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Sub-prime Loans and Shady Dealings Exposed

If we didn’t all already believe that used car sales was a dubious business to work for or to shop at, along comes John Oliver to do an epic, as well as entertaining, take down. His first concern and the central focus of the episode of his HBO show, Last Week Tonight, is sub-prime loans, which evidently account for one quarter of all car loans. This particular installment aired on August 14.

86 percentGiven the need most of us have for transportation, I am less concerned about the loan offerings themselves. They allow people with poor credit to get the car they likely need to get to a job in first place, as 86% of Americans do. And I’ve been there – frankly a high interest car loan helped me get back on track during a tough stretch.

$8,600What was particularly appalling were the mark ups used to inflate the price of cars themselves. The example used in the show was a $3,000 car that ended up over $8,600 once a number of unnecessary items were added. With the financing, the buyer would have paid out over $13,000 by the end of the cycle.

So lets talk about those ad-ons, and please recognize that you can and absolutely should say no to most of them.

First, we need to acknowledge that taxes, title fees, and registration fees are all real and simply must be paid. Also some states require a documentation fee. So don’t fret too much over these.

The following can and should be avoided period, particularly when purchasing a used car at a high interest rate.

•    Fabric protection – seriously?
•    Paint protection – wax the car when you get it home.
•    Rust proofing – please!
•    VIN etching – ONLY when buying a new car.
•    Extended warranties – there can be good reasons for this, but they are costly and most states already require a 90 day warranty on any car sold. Its not much, but real problems can show up in a short time frame.

Car lots can be intimidating, so please protect yourselves when car shopping and be aware of every line on the sales contract.

Autobytel has an excellent primer on car buying here, and do watch the John Oliver clip here. It’s a real eye opener – not to mention funny!

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