'The Car Was Repossessed, but the Debt Remains'

I saw an interesting looking car lot and stopped to kick tires. I found a couple of cars I could be interested in and when the sales guy appeared I asked for prices. I was given the monthly payment.

Since I always pay cash, I asked for the cash sale price and I was astounded by the high prices this lot had on its cars and I promptly left.

Sometime later, I learned that it must have been a “Buy here, Pay here” lot. They priced the cars very high because they didn’t want to sell them to cash buyers, but rather charge high monthly payments to folks that would take the bait.
CSA

20 years ago in my public high school I took a economics, business law, and accounting class. They were of course an elective and not required. I think a lot of people opted for the electives like photography, typing (remember it was 20 years ago), home economics, and other classes that did not really require much effort. I think at a minimum a personal finance class should be required, especially for anyone that is going to take out federal student loans.

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Like I said, the used car market paradigm would change but could it be any more a ripoff of the poor than it is now?

A couple of years before I retired, I was assigned a general​ studies computer course as part of my teaching load. For one assignment, I had the students write a program to compute the monthly payments on an amount borrowed over a specified number of years. Most of the students in the class were college freshmen and sophomores. I also had them sum up the payments and subtract the original amount borrowed to see how much the loan actually cost. I even took an actual price of a new car, subtracted the amount allowed for a trade-in to establish the amount borrowed. The students were shocked at how much a loan cost. Then, to really give them something to ponder, we looked at the value of the car after each year and compared it to the amount still owed on the loan. The students were shocked that one could owe more than the value of the car. I used the Kelly Blue Book so that the problem would be realistic. One student who had seen me driving my then 30 year old Oldsmobile remarked “Is that why you drive such an old car?”. I had another student come up after class, shake my hand, and said “I really appreciated you giving us this assignment”.
I had colleagues who would only ask about monthly payments when buying a car. I wonder if the truth in.lending laws ever made any difference. I guess the appeal of getting something new overrides any consideration​ of cost. (Mrs. Triedaq says that we are immune​ from getting pneumonia as we have never had anything pneu (new) in our lives).

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I would guess that forcing the dealers to accept the return of the car in lieu of further payments would drastically reduce the greatest part of the ripoff. But these days too many of us fortunate enough to avoid such ripoffs are apathetic to the dire straits of a huge number of people who through ignorance or bad luck or both find themselves desperately scratching for a grip somewhere in hopes they can hold on for one more day and week and month in hopes some opportunity will come there way. My state allows for 592% interest on loans and allows banks to process checks in order of highest value first to maximize overdraft penalties. Life is sweet for those unscrupulous at the top in Mississippi. Of course we are the poorest and most corrupt state in the union.

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That’s part of the problem. The dealer did the math the buyer would or could not. What would you propose we do? Make it illegal to repossess a car? That eliminates the poorest and many others with poor credit history from ever buying one.

How would you craft a law that protects both sides of the transaction? You know, the unscrupulous buyer that never intends on making a car payment AND the unscrupulous dealer who intends to resale that piece of junk over and over?

Yep in Minnesota anyway in high school general business class, gee we went through stock market, accounting, credit, interest rates, mortgages, car loans, home depreciation, personal finance, and on and on. We all kept little books on what we spent our money on just like the teacher and balanced them every month. And it was free but you had to sign up for the course. A lot of it was just repeated in college so a good foundation. 50 years later I still remember the teacher talking about the car loan he canceled because the banker had a big mouth and the time he spent all night looking for a 7 cent error in his record book. You just can’t force people to learn though.

Yes this would put a stop to the ripoff. It would also put a stop to the lending for people with bad credit. So the person with bad credit and no job would need to save his or her money to purchase a car with cash.

Congratulations on going to school in a northern blue state, where k-12 education gets adequate funding. I went to high school in an underfunded district in a southern red state that ranked 48/50 in school quality but 2/50 for the quality of our roads and highways.

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I have for years been somewhat critical of automobile marketing for many reasons with this situation being at the top of the list. Over the years I have been to many low end car auctions and bought a few cars and trucks that Irepaired and sold at a profit for cash. While at the auctions I met several tote the note dealers and saw the prices they paid for cars and often saw the price on cars bought at the auctionson their lots and without fail the posted down payment was more than the total paid at auction and the total payments would total more than the down payment.

And while I have no doubt that there are crooked people looking to stick it to the dealers they have are for the most part on thin ice with little chance to come out ahead in the long run whereas currently car lots have a license to lie, cheat and steal from the gullible public.

Somehow I feel sure there would be a shift in the marketing and financing situation rather than a shut down of the used car market.

I learned quite a bit about financial security from my parents and my kids learned from me. I had conservative parents and so did my kids. My daughter shared a house with 3 other girls at college recently. She called and said, “Dad! I had to explain to them that when they don’t turn off lights they are not using it results in a higher electric bill!” Hahaha

I went to school in a wealthy red county school district in my state. We were taught quite a bit about money and ways to save it and ways to waste it.

I held a real estate license a few decades ago. I remember having to purchase a state-of-the-art TI financial LED digital calculator of some kind to do amortizations. It was a multi-step process, but sure beat the amortization schedule books that contained every conceivable loan amount, interest rate, and time period, and payment amounts imaginable in them. It was magical!

