Auto Lending: Last Week Tonight with John Oliver (HBO)

cars The best songs from The Muse for America, from the complete works of Bruce Springsteen to Tim McGraw's American Truck Overdose, if you like it loud and proud then you know what I'm talking about, let me hear you say Truck Yes , truck, yes, that song. Is UN Trucking credible? I mean, it sure doesn't make sense that they're just driving around in an empty lot, but they seem like they're having fun, so who cares about a flying truck? But America's Auto Obsession isn't just a hobby 86% of American workers commute to work by car and the remaining 14% presumably travel by public transportation by walking, or in the case of that weird guy in your office named Nathaniel Penny Farthing, get off There by bike, stop and if you don't have a car to keep a job it can be a tremendous challenge, just watch a woman describe her daily commute on public transportation.

I usually still get the kids to their bus on time, it's just a matter of if I'll catch my bus, this is the first bus and then I catch two trains and another bus usually takes me about an hour and a half to 2 hours on a normal day. If I had to drive to work it takes me maybe 10 or 15 minutes so her trip would be 10 minutes with a car, but without one, it's literally the length of the movie. The imitation game away from your job, meaning wasted hours that seem like an eternity, but cars are obviously expensive, which is why many people have to take out loans to buy them. some from places like this, everyone is approved at Buyers Auto Sales, regardless of your credit, even if this is my trade-in, approved, even if I am self-employed, even if we have two repossessions, a foreclosure and a bankruptcy, they are all approved, okay, listen.

I don't want to be critical here, but don't approve of the clown, he is a clown. Genetically speaking, he is programmed to murder now that the ad is aimed at people with bad credit who are only eligible for what are called subprime loans and almost a quarter of all. Auto loans are now of the subprime subprime variety; in fact, so many are being issued that they recently hit a 10-year high, and if the phrase a boom in subprime

lending

is making your eye twitch as you remember the mortgage crisis, wait, we'll do it. get there, but first let me take you on a tour of the subprime

auto

loan industry and we'll start with the so-called Buy Here, Pay Here dealerships, who make their own loans, have been around for years, and their ads make it all seem like. very simple, how can we finance it when others can't?

Two reasons first, we are the bank, we don't have to send you or your business anywhere. The second reason we can finance you is because we don't even look at your credit score, of course, in fact, we don't even know what a credit score is, what is good PG-13 640 in the verbal 710 in math 300 par es that a good credit score we have no idea and that is why you should trust us and look theoretically, it is good that car dealers lend money to people who cannot get financing elsewhere, but in practice these dealers can trapping people with few options into paying much more than a car is worth;

It is just one of the many ways that when you are poor everything can be more expensive, the average interest rate on a Buy Here Pay Here lot is 19% and some pay up to 29% and that interest adds to the margins and add-ons that can inflate the price of the car, so look at Arlene Jones, she went to a Chicago dealership trusting them to help her when she first arrived at the Quick Auto lot, she told the salesperson she had an upper limit of price, he told him: "I can't pay it." no car, over $3000, she says he was very reassuring, don't worry, he said you can do it in person, in the end Arlene borrowed $8,600 at 24.9% interest for 3 years, how much money would she make if there was paid the loan?

She would have spent over $113,000 on a car that was only worth about $3,000, that's outrageous. The only way it's acceptable to sell someone a $33,000 car for $133,000 is if you slip a perfectly good copy of X-Men into the glove compartment at that moment. True, he's being generous, but it's no surprise that buy here, pay here loans had an average default rate

last

year of almost one in three and the majority of customers who default do so just 7 months after get the loan and just think about that 7 months is not a lot of time if you put a 7 month old baby in front of the screen right now he wouldn't understand anything I'm saying he wouldn't even know if I'm making fun of it I'll show you go ahead get a baby right now and put him in front of the screen, here we go, hey, fool, hey, you don't know I'm making fun of you with your stupid witch face, right?, no, no, no, no.

Who knows? You, no, you don't care, you don't care at all. Look, 7 months is not enough time to do anything. Now put the child to bed. You are a terrible father. But the problem is that even if you are just a few days late on a payment, the dealer can repossess your car and when they do it sometimes it is without taking into account what is inside when the mother went to pick up her three children at a daycare where she left her 9-month-old son. in the car but when she got out there was no baby or car.

