Clunkers turn into cash cows | The Republic
LOS ANGELES — Tiffany Lee wanted a car. She was weary of the two-hour bus ride to her job at a UCLA Health System clinic. She hated having to ask friends to drive her 7-year-old son to his asthma treatments.
But as a single mother with three children, bad credit and a $27,000-a-year salary, she couldn’t find a bank or dealership willing to give her a loan.
Then a friend steered her to Repossess Auto Sales in Hawthorne, Calif.
Another buyer might have balked at the deal she was offered. Lee figured she had no choice. She put $3,000 down and drove off in a 2007 Ford Fusion, agreeing to pay $387 a month for four years. The interest rate: 20.7 percent, nearly triple the national average for a used-car loan.
A year and a half later, Lee fell behind on her payments and filed for bankruptcy. So she was relieved when the dealership called and offered to make her loan more affordable. The sales manager even promised to throw in a free smog check. Lee, 35, drove back to Repossess Auto on a rainy Monday evening, handed the keys to an attendant and sat down with the manager.
Moments later, she said, employees parked four cars tightly around the Ford, blocking it in.
There would be no new deal. Lee’s car was being repossessed. She and her children waited in the rain until a friend could drive them home.
Lee, who described that night as “one of the worst experiences of my life,” had stumbled into the bare-knuckle world of Buy Here Pay Here used-car sales.
In this little-known but fast-growing corner of the auto market, dealers command premium prices for road-worn vehicles and finance the sales at interest rates that can top 30 percent.
In a kind of financial alchemy, they have found a way to turn clunkers into cash cows and make money off the least creditworthy customers: the millions of Americans who are stuck in low-paying jobs, saddled with debt and unable to qualify for conventional auto loans.
cars for cash loans houston tx - News
A car title loan uses your car as collateral. If you don't pay that loan back in time, you lose your car. A payday loan is expected to be paid back by the time you get your next paycheck. If not, the money comes right out of your bank account.
That's twice what new-car dealers make. Many of the lots require customers to return once or twice a month to make loan payments in cash — hence the term Buy Here Pay Here. A key reason for the industry's growth in tough times is that dealers can come
In addition to private equity firms such as Altamont, several payday lending chains are moving into Buy Here Pay Here and have acquired dealerships. Stock investors are snatching up shares in Buy Here Pay Here chains and other publicly traded companies
Under the Community Reinvestment Act, the Federal Reserve encourages banks to provide loans to struggling farmers, disadvantaged people hoping to buy homes and small businesses that want to expand — but not to people who need cars to work.
Twombly quit making loan payments, and Dig's Wheels of Escondido, Calif., repossessed the car. She again struggled to get to work on time and was fired. That set off a chain of events that left the 38-year-old single mother and her two children
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