Did you guys learn the rule of 72 and pass it down to your kids? Everybody should know that. First, I guess they need to learn the factors of 72.
CSA

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My high school driver training class instructor spent a few sessions discussing auto insurance. The part I remember is how upset the class got when he explained if you get into an accident that totals the car, and don’t have insurance, you’ll no longer have the car as it will be in the crusher, but you’ll still have to pay the remainder of the monthly payments on the loan.

Class: What! That’s not fair! Why should I have to pay the monthly loan payment when I no longer have the car?

@Propane_Car misunderstands. I’m too ignorant to know whether my
physician has diagnosed my disease correctly or whether she’s
prescribed the correct medicine; I’m too ignorant to know whether the
pharmacist has dispensed the medicine that’s labeled on the bottle;
I’m too ignorant to know whether the manufacturer has put the drug
that’s on the label in its pills. I have to rely on all of these.

The people in this story are too ignorant to know whether the car
they’re buying works, legal remedies for the purchase of a lemon,
whether the loan they’ve contracted would make owning the car more
expensive than taking taxis or Ubers or public transit even if the car
isn’t a lemon. You and I may be smart-enough to avoid such bad
deals: we’re different.

The difference in the first example is that physicians, pharmacists,
drug manufacturers break the law if they malpractice; the first 2 have
been trained to be ethical; their professional organizations police
them for ethical behavior and revoke their licenses for malpractice or
incompetence. Car dealers are trained to sell anything they can to
anyone they can; the NADA doesn’t police their behavior.

As @wentwest points out, losses from these loans get passed on to the
public in general through securitization, perhaps to the public
through taxes if failure is common enough to threaten the economy.

Even if these people are ‘bad’, public policy can make them suffer
less by regulating the lending market (note that not all states allow
more than repossession: what’s the deal there?) and keeping track of
the reputation of dealers in hope that enough people pay attention to
bad reps to put them out of business.

Perhaps if people who can’t afford cars don’t buy them we’ll have
better alternatives in public transit, Zip cars, etc. These are the
people who will benefit most from the driverless,
no-one-owns-their-own-car-anymore future: they have money to spend
today but not the wit to manage amounts larger.

I don’t think you have much faith in the general public if you think they can’t figure out their general finances. You need a medical degree to prescribe medicine but you don’t need a college degree to figure a check book balance or interest rates. These are basic life skills that are taught in high school and we covered some more in Boy Scouts to kids. Like we have argued before, a car provides mobility not offered by public transit or Uber. If you have mobility, you have freedom to live where you want and work where you want, not limited by others. Some people are against the general public having this type of freedom but I think its good for the country as well as the individual. If you don’t like your current circumstances, it’s a four letter word, MOVE. But you need a car to do it.

CSA, you and I are in full agreement that these are skills are usually taught (or not) at home. This culture of wealth management, and the absence of it in many of our sub-cultures is a big reason the rich get richer and the poor get poorer, while income disparity continues to grow.

As our friend Bing keeps demonstrating, wealthy school districts have the resources to teach these skills, but the poor school districts don’t have the resources to teach more than math, science, history, and language. In other words, those who most need this kind of education are the least likely to receive it.

I’ve never been a fan of class warfare, so in its place, I have long supported removing barriers to upward mobility, and this educational disparity is a big barrier.

We weren’t a wealthy school district like the metro schools. In college, our law professor worked for a bank downtown and taught two classes a semester. Any school district could tap into a local banker, broker, financial manager, etc. to offer a basic personal financial management course in high school. It doesn’t take a lot of money. We even did it for free in Boy Scouts. It just needs to be a priority in your own school district. I learned a lot of things from my dad but he wasn’t exactly a finance whiz so it needs to be taught in high school.

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I thought it was ‘rule of the 78s’. But it’s been a while.

I think it’s a shame that we take for granted all that we know and understand and feel anyone who isn’t as well informed and insightful and knowldegeable must be lazy or mentally incompetent or irresponsible.

I heard somewhere recently “he was born on third but thought he hit a triple” and that seems to fit a great many these days.

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I found the article a bit sensationalist. Yes there are car dealers selling overpriced junkers and the buy here pay here folks are the worst. One of the troubles is the people buying cars there really can’t afford cars at all. They don’t have money to pay for maintenance or repairs so when the car breaks down, it gets ticketed, impounded or reposessed. They never get a prepurchase inspection. They at re buying low qualitu cars from low quality sellers because no one else will sell them a car.
They don’t have cash to buy from a private party and don’t qualify for normal loans because they have a history of not paying their bills.
The article even lambasted one dealer who sold a car the broke down and LET THE BUYER PICK OUT ANOTHER CAR FROM HIS LOT. That doesn’t sound like a sleazeball to me. It sounds like someone dealing with the most difficult segment of the market.
WE all know people who have been " a day late and a dollar short " their whole life and habe never made a good decision. They won’t start now, no matter how much you try and counsel them, believe me, I have tried, many times. They all favor their short term wants over their long term goals or needs.

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