Predatory Auto Loans

A few years ago the American economy was shocked when the residential mortgage market went belly up and people start losing their homes.  Movies have been made, lectures have been held, and a lot has been written on how the mortgage crisis developed over years and the story is a really complicated one.  We have managed to bounce back, but now it looks like it is happening again.  This time, it involves auto loans.  The video below is a comical, but realistic, view of the auto loan market today.  As illustrated by John Oliver, the tell tail signs are there and have been there for some time.

Basically, auto loans are being given to people who cannot afford them.  “Buy Here/Pay Here” dealerships excel in giving loans with high interest rates with the expectation that people will default and the vehicle will be repossessed.  The vehicle is then resold to another individual who cannot afford it only to be repossessed, again.  This cycle happens over and over and the dealerships makes a ton of money.  The loans are then sold 2-3 times to various companies who try to collect the unpaid balances sending people into a debt hole that they will never climb out of.

Locally, we see this a lot from JD Byrider.  A common phone call involves someone who went to JD Byrider because they could not receive financing from another dealership.  JD Byrider gives them an auto loan with a really high interest rate forcing the person to pay way too much for a used car over a long period of time.  The car buyer soon learns that the loan payments are higher than expected and the default begins.  JD Byrider puts GPS sensors in all of its cars, so it is easy for the dealership to repossess the car at anytime from anywhere.

Check out the video below and share it with your friends, family, and on social media.  The more people we can educate about high interest predatory auto loans, the more chances we have at avoiding another economic crisis.