I wish you to rest a car. You check the car before taking it. It's a good rule of thumb for everyone, whether you're repossessing a car, picking a prom date, or making a pick in the NFL draft, don't take a baby, don't take a baby, I don't care what they did in the combined and and it's getting easier for dealers to buy here pay here get your car back because many now install a special device that activates when payment is due every 5 seconds; to school all the way to work, tell them they need to make the payment, contact your lender;

However, if they don't turn off the device at midnight, most lenders choose midnight as the device's shutdown time will not allow the car to start properly. Putting aside the horror of the fact that they can turn off your car, that beeping sound is incredibly annoying. Anyone who has a smoke detector knows that it only takes about 30 minutes of incessant beeping before you completely lose your mind. I pressed the button. I unscrewed the top and destroyed everything with the bread maker and it's still doing that so the only reasonable option now is to set my house on fire and once they get your car back these dealers don't have to refund your down payment and They could decide that you still owe the money because the car is now worth less than what they sold it to you, so you could easily end up without a car and thousands of dollars in debt, while the dealer can turn around and sell your car to someone else. person so that the The truth is that they can make money any way and the same car can be sold this way over and over again and to prove it, let me take you on a magical journey because a few years ago the LA Times tracked the sales of a Kansas

auto

mobile.

City Dealer Buy Here Pay Here was a 2003 Optima very similar to this one, it had a blue book value of $5,350 but in April 2008 it sold for almost $11,000 or double its blue book value. The original buyer complained of mechanical problems and refused. to make payments, so the car was repossessed and sold again in August before being repossessed again 4 months later and then resold after just 3

week

s before being repossessed again by a mother of three who without trans transportation lost her I worked at Walmart and then it was resold. again in May 2009 to an owner who complained of transmission problems, so the dealership took it back and resold it just four

week

s later, after which you'll never guess it was repossessed again by an owner who later filed for bankruptcy. bankrupt thanks in part to the payments he made.

It's owed for this piece of demon car, but wait, we're not done yet, it was sold again in December and repossessed just 5 months later before being resold in May and then surprisingly repossessed again despite the owner, a mother of four children, claimed that she made every payment and then, according to the LA Times, was sold for the

last

time before being repossessed just a month later, that car changed owners eight times in 3 years, each time at a price that doubled or even tripled its Blue Book value, at which point I almost felt bad for a car that presumably needed two therapy sessions a week just to be able to start its bad engine again now that that's where the LA Times left it, but we became so emotionally involved that we actually tracked down that car and found out that it has since been resold, repossessed again, and then sold once again, and when we called the last listed owner, she he said it had been stolen and I really hope whoever did that drove him straight off a cliff, although I guess even then some The sleazy lobster ended up selling it to some poor unsuspecting fish now, after seeing that he'll be glad to know that loans buy Here, pay here, they have lost market share in recent years, unfortunately, that is only because it seems like everyone is getting into subprime auto loans now.

There is a surprising amount of competition to make car loans to people with bad credit, to the point that people who have recently filed for bankruptcy are being actively targeted through the mail. Just listen to a bankruptcy attorney describe what he has seen. These are all quotes from Caron. High interest. Car loneliness sent to my bankrupt clients people who have already filed for bankruptcy. Here's one that looks like a check and is made out to $21,000. I assume it will be a used car, you know, with a signature and everything, sent to one of my clients. Here's one that looks like some kind of official certificate encouraging you to apply for a car loan even if you suffered bankruptcy, foreclosure, or all of the above; that's a bit of a strange tone of voice, he sounds almost excited about a bankruptcy, car repossession and foreclosure, it's like a doctor saying, wow, you have herpes, HPV and gonorrhea, most people only get one, You've got the hang of it and this feeding frenzy on subprime clients now includes big lenders like Sant Andere and GM Financial, both of which have expanded. its subprime auto financing and there are newer players like scopus and exitor that specialize in subprime loans and you might be wondering why everyone is in such a rush to lend money to people with bad credit.

I mean, sure in the mortgage crisis, uh, they were doing it. that to be able to bundle those high-end loans and sell them on Wall Street, but there is absolutely no way that that is happening, that it is happening again, that is exactly what is happening right now and people have been worried about this since some time ago. Is there a new bubble about to burst in the automotive sector? Are you worried about this at all? Could this become a repeat of the mortgage

lending

boom? Do you see similarities between the housing crisis and what's happening now with used car loans?

