991 for cash money, with no loan.

The second example is an easy one. The woman co-signed a loan for someone who disappeared.

The 3rd example is the one I feel sorry for. The transmission that failed on a $5000 car. Maybe they didn’t inspect it, maybe it was bad just bad luck. Transmissions do fail and they fail more often on older cars but ignoring the car payment was the wrong thing to do.

Not so much about poverty, all three are about bad choices. Choices that got them into a financial merry go round they haven’t escaped.


#26

In my not so humble opinion the only recourse for a delinquent car loan is the repossession of the car unless the borrower has damaged or stolen the car. If the buyer is up to date on payments and the car stops dead in the road the buyer should be able to pay a wrecker to return the car and cancel the remainder of the debt.


#27

Which will be followed by a rash of cars with blown engines and transmissions. People will buy it, make one payment and then some hoon wails on it 'til it blows up and leaves it for the lot to drag back. Then they go, and get another one for the same bit of fun. TONS of entertainment for one low car payment!

Of course, the price of older used cars will skyrocket because the lot must warranty them for the 36 or 48 or 60 months while these folks are making payments. Or they just go to a rental business model. Slimeball lots would love that!


#28

So in other words all cars should be guaranteed for as long as money is owed on it? I’ve been in a haze this past week so maybe that’s not what is meant. I don’t even expect this on a brand spanking new car.


#29

I agree. That’s going too far. They lent you the money to buy the car. As long as you still have the car (and even if you don’t still have the car, but the lender did not take it back from you) then you owe them the money for the car, plus interest.

Where I object is when they take the car back, but still expect you to remit the full value of the car (plus interest). That such things are even legal is asinine.


#30

I would imagine that far fewer cars would be sold on BHPH car lots and a great many more cars would be sold fo cash, often borrowed from legitimate lenders.


#31

Well yeah. There would be far fewer cars sold period, new or old. Of course that would mean cars being kept longer so good news for auto repair shops. Even Henry Ford figured out he needed to offer payments on new cars to increase sales.


#32

So much of consumer finance has been eroded into a dystopian swamp that has become accepted as the unquestionable status quo. My proposal is as near being a fair concept as what we currently deal with. I think maybe it’s EASY MONEY that’s at the root of all evil. Of course there are so many aspects to EASY MONEY as to give crooks opportunities from all 360* of the equation.


#33

Not car related, but in the early 1900’s my great grandfather owned a candy company building in Minneapolis. 3m wanted the building, banker called in the loan which my grandfather could not pay, 114k I believe in 1901, so 3m gave him stock for the building, so I still have some, capitol gain based on 1901. Just saying nothing is new under the sun.


#34

I guess I just have to disagree with your outlook and analysis. Consumer credit is now mainly provided by credit cards, not individual company credit departments like in the old days. Credit cards are pretty competitive (based on your credit history). For big things you can go to the bank or credit union, use home equity, and a number or ways to get very reasonable credit terms. This was not always the case. If a person insists though on borrowing money from a guy at the bar or a used car lot, I dunno, I think having some large friends would be more helpful.

I have accounts at a state bank, a credit union, and even the dreaded Wells Fargo. I can’t remember ever being treated badly at any of them. Of course we knew (edit out new-sheesh even me) how competitive Wells was especially after combining with our own Norwest Bank. They actually had one of the best economists that you could literally go to the bank with his predictions. It was Sung Won Sohn, never missed hearing him.

Back to cars again.


#35

Best bet is to pay cash and not purchase it if you can’t pay for it in most cases. I get that you’ll have to finance a house and MAYBE a vehicle.

I don’t get the payday loans. If you don’t have the money to pay the light bill now, you won’t next week either, 90% of the time. Either the lights go out, or you make some changes. I actually went without heat for a couple of weeks in January. I couldn’t afford the minimum charge for propane delivery when the gas ran out. So I just stayed cold a couple of weeks. I wore coveralls in the house. My then girlfriend didn’t come around much :grin:. That’s been a few years ago, but the same principle applies. I don’t have $50k cash to plunk down on a brand new truck. So I don’t get one. That’s life.


#36

Where do you live?

I’m 48 years old. Never in my adult life has $80,000 been enough to buy any kind of house you would want to live in, not even as a single person much less a family home. I was born and raised in LA, lived in the Seattle area for 25 years, and 3 years ago moved to a small city in Western Oregon. I bought my first house when I was 25 and paid $112K for that little starter home, and that was a deal.

I can’t imagine comparing car prices to house prices. We bought a car last fall, a luxury model, and even at that the price of the car might buy you an empty lot on which to park a trailer.


#37

You might find it entertaining to investigate some real estate deals out in middle America @asemaster. Search Marion County Alabama for instance.


#38

I almost bought a 3 bedroom one bath brick house for $70k. Definitely liveable, but it had cheap paneling and 1970’s shag carpeting and fixtures. My wife talked me out of it and we eventually built a 3 bedroom 2 bathroom house on a 3 acre lot for $112k, including the price of the land.

I assume car prices are the same wherever you live, even though income and cost of living may differ.

Even your starter home, at the price you noted - it seems unreasonable to me for a well equipped full size truck or suv to approach half the price of something you can live in.


#39

In the town where I grew up, if somebody needed a car to get to work and couldn’t afford even a used car, usually one of their relatives, parents, bro, sister, aunt, uncle etc, would fix them up with a loaner. I have to wonder why the family didn’t help out, so the auto credit lenders wouldn’t even be involved? That seems like a better sol’n. I recall one of my high school friends needed a car b//c he had got a job delivering flowers. The flower shop didn’t provide a car. His brother said he could borrow his second car, a jalopy, but first the shocks needed replacing. The brother bought the shocks, and my friend installed them. Then he was off delivering the flowers. Wasn’t that big of a deal at the time. I hardly thought about it. A need existed, and the brother filled it, with some labor from the boy with the need.


#40

Missouri has one of the lowest costs of living in rural areas. I bought a basic house for 80k. Nothing serious was wrong with it. Rooms needed to be painted, the driveway needed to be sealed, the deck needed staining, but I bought a perfectly liveable 3bd/2bth home in a decent neighborhood for 80k. It had hardwood floors, a new roof, newish vinyl siding, and all mechanical systems were recently updated and in good working order.

It was a 1960’s era home and I would find issues like how some other owner had wired extension cords as wiring in the basement, patched together plumbing, and such, but a few good weekends of work had all the major problems fixed that really caught my attention. The place wasn’t perfect but it was perfectly livable and the insurance company and bank had no issues taking a risk insuring and loaning money on it.

I have since bought 48 acres in the country for basically the same price. The place isn’t nearly as nice but I plan to build a custom home on the property in the next couple years. I am sure that will be more.

Real estate is a pretty stable asset, even in bad times, compared to automobiles. Spend your money on something that holds its value, not a car that drops like a rock.