mmarshall

With the exception of the Jimmy Carter years, when double-digit loans, inflation, and interest rates were the norm, I don't think I've ever seen a car loan of 18-20%, even at unscrupulous dealerships........except, maybe, from these guys:

IS-SV

It happens and it's legal. People like most of us won't see it being A-paper types.

In some cases these contracts are with the used car dealership itself, not a bank.

LexFather

Mike, you would then be stunned to know that those practices never went away and are very much very prevalent. If you are down in Tier 7/8 credit rankings you can get approved with a higher interest rate and some money down.

Hell I've heard of 30% and higher APRs from Wells Fargo for instance FOR A CAR.

jwong77

I thought this was a pretty entertaining explanation of the whole subprime mortgage debacle. http://www.crisisofcredit.com/

werewolf

Subprime loans on cars are a great 'asset' for lenders and car companies

1. Most borrowers are 'poor' and don't qualify for a normal or subsidized loan (2-6% APR 5 yrs etc) so they get rates from 7-12% depending on who does the underwriting (check out Cal Worthington and his 8yr loan, cant believe LB bailed him out--crook)
2. People are more likely to default on a house payment than a car payment
3. The loan is secured--You can repo the car pretty easily
4. The car makers need this easy credit to keep sales volume up on cars especially the crappy ones
5. Most buyers really don't understand car finance. They negotiate a decent price and give back the money with the 4 square and payment nonsense from the finance guys. Huge source of profit for dealers

Making money off poor people is the new black...check out payday lenders

mmarshall

Like you say, I guess anybody can get screwed enough if their credit is really low (some seedy places here in inner-city D.C. even use people's jobs as collateral, and advertise it). But I've car-shopped with numerous people with low or questionable credit, and never saw anybody get a loan over 9% at a bank or dealership...the average was 6-8%, except for special factory incentives like the 0-2% in their ads. Of course, I've tried to steer people towards dealerships (and salespeople) who know me and them, or who I am reasonably confident will give them a good deal.

However, I'll take your word for it.....I know you know your stuff when it comes to car finances.

mmarshall

Yes, the truth.....but only a small part of it. A complete explanation would probably require more storage/data space than on all of CL's files.