Now there is concern that there is going to be another subprime mortgage crisis, except it won't be mortgages, it will be Carls. Yes, there is concern that this could be the subprime crisis, but with cars, and usually if you add the phrase but with cars to any historical event it sounds a lot more fun, like the assassination of Abraham Lincoln. , but with cars, unfortunately, this is the exception to that rule. Now, before you panic, experts say there are important differences. Here subprime auto loans are a much smaller part of the overall economy than subprime ones. mortgages were like that, even if they go bankrupt, this would not necessarily be the great short again, as much as the director's video version with Brad Garrett instead of Brad Pitt and instead of Ryan Gosling, a real goal called Riot and the signatures Wall Street insist. that they have learned their lesson and set things up in such a way that tons of loans can default and investors will still be fine, but there are signs of trouble, for example the standards for some of the loans sold as investments can be surprisingly LAX we have.

The deals we've seen come to market with very low FICO scores and in some cases no credit score at all for the loans, which is surprising, which is why some people joke that you really only need a pulse right now to get a subprime auto loan, so that's it. such a good joke, such a solid setup, Hard Punch Line, potentially devastating effect on the American economy. Comedytop notch, the rule of three is what it is and, behind closed doors, some in the lending industry openly acknowledge that conditions are, in fact, deteriorating when we send in hidden cameras.

At a debt buyers conference in Las Vegas a few months ago, we ran into Ken Schulson, the head of the National Alliance of Buy Here, Pay Here Dealers, and he sees trouble brewing because he thinks about trying to keep up with the big players that have entered the subprime market. industry, its own dealers have been forced to issue longer-term loans with less money down and a higher cost to customers who are therefore at greater risk of default and these broader credit trends are clearly a terrible news for borrowers, but to hear it said it is a great opportunity for those who buy bad debt and collect on it, these people have negative equity at all times and will not be able to keep their life together for 7 years even, you know the customer, you know how collaborate, you have the legal right. experience what's holding you back wow that's both inspiring and deeply disturbing it's like the song I Believe I can fly merged with the rest of AR Kelly's life now listen listen to the news the news don't google that listen the news the news they used to Clearly, car dealers being predatory is nothing new, but it seems that these days market pressures are forcing them to be more aggressive and take more risks to the point where we could be approaching a industry that looks like this.

How do you guys need a car, you can't afford a car, no problem, just come over to Crazy Johnny Crazy Johnny today, but don't take it from me, take it from my cousin, Crazy Jimmy, come here, Jimmy, Crazy Johnny No, Crazy Johnny. I love the smell of the deals in the morning. I have a question for the people at home. You have bad credit we, we don't care, you are bankrupt, we don't care, your credit is so bad that giving you a high interest loan will basically cut you under a mountain of De, from which there is no reasonable hope of escape, we no You don't care, and if you come today, we have a nice deal for you right now, man, this is a pre-owned 2003 Kia Optima pre pre pre pre pre pre, it's aggressively Jimmy Jimmy, you gotta tell people what comes with it I'll do, it comes packed, loaded with four tires to a motor and a beeping device that supports a sound that will haunt your sleep, it comes with something else, man, if you check the back seat, this car has a fucking baby in it, baby, there's a real baby in this car right now.

I have serious personal reservations about the situation this city is in, don't focus on that look, this car is worth $22,000 but we will leave it to you with no down payment and only 200 a month for the next s years, that's almost $177,000 $177,000 no no no no no no no no don't do the real math on that, try thinking about it at home like this, act now and this car will affect every financial decision you make for most of the next decade and that's a crazy promise of Johnny Crazy Johnny and the crazy thing is that this car is actually an opportunity for Wall Street too, but don't listen, listen to me, listen to our crazy accountant.

Welter, come here, wter, come here Welter, crazy, well it's true if you put aside the human misery this loan has the potential to cause as part of an overcollateralized collateral, this can be sold as a high yield . investment, damn Walter, that has disturbing echoes of the mortgage, crazy, the point is that it is very easy for us to get you into this car, why is it almost criminal, it really seems like it should be a criminal activity and yet of In some ways it is not, that is our show, thank you very much for joining us, we don't mind.